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another one bites the dust

May 3, 2009

Well, even if the potential GM deal with the government and the UAW doesn’t go through, there’s always Chrysler, who, according to the Detroit Free Press, has declared bankruptcy under a new deal that will give a health care trust fund for UAW retirees 55% ownership.

Can the workers really do a better job of running the company than the likes of Nardelli and LaSorda? It looks like we might just get the chance to find out. Or will we?

It certainly looks like workers own Chrysler when you read the papers, but as one blog proclaims: “Don’t be fooled by the figures. Worker’s don’t own Chrysler.”

According to the Wall Street Journal, “55% of the auto maker will be owned by a retiree health care trust fund and not the union itself.” According to another article, “The U.S. government will name four Chrysler board members, Fiat will name three, the UAW one and the Canadian governments one.”

What’s even more bizarre is the fact that “the UAW would be able to act independently, even strike if necessary, despite the fact that the union would own a critical piece of the company through the VEBA trust.” Say what?

It all seems rather complicated to me, and I hope that the new Chrysler does well for the sake of Michigan’s failing economy, but something tells me that it’s going to be business as usual unless Fiat, the UAW and both the U.S. and Canadian governments can actually come together, recognize and fix the problems facing this industry.

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4 Comments
  1. My friend, Chris, comments:

    “You can’t rely on manufacturing to save us when you are off shoring our manufacturing. The auto industry is simply the last area that hasn’t entirely gone out of this country. Oh sure we may have toilet paper factories here and there, but they don’t add up as much as you’d think. How much of that do we export? We lost our worth in the world economy by “switching over” to a service based economy instead of a product based economy. Too bad we off shore that too. So what do we have? Nothing. Even the IRS’s 800 support line is in India. Fixing the auto industry is both good and bad in a sense that you can put a patch on it to stop the bleeding with funds, but will it help in the long run if we don’t bring back what we’ve lost already in other industries? Think about how much is stamped with “Made in ..”. So what do we do? Take a card from the socialists and let government intervene everywhere? A big pill to swallow, because how do we assure ourselves that those in DC aren’t the same ones who made the decisions to off shore to begin with? It isn’t a political party thing, it’s a money thing.”

    My response:

    “Exactly. China is now one the world’s manufacturing giants (Just look at their steel industry, for example. We used to import raw materials and export the majority of our steel, and it is the other way around). India is quickly becoming of the new IT giants. The United States has very little left in the way of manufacturing and exports besides things like subsidized corn, which, thanks to NAFTA, we dump off in places like Mexico. The real question is, as you have already pointed out, What do we do?

    “One of the main problems I see is the fact that U.S. based multinational corporations are beyond borders. They can pack up and ship their capital and resources, like manufacturing and tech support, to almost anywhere in the world with cheaper wages and and lower taxes while still technically being headquartered in the U.S. One thing we need to do is to make this more difficult, otherwise there won’t be anything left to outsource. It may be good for a company’s profit margins, but it is devastating to our economy as a whole.

    “You posed the question of whether we should take a card from the socialists and let the government intervene everywhere, and then rightly pointed out that the very people in DC are quite possibly the ones who made is easier for domestic companies to offshore production to begin with. That is why I think a better solution is to give the workers a bigger voice in the decision-making process and more power in the work place, which is real socialism. The reason is that the workers themselves benefit by having manufacturing and other product based jobs stay here. CEOs and shareholders, on the other hand, generally get paid big bucks no matter where the jobs are located, and even benefit more when they are able to ship them offshore where wages and taxes are considerably lower.

    “I am not a big fan of all organized labour, and I think that many unions have become just as corrupt and greedy as any board of directors, but without greater government involvement or worker participation in the decision-making process we are never going to keep the jobs we still have or get the ones we lost back. Unless, of course, the U.S., becomes more like a developing nation than a developed one, with high rates of unemployment, and the jobs get shipped back here due to the massive pool of cheap labour and lower taxes, which will mean things like our quality of life and social safety nets like Medicaid and Medicare, Social Security, unemployment etc. will take even more of a beating.”

  2. Update. From Time Magazine:

    A New Plan For GM

    General Motors announced a new deal with the U.S. Treasury on May 5 in which the government would forgive about $10 billion of the carmaker’s $15.4 billion federal debt in return for a 50% stake in the company. The United Auto Workers union urged the government to reject the proposed plan, which also includes a 100-1 reverse stock split, because it would call on GM to outsource more of its manufacturing to foreign countries.

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