Last week several groups, including the United Steelworkers, petitioned the federal government to whack the latest trade mole – illegally traded auto parts from China.
With President Obama announcing creation of a new trade enforcement unit in his State of the Union Address, the feds probably will investigate. But even if they whack down the auto parts mole, experience has shown a new mole will pop up.
Mole-by-mole trade enforcement isn’t the solution to America’s massive trade deficit. Although conservative candidates revel in ridiculing Western Europe, America could learn crucial economic lessons from Germany, which doesn’t rely on Whack-a-Mole and maintains trade surpluses, including one with China in auto parts.
The Steelworkers – along with the United Auto Workers, the Alliance for American Manufacturing and Campaign for America’s Future – explained why the federal government must smack down the latest trade problem that has raised its ugly head.
For example, China provided $27.5 billion in subsidies to its auto parts industry between 2001 and 2010. It’s fine with the WTO if countries subsidize industries that sell their products domestically. But it forbids subsidies for exported products because that distorts the free market, wrongly destroying jobs and industries in the countries that buy those artificially low priced goods.
China has prospered by breaking the rules. Electronics manufacturing is a good example. In a story about Apple’s experience, The New York Times described how America lost these jobs to China. Worker wages, while achingly low in China, were not the lure. And they were not the issue for Apple, a company that makes $400,000 in profit for every worker. It was a combination of other factors including the Asian supply chain and Chinese subsidies. (more…)
Now, nine months later, things have cooled down and turned around. In a deal with the United Steelworkers (USW), two Chinese companies have agreed to build as much of the wind turbines as possible in America, using American-made steel, and creating perhaps 1,000 American jobs.
The deal is a result of white collar Chinese executives negotiating with blue collar union officers to create green collar jobs in the U.S. The agreement defies stereotypes about unions as constantly combative, excessively expensive and environmentally challenged. The USW has a track record of engaging with enlightened CEOs for mutual benefit. It has a long green history. And it has worked to return off-shored jobs to the U.S.
The USW, like the Democrats in the House and Senate with their Make It in America program, is devoted to preserving and creating family-supporting, prosperity-generating manufacturing jobs in America. And if they’re green, all the better.
Billionaire investor Wilbur Ross has first-hand experience negotiating with unions, including the USW, to sustain U.S. manufacturing. He describes it positively. Here he is on PBS’ Charlie Rose on Aug. 2:
“I have found the leaders of big industrial unions, the steelworkers, the auto workers, they understand dynamics of industry at least as well as the senior management of the companies.”
Ross talked to Rose about dealing with the USW during the time when he was buying LTV Steel:
“We worked out a contract that took 32 job classifications down to five, changed work rules to make it more flexible and most important of all, we put in a blue collar bonus system. . .We became the most efficient steel company in America. We were making steel with less than one man hour per ton. The Chinese at the time were using six man hours per ton. We were actually exporting some steel to China.”
Ross accomplished that while paying among the highest wages for manufacturing workers in America.
The USW approached the Chinese companies that planned the $1.5 billion Texas wind farm, A-Power Energy Generation Systems Ltd. and Shenyang Power Group, the same way it did Ross. The meetings occurred with the help of U.S. Renewable Energy Group, a private equity firm that facilitates international financing and investment in renewable energy projects. Jinxiang Lu, chairman and chief executive of Shenyang Power, said talking to the union enabled him to see its “vision for win-win relationships between manufacturers and workers.”
For the USW, this deal means the Chinese firms will initially buy approximately 50,000 tons of steel manufactured in unionized American mills to fabricate towers and rebar for the 615 megawatt wind farm in Texas, will employ Americans at a wind turbine assembly plant to be built in Nevada, and will employ more American workers in green jobs at plants constructing the blades, towers and thousands of other wind turbine parts.
For the Chinese companies, the USW, the largest manufacturing union in America, will use its long list of industry contacts to help construct an American supply chain essential to amass the approximately 8,000 components in a wind turbine. The idea is to collaboratively create a solid manufacturing, assembly, component sourcing, and distribution system so that this team – the Chinese companies, U.S. Renewable Energy Group and the USW — will build many more wind farms after the first in Texas.
Additional wind farms mean more renewable energy freeing the U.S. from reliance on foreign oil. As U.S. Sen. Sherrod Brown, D-Ohio, says, there’s no point in replacing imported foreign oil with imported wind turbines. For energy and economic independence, green manufacturing capacity and green jobs must be in the U.S.
This deal does that. And there’s nothing unusual about foreign companies employing Americans. Many Americans, including USW members, already work in factories owned by many different foreign national companies, including German, Russian, Japanese, Mexican, and Brazilian, with names like Bridgestone-Firestone, Arcelor-Mittal, Rio Tinto, Grupo Mexico, Svenska Cellulosa AB (SCA) and Severstal.
In at least one other case, action by the USW forced the hand of a Chinese company to move jobs to the U.S. Tianjin Pipe, the world’s largest manufacturer of steel pipe, said it could not export profitably to the United States if tariffs rose above 20 percent. This was after the USW and seven steel manufacturers filed a petition with U.S. trade agencies in April of 2009 accusing China of illegally dumping and subsidizing the type of pipe used in the oil and gas industry. The union won that case this past April, and the U.S. Commerce Department imposed import duties ranging from 30 to 100 percent to give the domestic industry relief from the unfair trade practices. To continue selling in the U.S., Tianjin Pipe had no choice but to build an American pipe mill. Construction is expected to begin in Texas this fall on the $1 billion plant to employ 600 by 2010.
Although the USW is cooperating with A-Power and Shenyang Power, it will not back off its trade cases involving exported Chinese steel, pipe, tires, paper and other manufactured products. The stakes for U.S. jobs are just too high.
Back in 1990, when green was not as trendy, the USW recognized that the environment would be among the most important issues of the era and issued the report, “Our Children’s World.” Since then, it has steadily promoted green — became a founding member of the BlueGreen Alliance and Apollo Alliance, which promote renewable energy and renewable energy jobs.
Good, green American manufacturing jobs. Establishing American energy independence. It is win-win. And it’s getting a green light now.
By Leo Hindery Jr.
Chairman, U.S. Economy/Smart Globalization Initiative at the New America Foundation
The Financial Times just devoted a special section of the paper to “individuals and companies who have displayed courage and vision in the aftermath of the most wrenching financial crisis since the Great Depression.” This piece of journalism — and the awards that were granted — were especially designed “to recognize boldness on a global scale.”
A few years ago, in a book I titled It Takes a CEO: It’s Time to Lead With Integrity (Free Press, 2005), I tried to identify all of the traits — including boldness — that I believe characterize truly successful CEOs. It would have been a pleasure to collaborate with the FT’s editor and writers — they did a great job — however, when it came to matching specific companies and CEOs with leadership attributes, I think that in at least one instance they missed the “Integrity” trait.
Let me elaborate.
In its foreword, the FT said: “While recognizing the profit imperative, these awards have also paid due weight to the impact of a company on the wider community, whether through innovation, education or philanthropy.”
But there are a lot more things — and, especially, a lot more important things — than what flows from “innovation, education or philanthropy.” Specifically, it’s the impacts on employees, communities and nation which are transcendent, and given how extremely difficult this current economy is, we should be particularly interested in how these impacts significantly help strengthen the American economy and create jobs.
When the FT chose Sergio Marchionne, the CEO of Fiat and now also of Chrysler, for its Driver of Change Award, it picked a CEO who is responding admirably to these two economic challenges. And in Marchionne, the FT also found a recipient who evidences an abiding responsibility to others than just his shareholders, and who leads his life with grace.
For most of the last century, American industry’s successes were hallmarked by a commonly held belief among CEOs that they had equal responsibility to shareholders, employees, customers, communities and the nation — and the nation as a whole was the beneficiary. It wasn’t until the late ’80s, with the advent of ‘trickle down economics’ and wildly excessive executive compensation, that this sense of responsibility began to be noticeably and widely lost.
On the day that he became the CEO of Chrysler, Marchionne said, “No executive has the birthright to lead, and no company has the right to exist” — and ever since, in trying to fulfill his stated commitment to creating a ‘sustainably profitable company,’ he has shown great sensitivity to the communities in which Chrysler operates, to the nation — the United States — which gave him and Fiat the Chrysler opportunity, and, notably, to the employees of Chrysler who for two decades bore the brunt of the company’s really crappy senior management. Beyond owning a large piece of the company through their Union, the employees of Chrysler are now active at the Board level in its management and, when hard decisions need to be made, they have a major role in working them out fairly.
The other trait that is a sine qua non of a great CEO is grace, a fine old trait with religious roots that in today’s corporate and secular worlds denotes dignified, polite and decent behavior and, especially, the capacity to accommodate and forgive people. It’s living your life to earn and keep the respect of others — and while hard to describe, we all know grace when we see it, and we all miss it when we don’t.
Mr. Marchionne seems to live this way, and a telling example is the relative ease and fairness with which he reached agreement with Chrysler’s beleaguered employees and their primary union, the United Auto Workers. (Of course, no one gets it right all the time or in all ways, and I must note that Marchionne, who is definitely a tough guy in a very tough business, still has some important fence mending to do with the Teamsters, which he needs to get to.)
All in all, however, Sergio Marchionne was a great choice to receive the Driver of Change Award. Which is why the FT’s choice of Roger Agnelli and the company Vale to receive its Emerging Markets Award is so puzzling, as pretty clearly the FT failed to require each of its Award recipients to manifest both grace and broad stakeholder responsibility.
Vale is a 67-year old Brazilian company that many people still remember as Companhia Vale do Rio Doce or CVRD, and that until fairly recently operated essentially only in Brazil. It is now in 36 countries and the world’s largest producer and exporter of iron ore, and thus certainly worthy of a lot of recognition. And to its particular credit, much of Vale’s growth has been organic and achieved through steady investments in modernizing its mines and rail and port infrastructure, especially in South America and Africa which it sees as “the future of the world’s natural resources and of food production.”
But what really angers me is that all the while Vale has been executing of late on its grand global mission, it is, to quote the FT, “embroiled in a long-running dispute” with its workers here in North America, a dispute that I lay squarely at the feet of its CEO, Roger Agnelli, and that arises from nothing other than Vale’s greed and Agnelli’s obstinacy.
And all the while, Vale, under the leadership of Agnelli, is also a long way from being the world’s ‘most environmentally friendly’ mining company, and it has at best only a passing interest in seeing South America and Africa enjoy the important fruits of non-resources based development. It is critical that powerful nations and powerful multinational corporations never again treat with disregard countries, regions and continents as their storehouses, bread baskets, cheap labor sources, or environmental dumping grounds — yet this is precisely what Vale does every day, to one degree or another.
Now, here in North America we are seeing firsthand Vale’s insensitivity to its workers and their communities, as it tries to run away from fair wages and benefits that are the product of longtime collective bargaining.
When Vale purchased the large nickel mining company Inco in a high-value auction in late 2006, it promised not to reduce the workforce for three years. But the company, now called Vale Inco, broke that pledge in a big way in March 2009 when it laid off workers and shut down operations for two months. Immediately thereafter, the company demanded from its remaining workers, who are mostly represented by the United Steelworkers, harsh concessions while conditioning any bargaining on workers first accepting these concessions.
As unfair as they would be in good times, the cruelty of these demands in a recession is beyond the pale — and then to further drive home its power over its employees, Vale used the resulting — and ongoing — strike as the excuse to cut many of its ties with local services companies and to offshore that work and related jobs. Almost nothing in labor relations is more vile than ‘conditioned bargaining,’ yet Vale has made this approach the base of its demands — and just this past weekend, using this demand, it again cavalierly broke of all negotiations for the umpteenth time.
For all the accolades it is receiving from the financial community — heck, the company earned $5.3 billion in 2009! — Vale is obviously employing the global economic crisis to impose on Vale Inco its philosophy that corporations bear no duty to meaningfully share gains with or to accept long-term responsibilities to others than just shareholders. Vale’s concessionary demands clearly illustrate this intent — even if the concessions Vale is demanding saved the company $25 million in the first year, which is a fair estimate, they would change Vale’s cost of extracting nickel by only about 5 cents per pound, yet these demands, which have been accompanied by some of the most aggressive anti-union tactics since the Appalachia ‘coal wars’ in the 1930s, would economically devastate the company’s 3,500 union employees and their communities.
Politicians of all stripes are fond of saying that “our best days are still ahead of us,” or words to that effect. Part of me — my heart, I think — dearly wants to agree with this.
The problem, however, is that getting to these best days isn’t going to happen automatically. Whether as a person, a CEO, a company or a society, it’s going to take smarts, courage, vision, sacrifice and persistence — plus, for the CEO in that crowd, grace and a broad, unselfish sense of responsibility.
*** Leo Hindery Jr. is the author of “It Takes a CEO: It’s Time to Lead With Integrity” (Free Press, 2005). He is a member of the Council on Foreign Relations and serves on the Board of the Huffington Post Investigative Fund. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor, AT&T Broadband.
Defying popular stereotype, CEOs and labor representatives sat on a panel and largely agreed on major issues confronting industry and working people.
It happened Monday, Nov. 30 as CNBC taped “Meeting of the Minds: Rebuilding America” in a hall at Carnegie Mellon University before an audience of nearly 600 students, businessmen, steelworkers and other trade unionists.
For the broadcast Dec. 2 at 8 p.m., host Maria Bartiromo said the Steel City of Pittsburgh was chosen because:
“It was here that America’s soul was forged.”
She assured the audience that the panel of speakers – Dan DiMicco, President and CEO of Nucor Corp.; Bill Ford Jr., Executive Chairman of Ford Motor Co.; Jeff Immelt, Chairman and CEO of General Electric; John Engler, President and CEO of the National Association of Manufacturers; U.S. Labor Secretary Hilda Solis, and me — would tell them how to put America back on track.
Since precious few Americans, even those in the same political party, agree on how to realign America, that’s when a typecast smack down between CEOs and unionists might have begun.
But it didn’t. That’s because on the most crucial issues, like manufacturing strategy and trade policy, the panel pretty much concurred.
Really.
For example, this is the United Steelworkers’ position on manufacturing strategy: America needs one.
The lack of a strategy handicaps the U.S. when it attempts to compete with virtually every other industrialized nation in the world. They have policies. They’ve decided which manufacturing areas they’re going to emphasize and support. And they do that with taxes, tariffs, loans, grants, even higher education guidelines.
As I said that night:
“We need to have a plan. All the other major countries in the world have plans. I am not mad at China. I am mad at us. They are doing what they need for their people.”
Bill Ford and Dan DiMicco joined that position.
Ford said, for example, that he met recently with the president of another country where his company manufacturers cars. That president, who he did not name, asked, “How can I help you?” Ford said that country already had a manufacturing strategy, so he could have a conversation with that government. But, he said, today, in the United States, that same conversation “is almost impossible because there is no policy.”
DiMicco agreed. He stressed that a manufacturing agenda must be designed, and he said he believes that is now being done with the support of President Obama’s administration. “We need to create jobs for 30 to 40 years, not the short term,” he said.
Here’s something else we agreed on: trade laws must be enforced and improved. The failure to do so has led to huge U.S. trade deficits and the migration of millions of good, middle-class manufacturing jobs overseas.
Several USW officers went to Washington, D.C. the day after the CNBC show taping to testify before the U. S. International Trade Commission in an attempt to save the U.S. industry that makes specialized steel pipe that is called oil country tubular goods. Between the end of 2008 and September of 2009, this industry lost 2,421 workers because of a killer cascade of unfair Chinese imports.
The USW union is joined in this petition by U.S. Steel Corp., Maverick Tube Corp., Evraz Rocky Mountain Steel, TMK IPSCO, V&M Star LLP, V&M TCA, and Wheatland Tube Corp. Now there are a few more CEOs who agree with the USW.
During the CNBC taping, Immelt conceded that the policy of trying to put factories on barges to ship them overseas in search of the lowest labor costs, “has turned out to be not such a good idea.” For manufacturers like GE, and the U.S. workers who lost those jobs, America must enforce trade laws and create a manufacturing policy to establish the incentives essential to keep those factories at home in the U.S.
I have been ranting about trade for a long time. Rarely have I heard someone as angry about it as I am. But DiMicco clearly is. Listen to what he told the CNBC audience:
“You should be a lot ticked off about the failed trade policies in Washington, D.C. . . . That has destroyed the middle class in this country.”
One of those from the audience permitted to ask the panel questions seemed more ticked off about the trade union movement than failed trade policies. She asked Ford if shedding the United Auto Workers would enhance his bottom line.
He said no:
“We are very happy with our union work force. There is a misconception that we want to get rid of the union.”
He said Ford collaborates with its union workers. He noted that he is a fourth generation Ford and walks through plants greeting many fourth generation UAW workers who are committed to Ford’s success. “Together we have gotten a lot done,” he said.
Union leaders have no qualms about negotiating with CEOs like Bill Ford for a fair split of the profit-pie in collective bargaining. But first, working together, we must make sure – with a manufacturing strategy and strong, enforced trade laws – that there is a pie.
As rescue attempts go, the Obama administration and its Auto Task Force are pursuing a peculiar course: They seem intent on keeping General Motors and Chrysler afloat as corporate entities by tossing more U.S. workers overboard.
Even as unemployment rates soar in longtime GM-centered communities hit by shutdowns, such as Janesville, Wis. (14.7 percent), and Flint, Mich. (15.3 percent), Obama and his task force pressed GM and Chrysler for more cuts. GM plans to shut down at least 14 factories and discard some 21,000 workers. Chrysler is closing eight U.S. plants, though it claims that somehow its merger with Fiat will result in a new increase of 5,000 jobs. In a telling observation that carried unsettling echoes of Bill Clinton’s push for NAFTA, the New York Times called the job cuts and other worker sacrifices “steps that most analysts thought could never be pushed through by a Democratic president allied with organized labor.”
The most recent version of GM’s recovery plan-closely tailored to the demands of the task force-calls for a stunning 98 percent increase in autos produced in Mexico, China, South Korea and Japan for the U.S. market. In May, the United Auto Workers (UAW) and United Steelworkers launched a 36-city campaign to prevent GM “from importing small cars from China, a move that would have increased GM’s profits while very likely reducing the number of domestic automobile jobs,” the New York Times reported June 2. This last-minute drive was successful, but it’s still unclear exactly what modifications GM will make.
For its part, Chrysler announced May 1 (the day after it filed Chapter 11 bankruptcy) the closing of its Kenosha, Wis., engine plant and the transfer of many of the plant’s 850 jobs to Mexico. As recently as the day before, top Obama administration and Chrysler officials had assured Wisconsin legislators that the Kenosha plant would be preserved. Faced with a firestorm of protest for using federal dollars to transfer jobs to Mexico, Chrysler now says that Fiat will consider keeping the plant open.
On top of all that, job losses will balloon with the closing of more than 1,100 GM and 789 Chrysler dealerships, eliminating tens of thousands more jobs.
Although Obama hasn’t ordered auto industry cuts himself, “the revamping of the nation’s largest car company is being guided by the administration’s auto-industry task force, and it follows the president’s calls for a leaner, healthier industry,” DowJones.com reported on May 12. The Obama administration’s downsizing of the auto industry, established as a precondition for approximately $30.5 billion extended thus far in loans to GM and Chrysler (with another $20 billion in the pipeline), sharply contrasts with the lightly-conditioned, larger bailout of Wall Street. Nomi Prins, author of It Takes a Pillage, a forthcoming book on the Wall Street meltdown and its roots in Washington, estimated that Wall Street has received $12.5 trillion-nearly 400 times more-in loans, loan guarantees and taxpayer subsidies for the sale of risky loans.
Contradictory policies
Only three of the Auto Task Force’s members were notably pro-labor, despite protests from labor and auto-state lawmakers. “The Auto Task Force members are basically red-pencil types who looked at saving the auto industry on the cheap without much consideration to social costs, let alone generating green alternative jobs for auto,” says economist and author William K. Tabb. “They have the narrowest business criteria for auto, unlike the banks that got capital and loan guarantees worth trillions. So their focus was to save the auto companies but not the auto workers.” Essentially, Obama and the task force wanted a quick and cheap solution to the Big Three’s ailing finances rather than providing an endless flow of resources, as the government did to the “too-big-to-fail” financial sector.
Bizarrely, the Auto Task Force’s policy direction dramatically undercuts Obama’s $787 billion economic stimulus program. “The problem with GM’s new Washington-mandated restructuring plan is that it steps on the gas in the wrong direction,” UC Berkeley professor Harley Shaiken told NPR’s “Marketplace.” “The stimulus package spends $800 billion to create jobs, while billions in loans to GM are conditioned on eliminating them.”
In addition to the factory job and dealership cuts, GM will unload its Pontiac, Saturn and Hummer brands. By contrast, the Italian government provided $1.7 billion in aid to Fiat as long as Italian plants stay open, noted Robert L. Borosage of the progressive coalition Campaign for America’s Future. Also, France loaned $8.5 billion to its big three automakers, in exchange for pledges to keep jobs in France.
Labor advocates fight back
After months of the UAW trying to avoid a fight with Obama, in early May it began openly challenging the use of taxpayer loan money to finance the outsourcing of jobs. “We believe (GM) should have an obligation to build in this country the vehicles it will be selling in the U.S. market, thereby maintaining the maximum number of jobs in the United States,” UAW legislative director Alan Reuther wrote to the Senate.
Former Clinton Secretary of Labor Robert Reich blasted the notion of paying billions of taxpayer dollars to keep companies afloat while they cut tens of thousands of jobs and wages. “We’re transferring money from taxpayers to Big Three shareholders for no apparent reason other than the Big Three are headquartered in America,” he said. “Why should taxpayers foot any of this bill unless the Big Three agree to keep their workers employed while they try to turn themselves around?”
The full answer to that question remains unanswered at this moment, as the two corporations’ plans for future outsourcing are unavailable. But significantly, the Auto Task Force didn’t explicitly require that federal assistance be directed to renewing production in the United States. Furthermore, following conventional management wisdom, “the Obama administration structured the GM and Chrysler plans to lessen the union’s voice in management,” the New York Times stated.
But so far, the mainstream media hasn’t much noticed or criticized the contradictions between Obama’s plans to simultaneously stimulate job growth and shrink GM and Chrysler. With all the attention on unwarranted Wall Street bonuses, major media lump Wall Street brokers’ compensation and CEO pay with autoworkers wages as part of the same culture of “excess.” Reports that autoworkers were paid as much as $73 an hour quickly spread through the media.
Actually, the typical wage is $26 to $28 an hour, plus an additional $10 or so in benefits, according to the Center for Automotive Research. UAW’s agreement to accept a new starting wage of $14.20 an hour with vastly reduced benefits received little attention. Neither did the fact that UAW-represented plants ranked “very favorably” on quality and productivity compared to Japanese “transplants” in the United States, according to independent industry assessments.
Shielded by a lack of accurate and coherent media analysis, the Auto Task Force used a narrow and conventional single-firm turnaraound framework to create a strategy for GM and Chrysler. “A hedge fund wants to make money fast for its client-in this case, the taxpayer-without regard to social cost,” Shaiken says. “Unlike most clients, however, the taxpayer picks up the social cost. Longer unemployment lines and more foreclosures are devastating for the victims, not cheap for the rest of us.”
But the Auto Task Force seemed largely oblivious to the human costs of eliminating thousands of U.S. auto jobs. Obama and his task force withheld billions of dollars in new loans requested by GM until after the company came up with a more aggressive program of job cuts, plant closing and outsourcing. The Auto Task Force rapidly divorced the reinvigoration of GM and Chrysler from a longer-term shift to a fuel-efficient economy and production not just of high-mileage cars, but also of mass-transit equipment for buses and high-speed rail.
Ironically, GM’s ruthless downsizing of its U.S. workforce and outsourcing of jobs over the last 25 years diminished its leverage with the Obama team. GM has discarded 85 percent of its domestic production since 1990-and that was before it hit the current recession and the resultant nosedive in sales. It was no longer “too big to fail.”
So Obama and the Auto Task Force felt free to promote a recovery strategy for the two ailing auto firms that stands in appalling contrast to the generosity shown Wall Street. GM and Chrysler headquarters will remain intact, but thousands of U.S. workers will be vaporized, retiree health benefits could be put on the chopping block (especially at Chrysler) and numerous industrial communities will suffer permanent damage. And the Obama team has forfeited the opportunity to recast the current crisis into a fuel-efficient re-industrialization of America-right when the country needs the stimulus of high-wage green jobs the most.
Roger Bybee is a Milwaukee-based freelance writer and progressive publicity consultant whose work has appeared in numerous national publications and websites.
When General Motors filed for bankruptcy on Monday, it left behind a long trail of grievers– twenty-one thousand of them. The loss of these good, union jobs and the many more that will be shed when related businesses close are devastating families and communities. For Black workers, who are highly concentrated in the auto industry, these have long been some of the few reliable jobs that pay living wages, supplying families of color the with the possibility of entering the middle class.
As we now know, high levels of unionization equate with smaller income gaps between people of color and whites. But in the economy we’ve inherited from the last three decades of deregulation and declining union density, people of color are increasingly relegated to low-wage, precarious work that pays too little to support a family. Unless Congress acts now to ensure that work actually pays, these workers will have few options and we’ll only deepen the racial income and wealth divides.
A few months ago, I traveled to Michigan to interview dozens of people for “Race and Recession,” a new report released by the Applied Research Center. I met Leo Shipman, a 24-year-old Black man, who had recently lost his job in an auto parts factory in Detroit. “My biggest worry is my son,” he said about his 3-year-old. “You don’t know how you’re going to feed them. He doesn’t know the bills are running up, but I do.” When I met Shipman, he was on the edge of being evicted from his apartment.
With only a high school education–Shipman’s been trying to enroll in a technical college–securing a living-wage job proves elusive if not impossible. Because he had been underemployed, Shipman had no unemployment check coming in. It’s growing more likely that his only option will be to work a job that makes feeding his son a daily struggle.
As one of the last strongholds of union jobs shrinks, and people like Shipman are cast out, it’s time to confront some tough truths about work in our country. Black workers like Shipman have been hit especially hard by layoffs and closures because their concentration in the auto industry is higher than their overall share of the state’s labor market. In fact, across the labor market, workers of color are overrepresented in occupations with high unemployment rates. These include jobs in the service sector, as well as construction and transportation occupations. The loss of these auto industry jobs strikes a massive blow to the ability of workers, especially Black workers, to earn middle-class incomes, to save enough to pass on to their children and to achieve some financial stability. Indeed, the UAW was one of the first unions to organize Black workers and the implosion of GM further dismantles one of the mainstays of the Black middle class.
The collateral damage of job loss are taking their toll. Sandra Hines, a 55 year old Detroit native who I wrote about last week, lost the home her family owned for 40 years after her sister was laid off from GM and was forced refinance. The family was sold a predatory loan with an adjustable rate and was evicted after payments skyrocketed. As more people lose their jobs, more families will find themselves unable to pay their mortgages and more wealth will be drained. It is now clear that the perils of this situation go beyond these communities. Indeed, as we find in “Race and Recession,” the racially discriminatory predatory lending and foreclosure crisis was a central factor in pushing the economy into this recession.
As a country, we’re reckoning with the fall-out from decades of putting profit above people. As precious union jobs disappear, the time has come to ensure that those who are unemployed–disproportionately people of color–are able to enter employment that actually pays. Congress should immediately pass the Employee Free Choice Act (EFCA) so that workers can demand fair pay without intimidation. Since UAW now has a major ownership stake in the company, the workers who remain there will be taken care of, but the 21,000 workers who are getting pushed out will be less likely to find jobs with sufficient salaries and benefits, especially as the federal minimum wage increase to $7.25 next month still does not approximate a living wage.
Ultimately, as we recover from this recession, we need to make sure that the jobs we create and the economy we build help those who have been most hurt by the recession, which have disproportionately been families of color. Ensuring that good, sustainable jobs go to communities of color across the country is an essential part of building an inclusive and working economy.
***
Check out arc.org/recession to learn about how racial inequity rigged the economy and how to change the rules.
The proposition General Motors has presented to the United Auto Workers and American taxpayers in its latest restructuring plan is simple: You must pay for your own execution.
GM, which already took $15.4 billion in bailout money, wants another $11.6 billion and is offering in return this deal: It will close 16 of its American manufacturing plants, terminate 21,000 of its factory workers and double the cars it builds in low-wage Mexico, China and South Korea and ships back to the U.S. to sell.
There it is: GM is demanding that Americans pay to send their own jobs overseas.
In the world where corporate executives live, the one in which boards of directors grant CEOs multi-million dollar bonuses even after companies tank, maybe that’s not a perverse proposition.
But in the world where real Americans live, we’ve had enough of this crap. Decades of foolish tax and other federal policies that encouraged American manufacturing firms to throw Americans out of work and expatriate were bad enough. To expect American taxpayers to bankroll GM’s plans to layoff American workers and move their jobs overseas goes too far.
We’re taking a stand. It’s gotta stop here. The United Steelworkers (USW), the Alliance for American Manufacturing (AAM) and the Mayors and Municipalities Automotive Coalition (MMAC) are conducting an 11-state, 32-city protest bus tour. At each stop so far, hundreds of people have cheered our message: “Keep it Made in America.” And they’ve signed our petition calling for support of a simple idea: Buy it here; build it here. We will present the petitions at a teach-in conference in Washington, D.C. on May 19 when we will explain to elected officials why GM’s plan fails America and why they must require GM to submit a new plan supporting American jobs.
As much as for the UAW, this is a life and death struggle for the USW, American manufacturing, and for millions of Americans in good-paying jobs. Without manufacturing, America is in danger of attempting to subsist on an economy based on nothing more than amorphous derivatives, credit default swaps and Ponzi schemes. The Steelworkers represent hundreds of thousands of workers whose jobs depend on the auto industry, from steelworkers who make the steel, to the rubber workers who make the tires, to the glass workers who make the windshields, to the paper workers who make the glossy pamphlets.
Altogether, more than 7 million paychecks depend on the U.S. auto industry, including healthcare, education, service, retail and other jobs. This bus tour is about preserving those jobs, all of those jobs.
In just the past eight months of this recession, caused in huge part by recklessness on Wall Street, this country has lost 1.2 million manufacturing jobs, according to the U.S. Department of Labor. GM cannot take tax dollars to slash more. Former U.S. Labor Secretary Robert B. Reich agrees. Here’s what he told the Washington Post, “. . . it raises fundamental questions about the purpose of bailing out these big companies. If GM is going to do more of its production overseas, then why exactly are we saving GM?”
It’s not as if it’s impossible for a U.S. auto company to manufacture here. Ford Motor Co., which is not taking any bailout money, is investing $500 million in retooling its Michigan Truck plant outside Detroit so that it can make small cars that it will sell worldwide, including its next-generation, battery-electric Focus. And Chrysler, which is getting bailout money, has made a deal with Fiat under which the Italian car company will manufacture a small car in one of Chrysler’s U.S. assembly facilities, which, along with other long-term commitments, will eventually create 4,000 U.S. jobs.
On the first day of the bus tour, I was joined by the Rev. Jesse Jackson, actor Danny Glover, the angriest mayor in the U.S., Virg Bernero of Lansing, and U.S. Sen. Debbie Stabenow, among others.
The Rev. Jackson drew cheers as he remarked that somehow we’ve given billions to the “banksters,” yet somehow we’re still hemorrhaging hundreds of thousands of jobs and homes each month. He called for a moratorium on foreclosures and plant closings, and I’m with him.
Bernero is tired of Wall Street describing his father, a retired auto worker, as a legacy cost. His father is a human being, a senior citizen, who worked hard every day of his life and returned home exhausted from an honest day’s work. Now, however, Wall Street thinks it’s fine to reduce him to a sub-human term and cheat him out of the retirement benefits he earned.
Bernero’s father made things, real things that could be touched, held in the hand – not derivatives, not figments of the imagination that turned out to have less than no value at all.
Now Wall Street and GM must be made to understand that Main Street isn’t going to take it anymore. We’re not going to continue allowing corporate America to outsource the American dream. Bernero said it right: “This is America’s fight.”
Join us. Sign the petition. We have no intention of buying our own noose. We intend to win this fight.
AIG Chairman Edward M. Liddy gets the Creep of the Week award for his stunning, overwhelming, dumbfounding display of cluelessness.
Liddy not only awarded $165 million in bonuses to the very AIG employees whose risky speculation in credit default swaps bankrupted the once-great insurance giant, forcing it to beg for $170 billion in taxpayer bailouts, he then claimed he was a helpless victim of retention bonus contracts written before he took over in September. Here’s exactly what he said: “Quite frankly, AIG’s hands are tied.”
No other contender for this week’s Creep prize awarded by the USW sunk close to those depths of obtuseness. And in so many diverse areas! Let’s count the ways:
First, there’s Liddy’s claim that he just can’t squirm out of contracts. Boy, he’d be the first CEO on God’s green earth to be too feeble to break a contract. Think about it: Congress insisted that the Big Three auto companies crack open their contracts with the United Auto Workers to qualify for federal bailout money. Union contracts at all sorts of companies across this country have been broken, bent, re-opened and renegotiated by cooperative labor organizations willing to accept a variety of cuts to preserve employment during an economic crisis caused by the likes of, well, let’s face it, reckless speculators at AIG! But, somehow, Liddy couldn’t find a way to break, bend, re-open or renegotiate contracts with the white collar workers who caused the mess taxpayers are both suffering and cleaning up.
Second, there’s Liddy’s claim that he had to honor the bonus contracts or he’d be sued by his employees. With a straight face, Liddy asserted that the employees in AIG’s Financial Products subsidiary who neglected to account for the possibility of a decline in real estate prices would actually list their names on court documents contending they deserved extra money after bankrupting the company. If Liddy thinks there’s a jury in America that would buy that argument and award the bonuses, I’ve got some credit default swaps I’d like to sell him. It’s clear, in fact, even Liddy doesn’t buy the argument since he’s declined to publicly release the names, though he has given a great deal of information – under duress – to New York Attorney General Andrew M. Cuomo who is working on a lawsuit to recover the bonuses for taxpayers.
Third, there’s Liddy’s failure to understand these simple facts: people who caused a company’s demise don’t get bonuses and neither do employees of companies getting bailouts with federal tax dollars. The average AIG bonus payment was $395,000 – though 51 employees got more than $1 million and the winner of the fattest bonus got $6.4 million. Liddy told Congress he has asked some of the 418 recipients to return half of their bumps. If all 418 complied, the average would decline to a mere $197,500. That may be chump change to a Wall Streeter, but it is a life-saving sum to a middle class worker who has lost his job or can’t pay his mortgage because of Wall Street’s greed and recklessness. In addition, there’s an important reciprocal issue Liddy failed to understand: the fury he has provoked by paying those bonuses has made the middle class even less willing to invest their tax dollars in any future bailouts that Congress may claim AIG or Wall Street banks desperately need.
Fourth, there’s Liddy’s ability to treat with reverence those who caused the financial meltdown while regarding with disdain those who suffer as a result of it. It was Liddy’s contention that his white collar workers were special. He had to give them the bumps, or they would abandon AIG, refusing to clean up the mess they’d made. That didn’t apply to auto workers, though. No one cared what happened to them. They could be furloughed as a result of Wall Street’s misbehavior — and pay taxes to clean it up as their bonus. But what’s worse is the level of continued boldfaced, outright deception from Liddy and his like. The bumps were crucial for retention, he said, right? Wrong. Cuomo discovered that 11 big time bonus beneficiaries – those who got $1 million or more – had already left AIG.
Fifth, Liddy acted as if the American people didn’t already own 80 percent of his company. Earlier this month, after AIG reported a $61.7 billion quarterly loss, the largest in corporate history, the federal government promised to help prop it up by giving it another $30 billion in taxpayer dollars. The solution here is simple, as the Washington Post pointed out in a story last week. If the feds simply insist on a 100 percent share of the company, which, frankly, the American people deserve for that kind of investment, the bonuses stop.
In addition to Creep of the Week, Liddy gets a special bonus award: Clueless of the Week.
Leo W. Gerard: The likes of Alabama Sen. Richard C. Shelby and other “Toyota Republicans,” as I call them, contend that GM and its partners in the Big Three American auto makers are antiquated and irrelevant and should be euthanized. You’ve written a book, “Why GM Matters” that refutes Shelby’s premise by establishing that GM has remade itself as a company and is crucial to the American economy. I believe you. Why do so few others?
William J. Holstein: One major problem is that so many attitudes were formed five, 10, 20 years ago-long before GM began its transformation in earnest. These people, out of ignorance of the facts, are recycling old myths like these: GM can’t design cars that Americans want to drive. GM can’t innovate. GM hasn’t been willing to reduce its cost structure to compete internationally. And so on.
Then there are other people who are consciously trying to destroy or further cripple GM by recycling those arguments. One is U.S. Sen. Richard Shelby, who has four transplant factories in his home state of Alabama. It turns out that the Southern Republicans are working on behalf of their home states, and their home states have given hundreds of millions of dollars in incentives to Toyota, Nissan, Honda, Hyundai, BMW, Mercedes and others.
There is another lobby, which I call the “Bankruptcy Lobby,” that is trying to push GM into Chapter 11 because these bankruptcy lawyers and their law school allies would profit handsomely from it.
Gerard: So, to quote the book, here’s what you actually say:
“Free marketers had felt obliged to go along with the $700 billion {bailout} for Wall Street because Treasury Secretary Henry Paulson (the CEO of Goldman Sachs at the very moment that it had become embroiled in Wall Street’s love affair with mega-leverage) had convinced them the entire financial system would shut down if they did not.
“But when it came to the auto industry and the UAW, they wanted to slam the brakes on. Part of it also was sheer spite: Republicans were reeling after one of their most devastating electoral losses in history. The auto industry, and particularly, the United Auto Workers, had helped get the Democratic vote out and deliver the crucial swing states of Michigan and Ohio to Barack Obama.”
Are you actually saying that Republicans were willing to vote against the good of the country out of spite?
Holstein: Sad to say, but true. They are not acting in the national interest. They are playing for their home states. They have the right to do that. But everyone should be able to understand what they’re doing, and why. I blame the media for picking up comments from Shelby and others (“GM is a dinosaur”) and printing them, without subjecting them to critical scrutiny.
Gerard: Then you go on to say that the presence of “transplant” factories, or manufacturers like Honda and Toyota from foreign countries located in states like Shelby’s Alabama made a difference for some of these senators. And you cite Shelby as an example, noting that Honda, Hyundai, Mercedes and Toyota all located plants in Alabama with the help of state funds, but then he refused to provide federal funds for an American company. So are you saying that these senators were willing to vote for something that was bad for the U.S. – the bankruptcy of the Big Three – because it might provide more business for their home states?
Holstein: As I’ve said, I think that’s exactly what they’re trying to do.
Gerard: Oddly, considering the treatment of the UAW in the press, you manage not to lay blame for GM’s situation on the union. In fact, you say that by last spring, “The Harbour Report,” which you call the bible of car-making statistics, said Toyota factories needed 30 hours to assemble a vehicle while GM required 32. So what does that mean in productivity and difference in labor cost per vehicle?
Holstein: GM and the UAW have made dramatic progress in improving the way the company’s cars are manufactured. They’ve done that by absorbing the Toyota lean production method. And by altering their own relationship, by transferring health care costs to the union’s VEBA and by implementing a two-tier wage system. It is estimated that GM will have stripped out $5,000 from the cost of each vehicle by 2010. The relationship between GM and the UAW is by no means perfect, but they have made big progress in helping the company begin to approach the cost structure that Toyota has at its Georgetown, Kentucky plant. This is truly an historic response to Toyota.
Gerard: You cite a fascinating statistic in your third chapter. You say that although the transplants like Honda and Toyota located factories in the U.S. and American manufacturers make some cars overseas and import some parts, GM’s chief economist estimates that Toyota’s U.S. content is 50 percent while GM’s is 75 percent. What does that mean in the long run to Americans, in terms of jobs and the economy, for each GM car made?
Holstein: I don’t think it’s too dramatic to say that we are in the process of defining what kind of economy we want to have as Americans. Do we want to have an economy where we have many higher-paying jobs in finance, design, engineering, management, marketing (and in GM’s case, those jobs all depend on the folks working on the line) or do we want to send our kids to work in foreign-owned factories where a majority of the higher-value added functions are performed in Japan or Korea or Germany? You have heard it said, no doubt, that it doesn’t make a difference whether it’s a GM job in Michigan or Ohio or a Hyundai job in Alabama. The impact is the same for the American economy, so they say. But that statement is based on a very superficial understanding of auto manufacturing. In fact, it’s plain stupid.
Gerard: What I found striking about your book is that it took a hard look at Toyota as well. Here is a company that the Republicans glorified all through those hearings. Some said let the Big Three fail and Toyota can pick up the slack. And yet, Toyota’s sales fell off dramatically last year, and it posted a loss too. Wasn’t it simply affected by the same market forces that GM was? And if so, why does it retain an aura of perfection?
Holstein: Yes, Toyota has almost had a Teflon coating. The media and political leaders who are so critical of GM seem to turn a blind eye to what Toyota is doing. They glorified its Prius hybrids, which were undeniably a good thing, but ignored the fact that Toyota’s much more important push was into full-sized pickup trucks, which hasn’t worked. Toyota’s design also has fallen behind GM’s. Their cars aren’t as sexy or as fun to drive. They’re like appliances on wheels. Toyota’s reputation for quality is even suffering, as they launch recalls in the United States and Japan. Consumer’s Reports no longer issues an automatic recommendation for every Toyota car. So yes, things are changing at Toyota. I think we’re seeing them go through a period of consolidation or doubt. No company can avoid making mistakes forever.
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William J. Holstein is an author, writer and magazine editor. Before “Why GM Matters: Inside the Race to Transform an American Icon,” (Walker and Co.), he wrote two other books, “Manage the Media” and “The Japanese Power Game.” He has written for “United Press International,” “Business Week,” “The New York Times” and “Fortune” magazine and served as an editor for a decade for “Business Week,” managing the magazine’s Asian coverage. He covered the American economy and the auto industry for “U.S. News.”
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In a related matter, U.S. Rep. Tim Ryan, D-Niles, spoke with passion in Congress on March 10 about how crucial it is to sustain the U.S. auto industry. Watch him here:
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In 1941, car manufacturer Willys-Overland demonstrated the strength and sturdiness of its new Army scout vehicle – the Jeep — to Congress by driving it up the U.S. Capitol steps.
Invented and manufactured in the USA, the Jeep would become an icon of American ingenuity, durability and mechanical ability. Soldiers loved the lithe little vehicle for its uncanny capacity to go anywhere. The New York Museum of Modern Art would exhibit it in 2002 and describe it as a masterpiece of functional design. Now it’s 68 and constructed by United Auto Workers for Chrysler in Toledo, Ohio.
Disregarding Jeep’s help in securing this country against fascists, conservatives like former Republican Massachusetts Gov. Mitt Romney are calling for its execution. Romney and his conservative compatriots want Congress to deny Chrysler, GM and Ford federal loans so that the Big Three go bankrupt. Using false wage information, these conservatives have persuaded the public that auto workers are overpaid. That has resulted in polls showing 61 percent of Americans oppose aid to the Big Three. And now Senate Majority Leader Harry Reed is saying he fears he can’t muster the votes necessary for a loan.
Congress cannot let the Jeep die in bankruptcy. Congress must not fail the U.S. auto industry. Doing so would be abandoning the core of the American economy – manufacturing. America is not built on Wall Street’s credit default swaps and collateralized debt obligations. Its wealth and culture are built on and built by middle class workers who construct actual products like steel beams, tires and Jeeps, who operate and repair machines that pull oil and coal out of the ground, who log trees and man the mills that convert them into paper.
Just after the end of World War II, when the Jeep first became a civilian vehicle, 35 percent of workers belonged to labor unions. That’s significant because union members earn 30 percent higher wages than non-union workers and are 59 percent more likely to have health insurance. Those better wages and benefits helped create the great middle class in America. Workers earned enough money to buy refrigerators and homes and cars and, later, college educations for their children. The money they earned and spent churned through the economy and kept it humming.
But over the next half century, union membership declined. So it is only about 12 percent now. Business and industry groups intent on the extinction of unions can claim credit for a good part of that. These are the same organizations that are today misleading the public about auto worker wages, claiming they make $70 an hour when it’s really $28. They’re the same ones advocating auto company bankruptcy because it would allow the Big Three to renege on their contractual promises to workers and to retirees. They criticize auto workers for making a decent living, $28 an hour plus health benefits and a pension. And they denigrate the companies for being decent corporate citizens and fulfilling their health care and pension promises to retirees.
Over the past half century, multinational corporations have shipped a significant number of those good-paying union jobs overseas. With the help of wrong-headed federal policy that encouraged it, the U.S. lost an average of 12,000 manufacturing jobs per month since 1980. Since May this year, the average has been nearly 60,000. Multinational corporations sought cheap labor and lax environmental regulations in places like China and Indonesia, in what has become an international wage race to the bottom. Americans supposedly benefit from the import of cheap goods. But unemployed workers can’t afford to buy them.
Along with the decline in jobs and union membership came a reduction in the rate of personal savings and an increase in household debt. The financial situation of the typical American family became increasingly precarious even as, over the past 25 years, the very richest one tenth of one percent accrued more and more wealth. These were the kind of guys involved in short-selling – a practice through which a person owns nothing but makes money by betting that a stock will lose value – and by selling sub-prime mortgage-backed securities. These were the kind of know-it-all Wall Street risk takers who gave themselves $30 billion in bonuses last Christmas.
You know what happened next. Three months after those bonuses the initial investment bank fell. Bear Stearns got the first big federal bailout in March. Then other financial institutions and a gigantic insurance company involved in the subprime speculation toppled: AIG, Washington Mutual, Fannie Mae, Freddie Mac, and Lehman Brothers. Congress quickly offered up $700 billion to save financial institutions, and giant Citigroup took $25 billion of that in October and another $20 billion in November trying to stave off bankruptcy.
Congress used taxpayer dollars – working people’s money – to save those year-end-bonus awardees on Wall Street. Then it stiffed the working stiff. So far, there’s been talk, but no actual help for millions facing foreclosure. And while unemployment is rising, Congress is dithering over the Big Three’s request for a loan that could save millions of auto worker and support industry jobs.
Unemployment increased to 6.7 percent in November, after 533,000 people got thrown out of work in just those 30 days. Over the past 12 months, 2.7 million people lost their jobs. And finally, what every one of them already knew was officially declared earlier this week – the country has been in a recession for a year.
This nation clearly can’t survive on what is produced by Wall Street – reckless speculation. That took America down.
This country should not be spending all of its financial resources salvaging those who destroyed the economy. America needs to invest in what works – its people. Congress must provide mortgage relief. But, most urgently, it’s crucial that we re-invigorate our manufacturing base. America must be able to actually produce products. Swapping paper is not enough to sustain a strong and stable middle class that will save money and buy cars and homes.
The Jeep helped us win World War II. What has Wall Street actually done for you? Saving the Jeep – and Chrysler, GM and Ford – would be a symbol that America understands manufacturing is key to a strong economy and financially brawny workers.
Jeep owners should let Congress know they’re prepared to drive up the Capitol steps to support loans for the Big Three and investment in American manufacturing.
