The Sanctity of AIG’s Contracts March 16, 2009Posted by rogerhollander in Criminal Justice, Economic Crisis, Torture.
Tags: AIG, aig bonuses, aig executives, chrysler, cia interrogations, contract concessions, contracts, Federal Reserve, ford, geithner, general motors, glenn greenwald, International law, Larry Summers, obama administration, roger hollander, treasury department, uaw, united auto workers
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Published on Monday, March 16, 2009 by Salon.com
We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.
The United Auto Workers’ deal with Detroit’s three automakers limits overtime, changes work rules, cuts lump-sum cash bonuses and gets rid of cost-of-living pay raises to help reduce the companies’ labor costs, people briefed on the agreement said today.
The UAW announced Tuesday that it reached the tentative agreement with General Motors Corp., Chrysler LLC and Ford Motor Co. over contract concessions, as GM and Chrysler sent plans to the Treasury Department asking for a total of $39 billion in government financing to help them survive.
Concessions with the union are a condition of the $17.4 billion in government loans that the automakers have received so far.
Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others. Either way, the Obama administration’s claim that nothing could be done about the AIG bonuses because AIG has solid, sacred contractual commitments to pay them is, for so many reasons, absurd on its face.
As any lawyer knows, there are few things more common – or easier — than finding legal arguments that call into question the meaning and validity of contracts. Every day, commercial courts are filled with litigations between parties to seemingly clear-cut agreements. Particularly in circumstances as extreme as these, there are a litany of arguments and legal strategies that any lawyer would immediately recognize to bestow AIG with leverage either to be able to avoid these sleazy payments or force substantial concessions.
Since the contracts are secret and we’re apparently just supposed to rely on the claims of AIG and Treasury Department lawyers, it’s impossible to identify these arguments specifically. But there are almost certainly viable claims to be asserted that the contracts were induced via fraud or that the bonus-demanding executives themselves violated their contracts. Independently, it’s inconceivable that there aren’t substantial counterclaims that AIG could assert against any executives suing to obtain these bonuses, a threat which, by itself, provides substantial leverage to compel meaningful concessions. Many of these executives were, after all, the very ones responsible for the cataclysmic losses.
The only way a company like AIG throws up its hands from the start and announces that there is simply nothing to be done is if they are eager to make these payments. One might expect AIG to do so — they haven’t exactly proven themselves to be paragons of business ethics — but the fact that Obama officials are also insisting that nothing can be done (even while symbolically and pointlessly pretending to join in the populist outrage over these publicly-funded “retention payments”) is what is most notable here.
Legal strategies aside, just as a business matter, one of the first things which every compnay in severe distress does is go to its creditors, explain that it cannot make the required payments, and force re-negotiations of the terms. That’s as basic as it gets. To see how that works, just look at what GM and other automakers did with their union contracts – what they were forced by the Government to do as a condition for their bailout. Obviously, if a company goes into bankruptcy, then contracts to pay executive bonuses are immediately nullified, but the threat of bankruptcy or serious financial distress is, for obvious reasons, very compelling leverage to force substantial concessions. And the idea that, in this economy, AIG executives (of all people) will be able simply to leave and go seek employment elsewhere unless they receive their “retention bonuses” (even assuming that’s an undesirable outcome) is nothing short of ludicrous.
There may be other reasons why the Treasury Department decided it wanted AIG to pay these bonuses (Marcy Wheeler considers some of those reasons here), but this claim from Larry Summers that the sanctity of contracts precludes any alternatives is not just false, but insultingly so. It’s difficult to recall anything quite so vile as watching hundreds of millions of dollars in taxpayer money flow to AIG executives. One would expect the Obama administration to do everything possible to prevent that from happening. Instead, they seem to be doing the opposite.
UPDATE: Jane Hamsher has more here on AIG’s insultingly frivolous claims as to why these contract obligations are unavoidable, and here FDL has a petition, to be delivered to the House Financial Services Committee during Wednesday’s hearing on the AIG payments, demanding full disclosure before any more payments are made.
On a related note, could someone please reconcile Larry Summers emphatic declaration that “we are a country of laws” with this:
To use Larry Summer’s eloquent phrase (perversely deployed to justify the AIG bonus payments): if “we are a country of law,” we would probably do something about these severe violations of law that are right in front of our faces, particularly since we all know exactly who the lawbreakers are.
Apparently, this “we are a country of law” concept means that hundreds of millions of dollars in taxpayer money must be transferred to the AIG executives who virtually destroyed the financial system, but it does not mean that something must be done when high government officials get caught plainly breaking the law. What an oddly selective application of the “rule of law” this is.
Tags: congress, constitution, crimes against humanity, Criminal Justice, cynthia boaz, Dick Cheney, extraordinary rendition, ford, George Bush, george stephanopoulos, gonzales, high crimes, International law, Iraq invasion, justice, justice committee, nixon, nuremberg, nuremberg principle, nuremberg trial, ollie north, president obama, reagan, reconciliation, retribution, roger hollander, rule of law, rumsfeld, special prosecutor, torture, truth commission, us attorney, War Crimes, weinberger, wiretapping, wolfowitz
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by Roger Hollander
www.rogerhollander.wordpress.com, February 19, 2009
(SEE UPDATE BELOW)
An essay entitled “Obama’s Justice: Reconciliation Not Retribution” appeared recently in the progressive online journal, Truthout.com (http://www.truthout.org/021809J). Its author is Cynthia Boaz, assistant professor of political science at Sonoma State University, who is described as a specialist “in political development, quality of democracy and nonviolent struggle.”
Professor Boaz’s approach was most annoying in that she felt the need to set up a straw man (the notion that those who want justice want it for purposes of retribution) and resort to the ad hominem by characterizing those who are pushing for investigations and prosecution of the Bush era crimes as “disgruntled, self-identified progressives” and comparing them to “villagers wielding torches and pitchforks.”
But such annoyances pale in light of the implication of her thesis in support of Obama as a “unifier,” and his mission of “reconciliation, not retribution” in an attempt to justify Obama’s oxymoronic and disingenuous statement that he believes in the rule of law but would rather look forward rather than backward.
(To her credit Professor Boaz acknowledges that the Bush administration may have committed misdeeds “which in some cases, rise to the level of crimes against humanity” and does not argue that they should not be brought to justice. Her point is that justice should not be politicized, that the president should not seek “retribution” for his predecessor)
In the real world justice in fact usually occurs in a political context – especially when crimes occur at the higher levels of government. Obama recognizes this and his remarks to George Stephanopoulos were in response to overwhelming public sentiment for him to appoint a special prosecutor as reflected in his transition sounding exercise. Presidents do appoint Special Prosecutors and the United States Attorney General. Presidents grant pardons, often controversial and often of a political nature (Ford/Nixon; Reagan/Weinberger, North, Irangate). The political and the judicial are indeed intertwined.
Talking about “reconciliation” and “looking forward rather than backward” is in itself a blatant political intrusion in the world of justice. If Obama were not signaling to the heads of the Justice Committees in both houses of Congress (and the American people) that he would prefer for them to back off, then he simply would have affirmed his commitment to the rule of law and left it at that.
The evidence that is already in the public domain with respect to the knowingly false pretense for the invasion of Iraq, the high level authorization of torture, the extraordinary renditions, the wiretapping, the U.S. Attorney firings, etc. is so overwhelming that – in spite of the sacred principle of “innocent until proven guilty” – the American and world public cannot be faulted for demanding that the Nuremberg principles be applied to the neo-fascist Bush clique. That former Vice President Cheney, who is universally considered to have been the Bush administration Godfather, has been making the rounds boasting about his role in committing in effect what are crimes against humanity, constitutes an open challenge to anyone who takes the rule of law seriously. Given the literally millions of human beings whose lives have been destroyed or seriously debilitated by the actions of the Bush administration and the gross violations of constitutional and international law, the imperative for speedy justice within the context of due process is overwhelming.
What I fear is some kind of Truth Commission based on the premise of giving immunity for the sake of getting the truth out. This, I believe, is what Obama was getting at with his “looking forward” remark and what Professor Boaz would like to see. Such a notion mocks the concept and dignity of Justice. It gives no closure to those who have suffered at the hands of high level war criminals and it has little or no deterrent effect. What it is is politically expedient.
Do I expect to ever see Bush, Cheney, Rumsfeld, Gonzales, Wolfowitz et. al. in a United States court of law charged with high crimes? Honestly I do not (but I didn’t ever expect to see the election of an Afro-American president in my lifetime either). But genuine truth, reconciliation and justice demand that such high crimes be investigated and prosecuted; those who suffered deserve justice; and the future of what is left of constitutional democracy is worth fighting for.
What is more, if President Barak Obama or anyone else acts in any way to impede or frustrate the carrying out of justice, they become to some extent complicit with the principal perpetuators.
UPDATE (May 1, 2009)
There has been a lot of -pardon the pun – wate(boarding) under the bridge since I wrote this piece in mid February. If you surf around my Blog or the many Blogs I post on it, you will find dozens if not hundreds of articles on the issue of torture and criminal responsibility for it. Just today, for example, I posted an excellent article by Glenn Greenwald that appeared in salon.com which documented the words of, of all people, Ronald Reagan, who, in introducing the law that made torture a serious crime in the United States, states that torture is a crime, with no exception for extraordinary circumstances (including, presumably, the phony “ticking time bomb” scenario). Ronald Reagan!
Professor Boaz, who is the target of my criticism in the original article above, had argued that those of us demanding that now President Obama take criminal action against the Torturers were misunderstanding the role of the presidency. Investigation and criminal prosecution in the bailiwick of the Judicial System, not the presidency she tells us. I wonder what she is thinking now that President Obama has heard, tried and exonerated the CIA agents who carried out the war crime known as torture.
During the longest eight years in history that we lived through under Bush/Cheney, one felt that what was happening as if it were in the realm of the surreal. Anti-war election results, and the war escalates (excuse me, surges). Torture with impunity. Habeas Corpus out the window. Warrantless wiretapping. An ideologically politicized Justice Department. Signing Statements allowing the President to ignore laws passed by Congress. Dr. Strangeglove figures such as Rumsfeld, Wolfowitz, Rice, Gonzales; and Darth Vader himself disguised as Dick Cheney, bunker and all.
May the goddess help me, I am having the same surrealistic dizziness all over again. The Attorney General declares that waterboarding is torture. Torture is a crime. Therefore … do nothing about it. The President releases evidence in the form of the infamous torture memos that, that along with photographic and other (International Red Cross, for example) evidence, leaves no doubt about the nature and extent of the torture; and then he proceeds to grant amnesty to those who committed the crimes. They were only following orders, he says, as the Nuremburg amnesia sets in alongside the swine flu. Pelosi and Reid want investigations … in secret (!). The mainstream media, as it did under Bush/Cheney, plays along with the Alice in Wonderland fantasies, and the maniacs on the neo-Fascist Right have convinced a signficant percentage of Americans that torture is not a crime under “certain circumstances.” The torture memos written by John Yoo and Jay Bybee are so patently phony and Kafkesque that Yoo is invited to teach law in Orange County and Bybee is made a Federal Judge.
It has been suggested that President Obama doesn’t feel there is the political will to prosecute the war criminals, which is why he has been so wishy-washy, but that he has released the tortue memos and is soon to release more photos as a way to achieve that will. I don’t believe this, but that doesn’t matter. Only by latching on to the the issue like a pit bull and refusing to let go can we who believe in Decency and Justice bring the American War Criminals to justice.
A Recipe for Corporate Success in Tough Times? SaladShooters, Adult Diapers and Tactical Ammo December 16, 2008Posted by rogerhollander in War.
Tags: afghnaistan, ammunition, antiprsonnel mines, artillery, boeing, cannon rounds, contractors, corporations, dod, dow, Economic Crisis, flechette, ford, general tire, gm, howitzer, International harvester, Iraq, lockheed, military, national presto, nick turse, Pentagon, pin bullets, roger hollander, technology killing, vietnam, war, war profiteering, weapons, whirlpool
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While many companies have moved away from arms production, the line between civilian industry and military contracting continues to shift. (Photo: State Museum of Pennsylvania)
15 December 2008
by: Nick Turse, TomDispatch.com
Is it possible that one of the Pentagon’s contractors has a tripartite business model for our tough economic times: one division that specializes in crock-pots, another in adult diapers, and a third in medium caliber tactical ammunition? Can the maker of the SaladShooter, a hand-held electric shredder/dicer that hacks up and fires out sliced veggies, really be a tops arms manufacturer? Could a company that produces the Pizzazz Pizza Oven also be a merchant of death? And could this company be a model for success in an economy heading for the bottom?
Once upon a time, the military-industrial complex was loaded with household-name companies like General Motors, Ford, and Dow Chemical, that produced weapons systems and what arms expert Eric Prokosch has called, “the technology of killing.” Over the years, for economic as well as public relations reasons, many of these firms got out of the business of creating lethal technologies, even while remaining Department of Defense (DoD) contractors.
The military-corporate complex of today is still filled with familiar names from our consumer culture, including defense contractors like iPod-maker Apple, cocoa giant Nestle, ketchup producer Heinz, and chocolate bar maker Hershey, not to speak of Tyson Foods, Procter & Gamble, and the Walt Disney Company. But while they may provide the everyday products that allow the military to function, make war, and carry out foreign occupations, most such civilian firms no longer dabble in actual arms manufacture.
Whirlpool: Then and Now
Take the Whirlpool Corporation, which bills itself as “the world’s leading manufacturer and marketer of major home appliances” and boasts annual sales of more than $19 billion to consumers in more than 170 countries. Whirlpool was recently recognized as “one of the World’s Most Ethical Companies by the Ethisphere Institute.” The company also professes a “strong” belief in “ethical values” that dates back almost 100 years to founders who believed “there is no right way to do a wrong thing.”
In the middle of the last century, however — as Prokosch has documented — Whirlpool was engaged in what many might deem a wrong thing. In 1957, Whirlpool took over work on flechettes — razor-sharp darts with fins at the blunt end — for the U.S. military. While International Harvester, the prior Pentagon contractor producing them, had managed to pack only 6,265 of these deadly darts into a 90mm canister round, Whirlpool set to work figuring out a way to cram almost 10,000 flechettes into the same delivery vehicle. Its goal: to “improve the lethality of the canisters.” (In addition, Whirlpool also reportedly worked on “Sting Ray” — an Army project involving a projectile filled with flechettes coated in a still-undisclosed chemical agent.)
In 1967, an Associated Press report noted that U.S. troops were using new flechette artillery rounds to “spray thousands of dart-shaped steel shafts over broad areas of the jungle or open territory” in Vietnam. “I’ve seen reports of enemy soldiers actually being nailed to trees by these things,” commented one Army officer.
On a recent trip to Vietnam, I spoke to a Vietnamese witness who had seen such “pin bullets” employed by U.S. forces many times in those years. In one case, Bui Van Bac recalled that a woman from his village, spotted by U.S. aircraft while she was walking in a rice paddy, was gravely wounded by them. Local guerillas came to the woman’s aid and brought her to a hospital where a surgeon found a number of extremely sharp, three centimeter long “pins” inside her body. Medically, it was all but hopeless and the woman died.
A top player in lethal technologies back then, Whirlpool is now among the tiniest defense contractors. While, in recent years, the company has ignored requests for information from TomDispatch.com on their dealings with the Pentagon, records indicate that last year, for example, it received just over $105,000 from the Department of Defense, most of which apparently went towards the purchase of kitchen appliances and household furnishings.
Similarly, Whirlpool’s predecessor in the flechette game, International Harvester, is now Navistar International Corporation. Navistar Defense, a division of the company,
remains one of the Pentagon’s stealth “billion dollar babies.” But while it did more than $1 billion in business with the DoD last year, Navistar appears to have been building vehicles for the Pentagon, not creating anti-personnel weaponry. There are, however, companies that can’t seem to say goodbye to lethal technologies.
National Presto Industries
National Presto Industries traces its history to the 1905 founding of the Northwestern Iron and Steel Works in Eau Claire, Wisconsin, according to the Business & Company Resource Center. By 1908, the company was making industrial steam pressure cookers and, in 1915, began making models for home use. On the eve of the U.S. entry into World War II, the company entered the arms game when it scored a multi-million dollar contract to produce artillery fuses. Even with that deal in hand, it was reportedly on the verge of bankruptcy when its new president, Lewis Phillips, landed a series of other lucrative military contracts.
In the early years of the Cold War, about the time Whirlpool was getting into the flechette business, National Presto Industries had just introduced “a revolutionary new concept in electric cooking… a complete line of fully immersible electric cooking appliances employing a removable heat control” — and was about to launch “the world’s first automatic, submersible stainless steel coffee maker.” The company was also still churning out war materiel.
In 1953, National Presto announced plans to build a multi-million dollar plant to produce 105mm artillery shells. In 1955, it was awarded millions to make howitzer shells for the Army, and the next year, millions from the Air Force for fighter-bomber parts. By 1958, company President Lewis Phillips would declare, “The future of this company in Eau Claire and hence the security of our jobs here is now almost wholly dependent upon defense contracts awarded by the U.S. Government.” When the Army cancelled its contracts with Presto in 1959, Phillips lamented, “With little or no notice, this Government decision has forced us completely out of the manufacturing business here in Eau Claire.”
The tough times didn’t last. Soon enough, National Presto returned to the fray, benefiting from the disastrous American war in Vietnam. From 1966 to 1975, the company manufactured more than two million eight-inch howitzer shells and more than 92 million 105mm artillery shells. In Vietnam, 105mm shells would kill or maim untold numbers of civilians, but it was a boom time for National Presto, which took in at least $163 million in Pentagon contracts in 1970-1971 alone for artillery shell parts. Finally shuttered in 1980, the company defense plant was kept on government “stand-by” into the 1990s, a sweetheart deal that earned Presto $2.5 million annually for producing nothing at all.
As the Vietnam War wound down, National Presto turned back to the civilian market with a series of new kitchen gadgets: in 1974, the PrestoBurger, an electric, single-serving fast broiler for hamburgers; in 1975, the Hot Dogger; and in 1976, the Fry Baby deep fat fryer. In 1988, the company introduced its wildly popular SaladShooter, followed in 1991 by its Tater Twister potato peeler. When sales of its SaladShooters, corn poppers, pressure cookers, deep fryers, and griddles became sluggish, however, weaponry again proved a savior.
In 2001, National Presto decided to get back into the arms game. Months before 9/11, the company’s chairman Melvin Cohen expressed fears that a future war might mean ruin for the company’s kitchen appliance business. As a result, Presto purchased munitions manufacturer Amtec. In the years since, according to Securities and Exchange Commission filings, Presto has also “made other complementary acquisitions in the defense industry.” These have included Amron, a manufacturer of medium caliber ammunition (20-40mm) cartridge cases and Spectra Technologies, which is “engaged in the manufacture, distribution, and delivery of munitions and ordnance-related products for the DOD and DOD prime contractors.” Such types of ammunition are extremely versatile and are fired from ground vehicles, naval ships, and various types of aircraft — both helicopters and fixed-wing models.
Additionally, in the months after 9/11, National Presto entered the diapers trade, setting up that business in its old munitions plant. In 2004, with Melvin Cohen’s daughter MaryJo now at the helm, the company further expanded into the business of adult-incontinence products. “I spent a couple of days wearing them,” the younger Cohen told the Milwaukee Journal Sentinel at the time. “They’re very comfortable.”
In 2005, Presto’s Amtec was awarded a five-year deal by the Pentagon for its 40mm family of ammunition rounds. By the end of last year, it had already received $454 million and was expecting the sum to top out, at contract’s end, above $550 million.
Just as 105mm shells of the sort produced by Presto were a nightmare for the people of Vietnam, so too has 40mm ammunition spelled doom for civilians in Iraq and Afghanistan. Earlier this year, the BBC reported on a typical joint U.S./U.K. attack on a home in Iraq in which insurgents had taken shelter. After exchanging ground fire, coalition forces called in an airstrike. According to the BBC, “The aircraft fired 40mm cannon rounds at the two houses, finally dropping a bomb on one of them. It collapsed. The other house was set on fire. The two insurgents in the house were buried but so were a number of women and children.” Similarly, in August, news reports tell us, U.S. troops called in an airstrike by an AC-130 — which packs 40mm cannons — that helped kill approximately 90 civilians in the village of Azizabad in Afghanistan, according to investigations by the Afghan government and the United Nations.
As in the past, war time has been a boom-time for Presto. In 2000, before the start of the Global War on Terror, National Presto’s annual sales clocked in at $116.6 million. In 2007, they totaled $420.7 million, with more than 50% of that coming from arms manufacturing. Earlier this year, Presto nabbed another 40mm ammunition contract (a $97.5 million supplemental award) set to be delivered in 2009 and 2010. According to official DoD figures, from 2001 through 2008 National Presto received more than $531 million, while Amtec has taken home another $171 million-plus. Their combined grand total, while hardly putting Presto in the top tier of Pentagon weapons contractors, is still a relatively staggering $702.8 million — not bad for a company known for slicing and dicing vegetables.
Death is Our Business and Business is Good
These days, most civilian defense contractors aren’t like Presto. General Tire and Rubber Company, for example, once lorded it over a business empire that produced not only car tires, but antipersonnel mines and deadly cluster bombs. Today, the company seems to have left its days of supplying the U.S. military with lethal technologies behind.
Dow Chemical classically drew ire from protestors during the Vietnam War for making the incendiary agent napalm that clung to and burned off the flesh of Vietnamese
victims. Dow got out of the napalm business long before the war ended, but, due to widespread protests at the time, the company is still living down the legacy today.
At a 2006 Ethics and Compliance Conference, Dow’s President, CEO, and Chairman Andrew Liveris recalled, “Believe me, we have had our share of ethical challenges, most of them very public… starting with the manufacture of Napalm during the Vietnam War… when suddenly we went from being a company that made Saran Wrap to keep food fresh to a kind of war machine… at least, according the characterizations of the time.” While Dow is still a defense contractor, its DoD contracts appear not to include the manufacture of weapons of any type. Instead, such companies have largely ceded the field to dedicated “merchants of death” — weapons-industry giants like Alliant Techsystems (ATK), Lockheed Martin, and Boeing.
Right now, National Presto Industries may look like a throw-back to an earlier era when companies regularly made both innocuous household items and heavy weapons. In a new hard-times economy, however, in which taxpayer dollars are likely to continue to pour into the Pentagon, could it instead be a harbinger of the future? Having proved that outfitting real shooters is even more lucrative than making SaladShooters, Presto has gotten rich in the Bush war years. It has, in fact, greatly outperformed the big guns of the weapons business. While the stocks of top defense contractors Lockheed Martin, Boeing, and Northrop Grumman have all lost significant value in the last year — down 29.3%, 55.3%, and 50.1%, respectively — National Presto’s stock price was up 28.1% as of mid-December.
It isn’t hard to imagine more civilian firms, especially ones which are already Pentagon contractors, getting into (or back into) the weapons game. After all, when the Big Three Detroit automakers were scrounging around for a bailout just a few weeks ago, they used America’s persistent involvement in armed conflict as one argument in their favor. For example, Robert Nardelli, Chrysler’s chief executive, told the Senate that the failure of the auto industry “would undermine our nation’s ability to respond to military challenges and would threaten our national security.” While that argument was roundly dismissed by retired Army Lt. Gen. John Caldwell, chairman of the National Defense Industrial Association’s combat vehicles division, it probably wouldn’t have been if the automakers made more weapons systems.
Will Presto be the back-to-the-future model for Pentagon contractors in the lean times ahead? Only time will tell. At the very least, it seems that, as long as Americans allow the country to wage wars abroad, require their salads to be shot, and have bladder issues, National Presto Industries has a future.
Copyright 2008 Nick Turse
Cutting Wages Won’t Solve Detroit Three’s Crisis December 9, 2008Posted by rogerhollander in Economic Crisis, Labor.
Tags: auto workers, automakers, automobile industry, bailout, bankers, bankruptcy, benefits, big three, bonuses, chevrolet, chrysler, concessions, congress, detroit, Economic Crisis, environment, executive salaries, ford, foreclosure, gas, general motors, global warming, healthcare, homeowners, insurance, jane slaughter, japan, jobs, labor, labor costs, labour, mark brenner, medicare, motor city, oil, pension, petroleum, roger hollander, steel, sticker price, suv, taxpayers, toyota, uaw, unemployment, uninsured, unions, wages, Wall Street, workers
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Automakers have blamed workers for the financial collapse of the Detroit auto industry. (Photo: motortrend.com)
Thursday 04 December 2008, www.truthout.org
by: Mark Brenner and Jane Slaughter, The Detroit News
In the 1980s, Chevrolet proclaimed itself the “Heartbeat of America,” but today the American auto industry barely registers a pulse. As Washington considers Detroit’s plea for life support, the only place where pundits, politicians and Big Three executives seem to agree is that auto workers must make do with less or watch their jobs disappear.
Some lawmakers have complained that unions are the source of the problem, but they fail to understand some inconvenient truths. According to the latest figures from the U.S. Commerce Department, every worker in Big Three factories could work for free and only shave 5 percent off the cost of their cars. The auto companies pay as much for hubcaps and fenders as they do in wages.
Data from the Harbour Report – the industry’s gold standard – reveal that even including their benefits, labor costs in the Big Three’s plants account for less than 10 percent of the sticker price.
No matter how you cut the numbers, demolishing auto workers’ living standards will not transform the industry. The Big Three have been trying for years. They have slashed at least 200,000 jobs since 2004, and last year they wrung billions of dollars in concessions from the United Auto Workers. The union instituted a second-tier wage of $14.50 an hour for new hires, lower than pay in the nonunion, foreign-owned auto companies in the South.
The impact is all too apparent in auto communities across the Midwest. Forty thousand Detroit homeowners are in foreclosure, and the unemployment rate has hit double digits in many auto towns. That suffering will multiply if one of the Big Three collapses, or if retired auto workers are punished for decisions they had no hand in.
Automakers’ decisions have been disastrous. While competitors developed gasoline-electric hybrids, Detroit mined the gas-guzzling truck and SUV market, making $104 billion in profits between 1994 and 2003. Wall Street and Congress weren’t calling for more research and development or curbing the company’s dividend payments and high-flying executive salaries back then.
Pundits crow for us to “Dump Detroit,” but they don’t advertise that through a bailout or the bankruptcy courts taxpayers will shoulder the burden of the automakers’ colossal missteps.
Washington shouldn’t back into a bailout – it should jump in feet-first. What’s needed is not a half-measure, a cash infusion in exchange for selling the corporate jets. Now is the time to take a sweeping look at the country’s needs.
Our first steps should confront global warming and oil dependence through a comprehensive overhaul of the transportation system. Federal policy hasn’t changed since the 1950s, when gas was a nickel a gallon.
Detroit, the Arsenal of Democracy, retooled in a matter of weeks when we needed tanks, not cars, in 1941. We could produce this century’s answer to the interstate highway system and build mass transit and high-speed trains.
That same sense of urgency is needed for vehicles that don’t run on petroleum. If American engineers can build satellites that read your license plate from outer space, they can develop an alternative to the gasoline engine.
Automakers need direction as much as financial support from Washington, just as Japan’s government molded Toyota into a world-class performer.
In every other industrialized nation, government has stepped in and given their auto companies a significant edge. Most important, they all adopted national health care and pension systems decades ago.
General Motors alone provides health coverage to a million people – workers, retirees and families. The annual price tag is about $5 billion, which, as CEO Rick Wagoner is fond of pointing out, is more than GM spends on steel.
That burden could be lifted, to the benefit of 47 million uninsured Americans, by adopting a Medicare-style program for everyone. It would save the nation as much as $350 billion per year now spent for insurance companies to shuffle paper and deny claims.
The fate of the Motor City captivates us because it speaks to our future. For 30 years, politicians have bowed to Wall Street, sitting by while wages for most workers stagnated. Big Three workers have maintained their living standards better than most, in no small part because they have a union. In a country where investment bankers gave themselves $30 billion in bonuses last Christmas, have we reached a point where $58,000 a year with benefits is too much to ask?
We once promised the pursuit of happiness to all, including the workers who make our factories run, not just those who trade credit default swaps. Now more than ever, we need to recapture that spirit with a thoroughgoing plan to rescue the environment, care for the sick and transform transportation.
Mark Brenner and Jane Slaughter work for Labor Notes, an independent monthly labor magazine in Detroit. It receives no support from the United Auto Workers.
Poll: 61% Oppose Auto Bailout December 4, 2008Posted by rogerhollander in Economic Crisis.
Tags: auto industry, auto sales, bailout, bailout unfair, bankruptcy, ben rooney, big three, chrysler, congress, Economic Crisis, economy, ford, general motors, gm, roger hollander, taxpayers
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Survey shows that Americans think federal aid for the Big Three is unfair and won’t help the economy.
NEW YORK (CNNMoney.com) — A majority of Americans oppose a bailout of the troubled U.S. auto industry, according to a poll released Wednesday.
The CNN/Opinion Research Corp. poll, conducted by telephone on Dec. 1-2 with nearly 1,100 people, showed that 61% of those surveyed oppose government assistance for the major U.S. automakers.
The poll comes at a critical time for the American auto industry. Ford Motor (F, Fortune 500), General Motors (GM, Fortune 500) and Chrysler LLC are requesting up to $34 billion in emergency loans from the government amid the weakest auto sales in 25 years and persistently tight credit.
General Motors and Chrysler, burning through billions of dollars in cash, are the most imperiled. All three companies submitted plans to Congress on Tuesday that made their case for funding, and industry executives are set to testify Thursday and Friday as lawmakers debate whether to take emergency action.
But Wednesday’s poll suggests that Americans believe bailing out the Big Three is a bad idea.
A full 70% of respondents indicated that a bailout is unfair to taxpayers.
In addition to being unfair, the poll showed that a majority of those surveyed think a bailout would not help the economy.
Sandeep Dahiya, a professor of finance at Georgetown University, said the poll results were “quite surprising.” The large percentage of those opposed to the bailout “tells you much about how what is good for GM is not good for America.”
But the disapproval reflected in the poll may not result in the kind of public backlash that occurred in response to the $700 billion bailout package Congress passed in October, Dahiya said.
“The numbers are a lot smaller and there’s more apathy,” in the public following a string of other bailouts in recent months, Dahiya said. Still, public resentment is “festering” and an auto industry bailout is “not going to be an easy sell,” he added.
Despite being opposed to federal support of the industry, the possibility of a bankruptcy among one or more of the Big Three automakers is a concern for a significant number of poll respondents.
While only 15% of those polled think a bankruptcy in the auto industry would have an immediate impact on their families, 43% think a bankruptcy would eventually have an effect on them.
Dahiya pointed out that a bankruptcy does not necessarily mean an automaker will stop making cars. “Ideally, a bankruptcy leads to a fresh start,” he said.