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Auto Bailout Failure Sets Up Union Battle


From left, United Auto Workers VP Bob King and Pres. Ron Gettelfinger and Ford Motor Company Exec. Chairman Bill Ford and CEO Alan Mulally after reaching an agreement last December. (Flickr: Ford Motor Company)

When Senate Republicans last week killed a $14-billion bailout of Detroit’s sputtering automakers, they reduced the debate to what they consider its essence: the power of organized labor.

Earlier sticking points involving oversight, emission standards and the source of the rescue money had all been resolved rather quietly. The deal killer came when Republicans demanded — and Democrats rejected — that members of the United Automobile Workers take a big pay and benefits cut next year.


Illustration by: Matt Mahurin

The Republicans’ insistence on union concessions is part of a larger GOP effort to diminish the role of organized labor across the nation, according to many labor experts, union leaders and Democrats. With Democratic congressional leaders vowing next year to take up contentious legislation to expand workers’ rights, Republicans are using the highly partisan battle over the UAW as a warm-up.

“After three weeks of hemming and hawing, it really became clear that this argument was about labor,” said Mark Brenner, director of Labor Notes, a Detroit-based labor-advocacy group. “It’s a fight about whether labor unions are a legitimate institution in the 21st century. … The mask fell off [last week].”

There is some evidence for Brenner’s suspicion. An email circulating among Senate Republicans last week urged them to vote against the auto bailout as a practice round for opposing the Employee Free Choice Act, referred to as the “card-check” bill, which would make it easier for workers to form unions. The bill would empower workers to form unions if a majority sign a petition, or card, indicating their support.

Democrats, who have long supported the card-check bill, are expected to take it up next year when they control the White House and larger majorities in the House and Senate — a scenario that business groups and anti-union Republicans are already girding for.

“This is a precursor to card-check and other items,” the email’s talking points stated. “Republicans should stand firm and take their first shot against organized labor instead of taking their first blow from it.”

This union fight ignites as the nation’s Big Three automakers are on the verge of collapse. On Wednesday, the House passed a bill that would have provided $14 billion in emergency loans to General Motors and Chrysler. The companies say they need the cash to avoid bankruptcy before the year’s end.

The legislation — a compromise between the White House and congressional Democrats — ran into stiff opposition from Senate Republicans who demanded that UAW wages and benefits be brought into line with those paid by Toyota, Honda and Nissan. Alternative legislation introduced by Sen. Bob Corker (R-Tenn.) called for achieving that wage parity in 2009.

The changes, on average, would have amounted to a roughly $20,000 cut in pay and benefits for each Big Three employee, according to an analysis by The New York Times.

The UAW, with the support of Democrats, balked at the wage-parity timetable, preferring that the changes come in 2011, when UAW’s contract expires. At an impasse, Democratic Senate leaders brought the House-passed bill to a vote late Thursday and fell seven votes shy of cloture. Ten Republicans supported the legislation, while three Democrats opposed it. Twelve senators were absent.

Afterward, the White House indicated it will step in to help the automakers.

For many Republicans, the Senate stalemate boiled down to just one issue.

“The UAW refused to make any real concessions,” Sen. Judd Gregg (R-N.H.) said in a statement explaining his “no” vote, “and this lone obstacle brought the whole deal down and made it clear that we’d simply be throwing good money after bad.”

The UAW points out that it has already made some concessions. Last year, it renegotiated its contracts with the Big Three and agreed to cuts in wages and in pension and health-care benefits for new employees. “Major concessions were made,” said Gary N. Chaison, a labor professor at Clark University in Worcester, Mass. “And the frustrating thing for labor is that those concessions have been forgotten [in the bailout debate].”

Still, as Chaison explained, the effects of the concessions aren’t that significant because the number of new hires remains small. To make a difference, he said the UAW would probably have to slash the wages of existing employees as part of any restructuring deal. And worse.

“Jobs are going to be lost, there’s no way of avoiding that,” Chaison said. “It’s just a question of when — and how many.”

Senate Republicans denied that their opposition to the Detroit bailout was rooted in anti-union sentiment. Explaining his “no” vote, Alabama Sen. Richard Shelby, the highest-ranking Republican on the Banking Committee, said the bill simply wouldn’t have worked.

“It will not make the Big Three competitive,” Shelby said. “It will not make them efficient. It will not make them compete in the marketplace.”

But some Democrats question such rationales. Sen. Christopher Dodd (D-Conn.), chairman of the Banking Committee, said at a news conference Friday that the Republicans’ insistence on more worker concessions “was only designed to create a political problem rather than solve an economic one.”

There were other factors besides ideology at play — like geography. Many of the Republicans who voted against the bailout proposal represent Southern states where foreign automakers have established a big manufacturing presence. Chaison said these GOP senators “were saying that the future of manufacturing in this country is going to be Southern and non-union.”

Appearing on CNBC on Friday, Shelby said as much. “You look at the South. You take — not just Mercedes in my hometown — but BMW, Honda and all of them. These companies are flourishing with American workers made in America.”

Not everyone was convinced that the bailout vote was a stand-in for broader union issues like the Employee Free Choice Act. Jim Walters, who represents employers for the Atlanta law firm Fisher & Phillips, said the dispute represented decades of disagreement between the two parties. The Employee Free Choice Act, he said, “really doesn’t have anything to do with it.”

Meanwhile, the Bush administration said Friday it was considering dipping into the $700-billion Wall Street bailout fund to help the automakers — a move the White House had previously rejected. Some Senate Republicans blasted the idea, arguing that the financial system bailout was never intended to save failing manufacturers. Some accused the president of caving to save his reputation.

“I don’t think President Bush is going to let anybody fail,” Shelby told CNBC. “He just wants to get out of town.”

The same could have been said of Congress last week. And indeed it was.

“Most parties,” said Chaison of Clark University, “want to get out of this without having to say that they worsened the recession.”

He paused before adding a final observation. “Sometimes,” Chaison said, “you get the feeling that no one knows what they’re talking about.”

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