Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
HAVE YOUR DONATION DOUBLED!

If you are able to donate $100 or more for our Annual Fund Drive, your donation will be matched by another generous CounterPuncher! These are tough times. Regardless of the political rhetoric bantered about the airwaves, the recession hasn’t ended for most of us. We know that money is tight for many of you. But we also know that tens of thousands of daily readers of CounterPunch depend on us to slice through the smokescreen and tell it like is. Please, donate if you can!

FacebookTwitterGoogle+RedditEmail

Bankrupt Thinking

by ROBERT WEISSMAN

What in the world is the Obama administration thinking? The GM bankruptcy — entirely avoidable — seems designed to hurt every constituency it is supposed to assist.

First, as to the avoidability issue: There’s no doubt that chronic mismanagement and the deep recession have left GM in dire straits. But with the government pouring tens of billions of dollars into the company, it is clear that needed restructuring could have been done outside of bankruptcy. By last week, even the problem of bondholders who sought $27 billion from the company (the government and GM were offering a 10 percent stake in the new company) was moving to resolution. Yet the Obama administration’s auto task force has plunged GM into bankruptcy nonetheless. Why? There’s no obvious answer to that question.

Why does it matter? It matters because bankruptcy may further tarnish GM’s already very weakened brand, and make recovery for the company much more difficult. It matters because it creates some unique problems. And it matters because it forecloses — or, at least makes more difficult — other ways to reorganize the company.

The GM/auto task force plan for bankruptcy and restructuring — shaped by a secretive, unaccountable group of Wall Street expats without expertise in the industry — seems designed above all to perpetuate GM as a corporate entity. Preserving corporate GM should be not an end, but a means to protecting workers and their communities, preserving the U.S. manufacturing base, forcing the industry onto an innovative and ecologically sustainable path, and advancing consumer interests. It fails to meet any of these objectives, in entirely avoidable ways.

GM probably needs to be downsized, but there are questions about the extent to which it should be downsized and the method. There are very significant questions about decisions being made to eliminate brands, close factories and terminate dealer relationships. The auto task force may well be needlessly costing tens or hundreds of thousands of jobs at auto plants and suppliers. It has authorized the closing of many hundreds of GM and Chrysler dealerships, even though these dealerships do not impose meaningful costs on the manufacturers. Dealership closings alone will result in more than 100,000 lost jobs.

While there is probably a need to reduce GM’s capacity, there is no need to cut worker wages and benefits. Auto worker wages contribute less than 10 percent of the cost of a car, so even the most draconian cuts will do little to increase profits. Yet the Obama administration’s auto task force helped push the United Auto Workers into further acceptance of a two-tier wage structure that will make new auto jobs paid just a notch above Home Depot jobs. This will drag down pay across the auto industry, with ripple effects throughout the entire manufacturing sector. Stunningly, the Obama administration brags that “the concessions that the UAW agreed to are more aggressive than what the Bush Administration originally demanded in its loan agreement with GM.”

The ultimate evidence of the task force’s disconnect from its public mission is its approval of GM plans to increase outsourcing production of cars for sale in the United States. GM has now disclosed its intent to begin production in China for sale in the United States. What is the possible rationale of permitting a company propped up with U.S. taxpayer funds to increase production overseas for sale in the U.S. market? The point of the bailout is not to make GM profitable at any cost, but to protect the communities that rely on the automaker, as well as U.S. manufacturing capacity.

Finally, if the Chrysler bankruptcy is a harbinger, the bankruptcy is likely to wipe out the legal claims of people injured by defective and dangerous GM cars.

None of this need be so. The government could have averted bankruptcy. It could have sent its plans to Congress for more careful review. It could have demanded that worker wages and conditions be maintained or improved, rather than worsened. It could have been more surgical in the downsizing it is requiring, and more forward-looking at preserving manufacturing capacity. The government could (and still can) choose to accept sucessorship liability in the New GM for the injuries inflicted on real people by Old GM.

Some of these avoidable harms can still be averted, if the Obama administration chooses to exert the control that attaches to owning 60 percent of GM. Unfortunately, President Obama says, to the contrary, that “our goal is to get GM back on its feet, take a hands-off approach, and get out quickly.”

ROBERT WEISSMAN is editor of the Washington, D.C.-based Multinational Monitor and director of Essential Action.

More articles by:

ROBERT WEISSMAN is president of Public Citizen.

October 19, 2017
Farhang Jahanpour
Europe Must Stop Trump From Starting Another War in the Middle East
John W. Whitehead
The Experiment in Freedom is Failing
Karen Hicks
Make Big Pharma Pay for the Opioid Crisis
Patrick Cockburn
Why the Palestinian Unity Deal Might Not Change Much
Lawrence Davidson
A State for the Kurds?
Joseph Grosso
Guns, Drugs, and Suicide: Death in America
John Eskow
Witch Hunt TV: You Can Trust MSNBC, Really….
Desiree Hellegers
“Unnatural Causes”: Health Takes a Hit in Portland, Oregon
Binoy Kampmark
Vengeful in Defeat: Hillary Clinton Fantasizes About WikiLeaks
Robert Fisk
ISIS Has Lost Raqqa, Where Will It Go Next?
Pepe Escobar
Why Trump Has Gone Nuclear on Iran
Jenny Clegg
Will the US and China Go to War?
George Ochenski
Seduced by Greed: the Perils of Environmental Collaboration
Phyllis Bennis
Decertifying the Iran Deal: Trump’s Most Reckless Move?
Arnold Oliver
Bring Back Armistice Day and Honor the Real Heroes
Kim C. Domenico
In Search of Moral Energy in the Neoliberal Wasteland: a Preferential Option for the Poor Soul
October 18, 2017
Patrick Cockburn
Seizing Kirkuk
John Wight
Weinstein as Symptom: Notes From Hollywood
Matthew Hoh
Bowe Bergdahl: Traitor to American Exceptionalism and White Supremacy
Chris Ernesto
Funding for War vs. Natural Disasters
Aidan O'Brien
Where’s Duterte From and Where’s He Going To?
Jon Bailes
Mental Health and Neoliberalism: an Interview with William Davies
Ramzy Baroud
The Real Reason Behind Trump’s Angry Diplomacy in North Korea
Paul Craig Roberts
Washington, Not China, is the Biggest Threat to American Power
Binoy Kampmark
Trump’s Iran Deal
Lara Merling
Remember Puerto Rico Needs Fair Medicaid Funding Too
Phil Rockstroh
2 or 3 Things I Know About Capitalism
Eoghan O’Suilleabhain
Rambo Wept: Our Commandos Good, Your Terrorists Bad
Dimitris Bellantis
On Catalonia: Debates in the Greek Left
Robert Koehler
The Calm Before the Storm
Mike Hastie
Napalm Sticks to Kids
October 17, 2017
Suzanne Gordon – Ian Hoffmann
Trumpcare for Veterans? VA Outsourcing Will Create Healthcare Industry Bonanza
Patrick Cockburn
The Real Destabilizer in the Middle East is Not Iran But Trump
Jonathan Cook
The Real Reasons Trump is Quitting UNESCO
Murtaza Shibli
My Friend From ISIS in Raqqa
Kathy Kelly
Wrongful Rhetoric and Trump’s Strategy on Iran
David Bonner
Beyond Taking a Knee: Duane Thomas, Where are You When We Need You?
Tom Gill
Austerity, Macron-Style
Liaquat Ali Khan
Pakistan Faces a Life-Threatening Military Coup
Jeff Mackler
Is Trump a ‘Moron?’
Amena Elashkar
If You Work for Justice in Palestine, Why Won’t You Let Palestinians Speak?
John Feffer
Trump’s Unprecedented Right-Turn on Foreign Policy
Ariel Dorfman
Trump’s War on the Mind
Dean Baker
The Republican Tax Plan to Slow Growth
Gerry Brown
The Return of One-Man Rule in China?
FacebookTwitterGoogle+RedditEmail