The Senate standoff: When brinksmanship is bullheadedness

Posted by: David Welch on December 12, 2008

Ron.jpg

Is this brinksmanship or just plain bullheadedness? The Senate’s efforts to pass a $14 billion assistance bill for Detroit’s carmakers collapsed yesterday as the union and Republicans froze in a standoff. On one side, the United Auto Workers refused to rush a cut to pay and benefits demanded by Republican Senators who’d love to see the union’s demise. On the other, there are Republicans (Tennessee’s Bob Corker comes to mind) who seem legitimately interested in getting a deal done, but want to make sure that the industry restructures for real this time.

Clearly, there are Republicans like Sen. Richard Shelby (R-Ala.) who wouldn’t pass an assistance bill for Detroit if it moved every car and parts factory to his home state and let the University of Alabama football team take the Detroit Lions’ place as the Thanksgiving Day football team. (As an aside, the Crimson Tide may have an equal chance of beating an NFL team) Some of those Republicans asked the UAW for rapid concessions at the last minute, demanding that they accept parity with Japanese factory wages and benefits. They offered a deal they reckoned UAW President Ron Gettelfinger wouldn’t take. They were right.

For the union’s part, Gettelfinger should have done nearly anything to get a deal done. History is rife with examples of unions who were too stubborn to give and ended up paying the ultimate price. It happened in steel and railroads. I was an intern at the now-defunct Pittsburgh Press when a union strike in 1992 dragged on for nine months. It eventually killed the paper, leaving the town with one major daily and hundreds of workers without a job.

It’s easy to see why Gettelfinger wouldn’t want to back down to the same party that wishes the doom of his union. But he’s not playing a game of brinksmanship with the Senate. Majority Leader Harry Reid (D-Nev.) already said that if there was no deal last night, there’d be no deal in 2008. With General Motors and Chrysler facing collapse in the coming weeks, Gettelfinger seems to be dancing on a land mine.

The Republicans are, too. Asian market dropped sharply on news that the bridge loans failed. If the econimists are right and a couple million Americans lose their jobs as a result of a couple big Chapter 11 filings in Detroit, we’ll have a real economic mess on our hands. Then the Republicans can own the banking mess and the auto collapse. Good luck in those 2010 mid-term elections, Senators.

The only way Gettelfinger will emerge as a smart poker player is if he and the auto executives know something we don’t. Either there’s a way to get one last ditch vote on a new compromise in the Senate—which is very doubtful—or the White House signaled behind the scenes that Pres. Bush and Treasury Secretary Hank Paulson won’t let these two companies fail. For the sake of the U.S. auto industry, let’s hope that’s the case.

If it isn’t, GM and Chrysler could soon be sailing into bankruptcy and possibly their demise. Then, Gettelfinger’s union will lose a lot more than was proposed yesterday. So will a few million workers.

Reader Comments

Paul (Vw)

December 12, 2008 9:26 AM

Aside from a good does of hyperbole ("Clearly, there are Republicans like Sen. Richard Shelby (R-Ala.) who wouldn’t pass an assistance bill for Detroit if it moved every car and parts factory to his home state"), I have yet to see a comprehensive/believable explanation why filing Chapter 11 would result in the end of Western Civilization -- or even the Detroit 3 for that matter.

Just for the record, "assistance" does not necessarily have tomean the bailout being offered by Reid. It could mean a prepackaged Chapter 11 with gov't guarantees.

>>> They offered a deal they reckoned UAW President Ron Gettelfinger wouldn’t take.

A bailout without concessions from the UAW is a waste of time and money. The UAW contracts are a primary reason Detroit is imploding (albeit a little faster now because of the gas price spike and global meltdown).

A bailout without substantive UAW concessions is just a political payout.

Even if this bailout fiasco does happen, one thing will be very clear to the American voters...the greediness and intransigence of the UAW.

>>> Senate. Majority Leader Harry Reid (D-Nev.) already said that if there was no deal last night, there’d be no deal in 2008.

That's right. Either way Reid wins, hence the lack of urgency on his part. If a dangerous bailout is avoided, the DNC can blame a Republican party that, as you allege, is a "party that wishes the doom of...[the]...union." If the bailout does go through, they will retain the UAW as a faithful long term client--perpetually as nothing in Detroit will have been fixed.

nyongesa

December 14, 2008 3:25 AM

This portion of the article nailed it....("The only way Gettelfinger will emerge as a smart poker player is if he and the auto executives know something we don’t. Either there’s a way to get one last ditch vote on a new compromise in the Senate—which is very doubtful--or the White House signaled behind the scenes that Pres. Bush and Treasury Secretary Hank Paulson won’t let these two companies fail. For the sake of the U.S. auto industry, let’s hope that’s the case.")....

That is because they do know something we too already suspected, and that is they would win this game of chicken with the Government, as had the banks before them. The systemic failure argument, to big to fail, is a straw man, as Paul (Wv) points out. We are presented with a false choice between two extremes, for which the lesser of two evils is the "bridge loan". We already know it is the beginning of the bailout sequence that will roll through 2010 to the 2011 contract talks and beyond. Once committed as taxpayers/creditors, the rational of deeper support will grow, and the same political expediency will only get stronger as the Automakers hone their gaming craft.

That is why the Automakers have been working Uncle Sam all this time, it was the easiest out. With billions in assets, debts and global operations, it is implausible that no we have heard little to nothing of detail about their exit plans over the last week, months and years. Nor have we heard the myriad alternative scenarios. More details go into a marketing study for a new vehicle launch than what we are being proposed.

Like the banks, this is simply a form of economic blackmail, and the republicans called their bluff on even the most rudimentary concessions necessary to "revive" the companies. The reason you don't negotiate with blackmailers is that, once it works they have you over a barrel. $15 billion or 25 or the eventual $100+ billion, this will cost us, is not the real long term cost of this bailout. It may be cheaper than the supposed 1,000,000 million jobs, but the beginning of the demise of American capitalism, as political capitalism ascends is the disaster about to befall us. The instinct to save the critical rail or ship building industry, a hundred years ago, or steel makers more recently, is not the instinct that gave us a mode of capitalism that created a biotech, software or computer industry.

No new car industry will ever emerge out of the tens of thousands of workers, engineers, and mid-level managers trapped in these coddled, protected behemoths. The false dawn of a "jobs saving program" in a recession, will be the long term extinction of the Big 3. They now have no incentive for real change.

It's truly a sad day in America.

don wilson

December 18, 2008 1:21 PM

I would like to go back to work for chrysler if they decide to file chapter 11. I know I will not be able to support my family after they get done with the legacy cost! So they should give me the option to return to one of the plants.

phantom

December 20, 2008 8:44 PM

Mr.Don Wilson:
Certain that it seems like a fair enough
request-to return to the work force. If
in fact your pension benefits are scalled down.
However what makes you think they would
either want you or try to even things ?
You will become a victim of statistics!
Owed nothing!Possibly some gutless over-
paid exec will get a bonus for this !

Post a comment

 

About

Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

BW Mall - Sponsored Links

Buy a link now!