Multinational Monitor

MAY/JUN 2009
VOL 30 NO. 3


The Nationalization Option: Considering a Government Takeover of Citigroup
by Robert Weissman


The Wall Street Rip Off: Fees and Consequences
an interview with
John Bogle

Eyes on the Prize: Incentivizing Drug Innovation Without Monopolies
an interview with
James Love

New Directions for Government Motors
an interview with
Jerry Tucker

A BIG Idea: A Minimum Income Guarantee
an interview with
Karl Widerquist

Grassroots Power and Non-Market Economies
an interview with
Beverly Bell



Behind the Lines

Single Payer Sanity

The Front
Dying for Work - Radioactive Mining

The Lawrence Summers Memorial Award

Greed At a Glance

Commercial Alert

Names In the News


New Directions for Government Motors

An Interview with Jerry Tucker

Jerry Tucker is a former executive board member of the United Auto Workers union and co-founder of the UAW New Directions Movement. He is also co-founder of the Center for Labor Renewal.

Multinational Monitor: Could you give a thumbnail sketch of how GM and Chrysler collapsed into bankruptcy?

Jerry Tucker: It certainly is not something that just came about. Over the years there has been a steady development that put them on this course.

For a long period of time, the corporations were seeking, as most companies do, to maximize profit — but at the risk of profit in the future. The entire domestic industry behaved as if gas prices would never rise. It’s true that small vehicles don’t produce as much profit as the big ones — the corporations wanted to maximize short-term profit.

Management certainly became ingrown. I suspect that they talked more to each other and listened less to the consumers. They certainly didn’t listen to environmentalists talking about emissions, and the union didn’t either. I was in Washington in the 1970s as one of the union’s representatives, and we actually lobbied against the corporate auto interests for cleaner air. We later became a partner with them in fighting to keep any regulation off of the industry.

At the same time, the corporations refused to become part of the lobby for government insurance and social insurance like the single payer bills that we’re fighting for now. This was even though there had been requests by the union at an earlier period to look at the question of how to deal with the healthcare cost differently. The corporations were smugly building products that consumers could suddenly deviate from based on certain conditions.

Another part of the problem is that the union has become complicit in this by dropping any adversarial stance and becoming a partner with the corporations. Back in the 1950s, [then-UAW President Walter] Reuther criticized the corporations for what they built, and to some extent the materials they used, and the safety of their products. In recent years, starting in the 1980s, the union’s role became to agree with everything the corporations said.

MM: What are “legacy costs?”

Tucker: Legacy costs in this case are both the pensions and healthcare coverage for retirees, which were negotiated by the union over the years. The million-plus auto retirees from GM, Ford and Chrysler, and their families, are entitled by contract to health insurance — it’s a relatively good plan, though it’s been modified in recent years — and a pension. Money for the pension is supposed to be put up and held in reserve over time. The healthcare costs have never been put in a reserve fund, so it’s a liability to the companies. That’s a huge amount of money. If the Big Three had not had those legacy costs, and retiring workers would be otherwise protected by social insurance, then there wouldn’t really be a question of bankruptcy for any of the Big Three.

It’s important to understand that the pensions and health insurance plans were negotiated because the corporations said that was the satisfactory way to resolve those problems. I remember Leonard Woodcock [president of the United Auto Workers from 1970 to 1977] in 1970, right in the middle of an expensive 10-week strike at General Motors, publicly asking the corporations to join with him in pursuing legislation for a Medicare-For-All-type of healthcare bill. And the corporations refused to even consider that.

It’s also important to note that the workers quite often forfeited wages so that those healthcare benefits would be available. It’s not as if it all came out of the corporations’ coffers. It was wage deferrals and cost-of-living deferrals that paid for a great portion, if not most, of the healthcare over the years.

MM: The conventional story about why the auto companies failed includes the healthcare costs, but also unreasonably high wages for the UAW and a backwards work force.

Tucker: How did the wages become unreasonably high when they are less than the productivity gains that are made by the workers in question? Annual productivity gains in the auto industry have never been below 3-plus percent. But the workers’ wages in the last 30 years have almost always been below productivity gains. If the age-old model that you’re supposed to be paid at the rate of your productivity applies, the wages are, if anything, too low. So I reject that out of hand.

When I was assistant regional director in St. Louis, the Fairfax General Motors plant near Kansas City had 6,200 workers producing 63 cars an hour. That was their hourly car production rate. By the time I was finished and into the early 1990s, with all of the union workplace concessions — I’m not talking about economic concessions, I’m talking about concessions in work management, like the team concept and some of these other schemes of that time — the company was down to 2,800 workers and producing 64 cars an hour. That’s an amazing increase in productivity, for which the remaining workers were hardly overcompensated. Their wage rates never really achieved anything close to what that productivity gain represented. Not even close.

So, to say that the workers’ wages, which escalated below the rate of their productivity, are too high is absurd. That’s just from the right-wing playbook. That’s from that bunch of know-nothing Senators who put that in the game during the debates in Congress. And too often other politicians — including some Democrats — buy into it.

There is this disdain for working class people who achieve reasonable comfort. That’s not really being addressed by anybody right now, as it should be. I include among those people who are not speaking out as forthrightly as they should the current administration, people who are in charge of the auto bankruptcy issues, and the labor movement’s top leaders in some cases. The defense of the auto workers has not been very vigorous.

MM: If you think back over either the last year when the companies were coming to the government, or back to 2007 and the last contract when all this was coming into focus, how would you describe the UAW posture, and what would you have had them do instead?

Tucker: The first part of the question is easily answerable. The second part is impossible to answer. What happened was the late stage of a long aggregating process and problem.

The union’s approach to the 2007 bargaining was, where do you want us to park the next series of concessions? What can we do to help you again with this question of becoming more competitive?

It had become conventional wisdom, accepted by the national labor leadership of the UAW, that the domestic auto industry had to have more relief. And the union set about finding creative ways to provide that relief.

The UAW agreed to a huge concession in agreeing to let the companies hire new workers to do the same work as the current workforce, at half the pay — $14-something an hour.

The problem for the UAW and the companies was the economic recession that was unfolding beyond the 2007 agreement. The theory of the 2007 agreement was to make the corporations competitive by negotiating a radically lower rate of pay for the same work of assembling vehicles. And we will offer buyouts to the tens of thousands of existing workers who were being paid $26-something an hour, on average. To the extent that they will take the buyouts, we will make them relatively generous. That actually exacerbated the legacy cost question.

It should be kept in mind that the whole labor cost question has always been distorted. It’s never been more than 14 percent of the production of the vehicle in the first place, and it’s probably around 10 percent now. When we hear the raging arguments that it is all the workers’ fault, what about that other 90 percent of the cost of the production of automobiles?

The actual radical reduction in compensation wasn’t just in the form of the $14-plus entry wage. There was not to be a cost-of-living increase beyond that. After the 2007 agreement, new workers were not to receive a defined benefit pension, but a possible 401K after a certain time at work. They were not to receive the same health care protection at retirement.

These massive concessions were contested by the workers. The Chrysler workers actually probably rejected them, but there seemed to be some creative accounting going on in the vote count.

So we had that contribution on the part of the union leadership to the corporations’ bottom line. But with the global recession, car sales just dropped off the map.

The wage and other concessions also don’t mean that much in terms of real competition. The transplants [the Japanese manufacturers in the United States] follow down the UAW concessions. After the UAW and General Motors, Ford and Chrysler signed the 2007 agreement, Toyota promptly announced that it was going to reduce its future hire wages to even below the UAW level. They don’t have legacy costs because they haven’t been around that long (nor have they produced a healthcare plan for would-be retirees). And their pension has always been a 401K.

That takes us to the place that Sam Gindin, the now-retired research director for the Canadian Auto Workers, stated years ago: “Once you begin accepting competitiveness as the workers’ agenda, you place yourself in a downward spiral from which you can never recover.” It’s still an ongoing process. The downward spiral is still in motion. No one suggests that even when the plants are populated with a majority of the low-wage workers — $14 an hour is barely a living wage, if it is one — that the concession-era is over. Concessions will still be demanded. And the claim of competitiveness will still be the lead argument by the corporations.

We’ve lost our historical sense of what unions existed to do in the first place. Our task was to help workers obtain a proper share of the fruits of our labor. And we’ve totally lost our way in accepting the corporations’ agenda and the competitiveness agenda. The UAW’s role in the economy in the 1940s and 1950s and 1960s created a lift for many of their workers and for workers in other industries. Now the destruction of the UAW worker is going to bring down other workers in this country.

MM: The government now is the majority owner of GM, the largest U.S. auto company. Thinking about it from a public point of view, what would you say the government should do?

Tucker: Starting about four months ago, Sam Gindin and I started identifying plants that had in very recent years been mothballed, which were perhaps potentially the best candidates for conversion from auto production to light rail and to many other things. A lot of the smaller parts industry could easily work on the wind turbines and motors for undersea power generation. The availability of capacity made available by the auto industry situation could help achieve many of the different things that the Obama administration keeps talking about in terms of gaining independence from fossil fuels.

Those plants are all over the place. We have two very highly tooled Chrysler plants idle here in St. Louis. You could literally put any major kind of production in there, short of C-17s or big airplanes that wouldn’t quite fit. The government should be looking at using some of the idle capacity for the R&D and production of new energy solutions that we need. This would employ auto workers in the towns and the cities where they currently live. All through Michigan, Indiana and Ohio, as well as here in St. Louis, which was a major auto center for years, you have idle capacity and idle workers — workers whose skill base is quite complementary to that type of production.

It wouldn’t be at all difficult to start producing light rail in the two Chrysler plants here in St. Louis, for instance, for markets throughout this country. We don’t build light rail cars anywhere in this country. We don’t build enough natural gas-powered buses, like are used in the District of Columbia now. This could all be the initial step toward a transportation policy, which we don’t have in this country. Now the government has a very large stake in the auto industry and ought to exercise that stake. Even if they’re going to allow these corporations to exist as private corporations and not fully nationalized, they could at least purchase light rail and new appropriate technology from the auto companies. The companies could be ultimately imbued with entrepreneurial spirit and developed and spun off as fully private at a later time. Personally, however, I would much rather see some level of state ownership and control to make sure the companies stay on course.

Can the current union leadership be a constructive part of that? I doubt it. I think they’ve exhausted themselves in their constant hugging of the corporate agenda. But I think in our greater workforce, if members of the union with ideas would act collectively or concertedly and begin to take responsibility in local unions and in other ways, then I think the union could become a more creative force in this.

I think these are areas that, out of the terrible situation that does exist, new and creative thinking could move forward. But none of it can be predicated on beating the workers down.

In this so-called fight against the recession, there is so much emphasis on restoring the finance industry and so little on producing jobs of the type that we’ve previously had in manufacturing and transportation. Yet the alternative is within reach. It can be seen. Nothing immediately is going to make that poor new worker at GM coming in at $14 an hour — without cost of living, without the long-term supplemental unemployment that we used to have — have a great work life immediately. But you could at least begin to put some of the workers who are being jettisoned or rationalized all across the country back to work. Throughout the Midwest, it would create electrical and steel and chemical jobs, and others would gain employment and begin to regain the lost wealth that they had thanks to unionism in the middle class.

MM: What is your assessment of the R&D capacity within GM to contribute, under government direction, to a more environmentally sustainable future?

Tucker: They’ve always had the capacity. It’s the restraints management placed on the engineers. They didn’t want to convert from the internal combustion engine. I’m sure that the engineering capacity is not as flush as it should be because there hasn’t been that much concentration on developing those types of new skills, but there’s talent there. The key is to get the managers out of the way.

Prior to World War II, Reuther pointed out that the auto plants in the immediate Detroit area could produce what the government would need when the war came our way. And they did. He made his pitch for 500 planes a day at the Willow Run plant. Within two short years, they were producing nearly 500 planes a day at the Willow Run plant in Michigan. My dad worked at Emerson Electric here in St. Louis. He was a tool and die maker. And they produced all of the turrets for all the B-series bombers. They were hugely efficient and the conversion was relatively swift.

Things haven’t changed. It’s a crisis now as it was then, although a different kind of crisis. And the capacity to respond is there. If Obama is going to keep putting these Wall Street finance types in charge of everything, including auto production, hell, it’s going nowhere. You’d be better off grabbing three lead tool and die makers and two engineers and saying, you do it. These people really know what they’re doing.

MM: Are you surprised at how things turned out? Were you expecting the administration to have made the choices that it made?

Tucker: I think the Obama administration has a tendency, if not a propensity, to try and lodge somewhere in what it thinks is the middle of each situation, and not go too far one way or another, toward a solution. It looks as if that’s how they approached their decision about how to handle the domestic auto industry situation. The administration didn’t choose to nationalize and put to good use all of the industry’s idle capacity and try to reinstate as many workers as possible. That obviously wasn’t an option that they took seriously. At the same time, they haven’t said to the corporations, look, we’re going to totally help you sheer off all of these costs that you have and set you back in motion.

But it’s hard for me to imagine that this recession is going to abate quickly. And I don’t see any evidence that the number of automobiles sold annually in this country is going to radically rise back to the level of 16 million. The fallout from that means that without a plan to put idle capacity to use, somebody has to go. So there are going to be fewer producers, and fewer corporations. And there is going to be less union representation. Again, it goes back to the point that the government now has the ability to change the elemental production model and to produce new and necessary things to meet our transportation and energy needs. Will it? The administration seems pretty timid to me. That timidity is costly, I believe, because the jobs that are needed can be found in these very areas.

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