The Auto Sector Bailout: How Should We Respond?

by Herman Rosenfeld of The Socialist Project
Basics Issue #12 (Jan/Feb 2009)

Working people throughout North America have been wondering about the loan guarantees being provided to two of the Detroit-based auto companies, General Motors and Chrysler, by the governments of the US, Canada and Ontario. These corporations are to receive loan guarantees of $17 billion in the US and about $4 billion from the Canadian federal and Ontario provincial governments. Technically, if used, these have to be repaid. Ford, the third company, is to receive a line of credit.

These companies, which used to be the largest and strongest capitalist enterprises in the world, are genuinely in trouble. Without this aid, they will run out of cash and will go into bankruptcy court. This would lead to massive layoffs and closures of workplaces in many communities.
The financial crisis has affected the operation of the real economy – that produces goods and services that all of us use. The breakdown in credit has made it difficult for people to borrow money. With no one buying cars, these companies must use up cash reserves simply to keep themselves solvent.

Why should we be concerned with this at all? After all, these companies have never been great friends of the working class.

The problem is that in a capitalist economic system, workers are dependent upon employers’ survival in the marketplace in order to retain their jobs. This is a real material dependency. It represents a key source of strength for the capitalist system and acts as a kind of brake or limit on the independence of the working class from capital. We have to always keep it in mind while working to lessen and ultimately break that dependency. But we can’t ignore it, if we want to make change.

The loan guarantees allow the auto companies to survive for the time being. Without them, millions of workers will simply lose their jobs and the collective productive capacities these industries represent – even in their alienated form as private capital – would be lost to all of us. Obviously, we can’t trust these companies or the current US and Canadian governments to restructure them in ways that benefit working people.

The US Congress has demanded that UAW members in the US at the Detroit Three cut their wages, benefits and working conditions to match the non-unionized “transplants” (plants owned by overseas-based capitalists) by the end of the year. Canadian governments have also demanded concessions from the CAW.

Concessions from workers in the auto-sector would affect more than autoworkers. Concessions in the one sector will undermine the rights of the rest of the working class: non-unionized autoworkers in the transplants (foreign auto-maker plants) will no longer receive wage and benefit packages that match the unionized sector. Workers in other sectors that currently provide low pay and few protections, would be that much weaker, as the possibility of unionization becomes more remote and unionization promises fewer gains. It would lower government revenues and depress the buying power of all workers. In other words, the strength of the autoworkers and their unions plays a role in supporting and building the power of others. A massive defeat for the autoworkers would be a defeat for the entire working class. Socialists have to call for (and organize for) a different set of outcomes. This might mean:

•Demanding that the companies produce affordable, recyclable, environmentally-friendly vehicles.

•Resisting concessions.

•Regulating investment levels in the auto industry, subjecting the industry to a form of nationally-based planning.

•Surplus plants, tool and die shops, precious skills and workers’ capacities need to be used to produce useful goods and services that people need. Working people should be able to democratically decide on what community needs should be fulfilled by these resources, be it public transit, manufacturing environmentally-friendly technologies, schools, hospitals, recreational facilities or public and co-operative housing. Workers in these surplus plants should be paid wage levels at par with unionized workers.

•The unemployed need to mobilize. Those unable to work need to have social assistance levels that allow a reasonable standard of living and the organizational power to fight for it.

•Finally, financial institutions need to be nationalized and democratically run as a public utility to finance the production of these needed goods and services.

For socialists, the key is that we develop our own capacities as workers to organize, build unity around common goals for different segments of the working class and mobilize behind a set of demands and approaches that will contribute to the kind of society we would like to see in the future.