Main Street's Engine

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Main Street's Engine

By Ron Gettelfinger
Friday, November 14, 2008; A19

It's time to stand up for the Main Street economy.

In the face of a global credit crisis and a worldwide economic downturn, U.S. auto sales have slowed to a crawl. As insecurity spreads throughout the economy, consumers are delaying major purchases -- and those who do visit auto showrooms are not finding credit available on reasonable terms.

The domestic auto industry simply cannot succeed in today's unstable economic environment without immediate help from the federal government. And the costs of failure are unacceptable.

This isn't just about three large Michigan-based companies and the 240,000 people who work for them, including 150,000 of our members. It's also about thousands of car dealerships that are anchor businesses in cities and towns across America. It's about thousands of small and medium-size businesses -- employing millions of workers -- that provide parts, logistics, research, engineering and other goods and services to Chrysler, Ford and General Motors. If a major domestic auto company were to fail, a significant number of supplier companies would also be in jeopardy. This would quickly affect all the companies that produce autos in the United States -- including Toyota, Honda and Nissan -- because many of them buy parts and services from the same group of suppliers.

A major disruption in the auto supply chain would quickly curtail production at auto plants, whether domestic or foreign-owned, throughout the United States. The cost of failure at even a single U.S. automaker would be millions of lost jobs and hundreds of billions of dollars' worth of lost sales and revenue spread across all 50 states.

In addition, more than a million retirees and dependents receive pension and health-care benefits from Chrysler, Ford and GM. If these companies are unable to meet their obligations, the human toll on retirees and their families will be devastating. It's also possible that the failure of these companies could impose severe costs on the federal pension guaranty program and public health-care programs.

In the face of a looming economic catastrophe, it's disappointing to see The Post and some of its opinion writers indulge in old-fashioned Detroit-bashing -- especially since these observers seem to be writing about the domestic auto industry of the 1970s.

It is not the actions of our members that have caused the crisis in today's auto industry; the crisis is being driven by economic factors that have nothing to do with labor costs or factory performance. To the contrary, our contracts have put our employers in a position to compete.

The reality of today's auto industry is that union-made vehicles are winning quality awards and that union-represented factory workers are winning productivity awards. A Nov. 8 Post editorial claimed that unionized auto manufacturers pay "wages and benefits that far exceed those of non-union competitors," but recent labor negotiations with Chrysler, Ford and GM addressed this alleged wage and benefit gap.

Our 2007 labor negotiations with the companies transformed the domestic auto industry; when the agreements we reached have been fully implemented, they will largely or even completely eliminate the labor-cost gap between unionized auto plants and our nonunion competitors. One analyst has estimated that as a result of our contracts, GM will soon enjoy a labor-cost advantage over Toyota.

The various demands for cuts in the wages and benefits of active and retired autoworkers as a condition of federal assistance are curious -- and extremely unbalanced. To my knowledge, no one has proposed cutting the compensation of everyday active or retired bankers, bond traders, and office or building personnel who work at AIG, Bear Stearns or the numerous banks that have received billions in federal aid. Why is it only autoworkers who are singled out for this dubious honor?

Besides being unfair, government-mandated wage and benefit cuts make no economic sense. In the midst of the most severe recession in decades, the last thing we should do is take money out of the pockets of working families, since it is consumer spending that drives two-thirds of all U.S. economic activity.

President-elect Barack Obama has described auto manufacturing as "the backbone of the American economy," and bipartisan efforts are underway in Congress to provide strategic assistance for this critical U.S. industry. It's a good deal for U.S. taxpayers -- because the alternative is lost jobs, closed businesses and shattered communities, which would impose severe human and economic costs on all of us for many years to come.

Ron Gettelfinger is president of the United Auto Workers.