News Intelligence Analysis



From the Nation

Zapping the Volt

by Jane Hamsher

11/17/2008 @ 4:29pm

It's hard to imagine that at a time when an unprecedented amount of wealth is held by the top 1% of the US population -- 24% in as of 2006, a level not seen since just before the depression -- that a lot of cuff-snapping over-educated David Brooks types would commence a crusade against working people.

"Let Detroit Go Bankrupt," says Andrew Sullivan. With spittle-flecked rage, Charles Krauthammer writes, "hourly cost of a Big Three worker: $73; of an American worker for Toyota: $48."

In fact, in their last contract the UAW made deep concessions that put GM wages at a par with their non-union counterparts in the US. But this isn't about facts, this is a religious crusade where "free-marketeers" want to impose Shock Doctrine tactics for philosophical reasons with little regard for the consequences.

Bloomberg reports that a General Motors failure would cost the federal government $200 billion. And the Center for Automotive Research concludes that if the Big Three fail, it will mean the loss of 3 million jobs in the first year of collapse.

As Naomi Klein has writen, proponents of unfettered capitalism are always looking for these "clean slates" where other people pay the price in misery for their philosophical experiments. But as Paul Krugman noted on This Week when he ate George Will for a mid-morning snack, expecting the economy to absorb that kind of impact right now would be extraordinarily risky.

But let's explore things from another angle. The same people salivating to put the UAW out of business once and for all are often the ones preaching about how green fuel technology will save our economy. Labor may be unseemly, but green?

Well, that's hip. Quoth the selfsame Andrew Sullivan:

The whole world stands to gain. Not only would the policy switch reduce carbon gases that may well be contributing to global warming. It would also help defuse a looming global superpower fight between China and the US over oil supplies.

So maybe the people who seem to know even less about auto manufacturing than they do about economics should consider that GM is in the forefront of green engineering with the Chevy Volt. From US News:

The prototype Volt that GM has been showing off is a sporty four-seater with futuristic touches meant to draw in mainstream gearheads. The dashboard controls are touch-sensitive and set in a white console reminiscent of an iPod. Instead of standard gauges for speed and RPMs, there's a digital display that looks like the screen of a Sony PSP. Wind-tunnel engineering has made the Volt even more aerodynamic than a Corvette, critical for milking the most mileage possible out of the battery. GM says that recharging the car at home, through an ordinary household outlet, will cost less than $1 per day and drain less power than it takes to run a refrigerator.

But before you put the Volt on your 2010 wish list, consider that sending GM into bankruptcy would do more than just break the UAW -- it could condemn the Volt from ever reaching the market:

In Chapter 11, creditors and a bankruptcy judge have a lot of say over corporate strategy, and it could get hard to justify large expenditures for a futurecar at the expense of mainstream offerings today.

Despite its allure--and the attention the Volt would get if it succeeded--GM officials admit it will be a low-volume car for several years, with sales of perhaps 20,000 per year. Would GM be able to justify spending on the Volt while, say, delaying the launch a mainstream compact car like the Chevy Cruze, which is also due in 2010 and could promise annual sales of 150,000 or 200,000? It stands to reason that GM has plans to use the Volt's electric-drive technology in other vehicles, which would be essential to justify the expense. But in Darwinian times, survival trumps nice-to-have, and in order to get to 2015 you have to first make it through 2009. Besides, if gas prices continue to fall, will drivers really care that much if the Volt cuts yearly gas consumption by 500 gallons? [Emphasis author's]

It's sexy for "fiscal conservatives" to stand around pontificating that the US auto makers are in bad shape because they make nothing but gas hogs, but the fact of the matter is that until oil prices soared, gas guzzlers like the Escalade have been big sellers.

Despite that, GM has been putting money into green technology that might not be profitable for years.

As David W. Patterson of GM Canada explains, there has been "a profound, massively expensive transformation" taking place at GM over the past two years:

" that now sees us offering more new hybrid models than any other auto manufacturer for the 2009 model year, leading on R&D and the introduction of electric cars, winning many prestigious new-car and green-technology awards, and, most importantly, placing GM's cost structure (including our labour and legacy costs) on track to be among the lowest of any global auto manufacturer. That transformation continues with enormous investment - and not a small amount of pain."

What happens if David Brooks gets his way, GM goes bankrupt and the labor unions are broken? Is this going to lead to the magnificent stripping down and modernizing of the auto industry that everyone is hoping for that will have us all peddling around in solar powered cars by next Easter?

In a word, no. Without help to ride out the storm, the Volt research and development money is going to be too expensive to maintain for a company in receivership that is looking only to keep the doors open:

If GM were healthier, these would represent the kinds of reasonable risks that global companies have to take in order to be competitive down the road. But GM is hurting, and the pain is going to get worse.

All this screaming about bankrupting GM has everything to do with a conservative philosophical imperative that the free market will set all these things right, that unions are bad and they are an affront to free enterprise. It's a moral position not a rational one, and it persists despite all evidence to the contrary. It should have been thoroughly discredited by this point, but alas, some continue to cling to it. The problems being suffered by the auto companies right now are nothing more than a shock doctrine opportunity to destroy the UAW to them. They either have not come to terms with the fact that one in every twelve jobs in this country have income that is tied to the Big 3, or they simply don't care.

Or, like Alabama Senator Richard Shelby, they come from right-to-work states that would benefit from Detroit's demise. Shelby may carp about "the uncompetitive structure of [the Big Three's] manufacturing and labor force," but as Marcy Wheeler notes, his state is home to the non-union plants that make M-Class SUV, GL-Class SUV, Pilot SUV, Santa Fe SUV, plus engines for Tacoma and Tundra pick-ups and Sequoia SUVs.

Not exactly a vision in green.

Back in 2005, Obama sponsored the "Healthcare For Hybrids" act, whereby the government would assume Big 3 legacy costs if the auto industry would use the savings to invest in fuel efficient vehicles. It was a forward-looking piece of legislation that holds out a lot of hope that Obama understands the problems of American auto manufacturers and is willing to address them in innovative ways.

Let's hope there's enough pressure brought to bear today on Mitch McConnell, Kit Bond and other Republicans whose states would be hard hit by a Big 3 bankruptcy to keep them functional until Obama takes office and better minds are in charge of addressing the problem.

Because as emotionally satisfying as it would be for the Italian loafer set to see the unemployment numbers of the great unwashed swell with union workers as the UAW is crushed, it would be an enormous setback to the hope of a green resurrection of the American economy.


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