PETER O. ZIERLEIN*
The crisis in the American auto industry marks a decisive turning point for the nation’s manufacturing economy. During the past three decades of global overcapacity, Detroit’s Big Three, the backbone of US manufacturing, have stumbled through intense international competition by periodically shuttering factories; squeezing the pay and benefits of their workers; and every so often getting a quick fix from the sale of gas-guzzling SUVs, minivans and big pickups.
But time has run out. Once the dust clears it seems certain that Chrysler and General Motors will be radically downsized: at least a third smaller, with fewer workers and brands and a dealer network slashed by as much as 40 percent. Most remarkably, these two companies, once in first and fifth place on Fortune‘s list of the 500 largest, will have ceded a big slice of their ownership to the United Automobile Workers and the Treasury.
Under the latest iteration of the GM restructuring deal, the Treasury will own 50 percent of the company and the UAW will own another 39 percent through its healthcare trust. Chrysler will be merged into Fiat, but the government and the union will also take large stakes in the company as they swap debt or healthcare payments for equity.
Given all this drama, the UAW has been strangely silent. Who has heard of Ron Gettelfinger, its president? He has been playing back-room hardball to fend off efforts by Republicans, bondholders and some in the Treasury to slash union jobs and wages. But none of his efforts have amounted to a program that could rally the country on behalf of the UAW and the rest of the union movement.
History, Mark Twain is credited with saying, never repeats itself, but sometimes it rhymes. If we revisit another moment of crisis in the auto industry, perhaps we can catch some of that social and economic poetry. In the mid-twentieth century, the UAW was a far larger and more powerful organization led by men and women of vast ambition and limitless imagination. C. Wright Mills described it as a “‘Grass Roots’ Union With Ideas,” a political and economic formation that Walter Reuther, its legendary president, called “the vanguard in America,” “the architects of the future.” If contemporary progressives and the beleaguered UAW look back at the ambitions of Reuther and the autoworkers of his era, we might find the inspiration and ideas to reshape the bailout and bankruptcy agenda, to build a new vision for the nation’s manufacturing and the millions who labor in American factories and mills.
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Reuther was just 33 in 1940, but he was already a union official and the leader of 200,000 workers who labored at GM, an enterprise that Fortune identified as “the world’s most influential industrial unit in forming the life patterns of the machine age.” During World War II the company would account for 10 percent of the nation’s manufacturing capacity; Detroit was then the fourth-largest city in the country, an industrial dynamo where just about every blue-collar worker sported a union button. The shuttered factories and derelict neighborhoods that today exemplify Detroit’s decline also measure the shrinkage in UAW ranks, which have been slashed from more than 1.5 million more than thirty years ago to about 430,000 active workers at the end of 2008. (It is important to note that the American auto industry is not dead: there are still almost a million workers, most nonunion and poorly paid, who design, forge, build, assemble, ship and service the 15 million cars and trucks normally sold each year in the United States.)
Although the automobile industry was making money in 1940, it faced a crucial challenge: how to align its profit-making imperative with the crisis-generated needs of the nation. That year the threat came in the skies of southeast England, where the Luftwaffe and the Royal Air Force were engaged in a bloody contest. President Roosevelt had not yet committed the nation to warfare against the Nazis, but he famously pledged to make the United States an arsenal of democracy with the aim of turning out 50,000 airplanes per year, an astounding goal at the time, far more than the entire number of warplanes that existed on the planet. Auto executives did not want to cooperate; they were finally making money turning out passenger cars after a decade of the Depression. If FDR and the New Dealers wanted warplanes, Detroit would help build them, but only in factories as yet unconstructed with machines still unordered and with newly hired, untrained workers.
This was the crisis in which Reuther stepped forward with a dramatic plan to help advance the war effort. Despite opposition from auto executives (who saw his plan as another effort to erode managerial power) and the communists and old-line conservatives within the labor movement (who saw it as a form of class collaboration), Reuther proposed that the union help build 500 planes a day on Detroit’s existing assembly lines. Car production would not stop, but idle machinery, skilled labor and factory space would be combined to produce desperately needed fighter planes, regardless of whose corporate balance sheet took the hit.
Today the auto industry is faced with a similar crisis; in order to align its fortunes with the nation’s needs once again, it must abandon the high-margin SUVs and minivans in the name of energy security. President Obama wants a greener, leaner auto industry, but he declares that he is not an automobile engineer. So who will do the social engineering necessary to transform this industry? In years past Reuther and the UAW stepped into this vacuum, but any effort to articulate a bold vision for the industry’s future has been sadly missing under Gettelfinger; worse, the UAW has often just mimicked the views of the auto executives. If the UAW hopes to emerge from the current negotiations in anything other than survival mode, it must align its cause with the millions of liberals who side with Obama and explain why a new era of social and economic transformation is needed to get the auto industry back on its feet. For example, the UAW could forge a high-profile alliance with environmental groups to demand higher fuel standards, and it could insist that all companies receiving government funds create or save jobs through temporary work-sharing arrangements negotiated either by the union or by new workplace committees set up in each factory. Most important, the unions and their supporters need to act boldly and visibly.
Gettelfinger need not look all the way back to 1940 to glimpse what a bold UAW plan might look like. The Reuther Plan of that pre-Pearl Harbor year proved to be a template for decades of UAW bargaining with the auto companies and the government. In the mid-twentieth century the UAW was indeed in the vanguard, with the ambition to leverage its power on behalf of a progressive vision for all working Americans. The reason labor was a powerfully attractive political force in the 1940s and for much of the generation afterward was not just that it had muscle and members but that unions, the UAW above all, had ideas about how to run the companies and industries with which they bargained, linking working-class welfare to a progressive conception of the national interest. Thus in 1945 Reuther proposed that surplus war factories be converted to make houses and rail cars. He led a 113-day strike against GM in the winter of 1945-46, not just for a substantial wage increase but for a lid on the price of the new cars for which the public was clamoring. Two years later the UAW published a pamphlet, “A Small Car Named Desire,” urging Detroit to build cheap, Volkswagen-like compact cars. In the 1950s the UAW used its bargaining leverage to try to get the auto companies to support a higher level of Social Security benefits, national health insurance, profit sharing and “steady-state” auto production that would avoid the usual boom-and-bust cycle.
This pattern continued after Reuther’s death in 1970, even in the years when the auto industry faced turmoil and competition. During the 1979-81 financial crisis at Chrysler, when the firm got a government loan guarantee, the UAW agreed to a series of painful wage concessions, but the union also persuaded Chrysler president Lee Iacocca to put UAW president Douglas Fraser on the company’s board. And when the Japanese and German auto companies began to take market share from the Big Three in the early 1980s, the UAW proved instrumental in pushing Congress to pass legislation that encouraged the construction of a generation of foreign transplants–which the UAW hoped, vainly as it turned out, would be unionized. Even the much-maligned job bank, which still offers regular pay to 12,000 autoworkers for idle days at the factory, was the productivity-sharing price the UAW forced Detroit to pay in the 1980s, when the industry sought to shut factories, slash payrolls and generate a more “flexible” workplace.
The UAW could not do all of this alone. It faced disaffection from a new generation of liberals who disdained organized labor; competition from lower-wage, nonunion rivals; and increasingly adamant resistance from Detroit executive suites. Sophisticated corporate executives like Charles Wilson and Henry Ford II made a long and largely successful effort not only to protect management power but to keep the government out of their business and align UAW interests with those of the auto companies. Thus, when the union demanded price controls to stanch postwar inflation, GM countered with a quarterly cost-of-living adjustment that for decades kept auto wages abreast of inflation, even before negotiations started on an additional wage increase. Likewise, when the UAW and other unions sought a national health insurance program and a boost in Social Security benefits, GM and Ford took the lead in putting their own company-specific plans on the table.
The UAW called the plans inadequate, fought to improve them and sometimes even struck and won. But the net result was a sort of private welfare state for one industry. Charles Wilson was satisfied. “Both the union and we get the things the country, the company and the union need: high discipline, high productivity, high wages and high employment security,” he said.
This worked fine until the 1980s. The patterns established in highly unionized industries like auto, steel and trucking soon spread to millions of other workers, even those employed by nonunion firms whose management sought to keep them that way. Real wages in the United States rose for two postwar generations, and the proportion of workers covered by private pensions and receiving company-paid health insurance peaked in the late 1970s.
Since then the system has begun to unravel, and with it the spirit and ideas that once animated the UAW. Solidarity wages are a thing of the distant past. GM, Toyota and every other automaker depend on a desperate stratum of low-wage suppliers to keep their assembly lines humming. And the private welfare state, which the Big Three once gladly saw as an alternative to an expansive New Deal, is now a crushing burden, a “legacy cost” that has to be offloaded onto the taxpayers, the retirees or the few remaining workers. Indeed, these are the costs that make up the bulk of the wage differential between the transplants and the Detroit-headquartered producers. Domestic car companies have more than 775,000 retirees and surviving spouses, while all foreign automakers in the United States support a total of 5,000 pensioners. No wonder that legacy costs amount to more than $16 an hour at Ford, compared with $3 an hour at Toyota.
The collapse of the auto industry has been so dramatic and so radical that GM has been forced to abandon just about every managerial prerogative for which it fought so long and hard. Obama wants CEO Rick Wagoner to resign, and he is gone. Treasury tells Chrysler to merge, and on what terms, and Fiat takes over. Indeed, with the government and the union owning nearly 90 percent of GM common stock, it is time to think boldly and progressively about how to restructure some of America’s greatest manufacturing companies. They are far too important to be left in the hands of a generation of discredited managers and Wall Street speculators. So let’s make history rhyme. It is time to dust off and update some of those Reuther plans in order to put labor’s voice and the people’s interest to work rebuilding an industry that might once again become a democratic arsenal.
