Cynical Synapse

Fri, 01 May 2009

May Day: Disaster for Chrysler, Workers, and Families

Filed under: Bailout, Business, Cars, Economy, Life, Michigan, Profiteering — cynicalsynapse @ 8:26 pm

Around the world, May Day (the first day of May) is a legal holiday. Akin to the US Labor Day holiday, which is the first Monday in September, May Day honors average workers. The day serves to recognize oftentimes hard-won rights, benefits, and a certain lifestyle. Ironically, May Day has its origins in the US, with the labor movement in the 1880s, but is largely perceived as Communist, Marxist, or Leftist. The Cold War legacy lives on long after the spectre of Moscow’s annual military parades has faded away.

Workers arrived at Chrysler’s Warren, MI, truck assembly plant for their last day of work yesterday. Getty Images

For Chrysler employees, retirees, and their families, May Day 2009 equates to closed plants and no paychecks. Retirees have already lost benefits and now their future is up in the air, depending on the whims of the bankruptcy court in New York. Many people’s hard work to see to Chrysler’s future viability was cast to the winds by greedy hedge funds refusing to bargain. As the last piece of the deal Chrysler needed collapsed, the April 30th deadline set by an optimistic President Obama and his automakers task force came and Chrysler was forced to file for Chapter 11 bankruptcy.

Coming too late, a still-optimistic president blasted the hedge funds for wanting a bigger payoff on their 30% of the Chrysler debt even though the banks who held 70% had already settled. Since the banks and speculators are largely responsible for the current economic doldroms, Wall Street caused the auto industry collapse. The credit market still has not loosened up so people who want to buy have trouble getting loans. Since the only benefit Main Street can see from the trillion-plus given to AIG, banks, and Wall Street is bank buyouts, mergers, and huge-ass bonuses to the schmucks responsible for economic chaos in the first place! The hedge funds needed to share in the sacrifice just like everyone else. They bought into Chrysler debt at a discount in the first place. They failed to do due diligance and now they claim their fiduciary responsibility wouldn’t let them take the same deal as the banks.

The Chrysler bankruptcy iceberg has considerable behind-the-scenes impacts. Chrysler plants will remain closed during bankruptcy procedings. Those workers will be living off unemployment and they may need Medicaid assistance. They will be struggling to buy the essentials and certainly nothing else. They will not take vacations and they may end up in foreclosure. It should be apparent their indefinite layoffs are actually counterproductive to reviving our economy. Never mind the personal suffering. More significantly, however, many other businesses—besides suppliers—will lose revenue and probably cut employment. These are the restaurants, stores, and gas stations near Chrysler plants. Add to this that while a car is a necessity outside of the top metropolitan areas, it is still a discretionary expense. This means people with jobs who are uncertain about their continued employment will not buy a car, no matter how much they might want to. The net effect is fostering a continuing downward spiral. At the same time demand for social services (unemployment, housing assistance, Medicaid, welfare) rises while tax revenues decline. The one-time economic stimulis bill will not turn back the inertia of this problem.

I was emphatically opposed to the Wall Street bailout, figuring I was going to pay anyway. Wall Street has always been like the alchemists of old and things like credit default swaps just seem to prove that. A lot of financial stuff seems to be like the shell game, moving “stuff” from here to there while the value isn’t really obvious. The point is they don’t make anything tangible. But auto companies make a tangible product that you can touch and feel. What I’m frustrated by is the fact Wall Street gets over a trillion dollars, no questions asked, but automakers are begrudged just a few billion. I’m confused. We have a double standard: charlatans—Wall Street—get an unlimited amount of support and keep their contract terms while average folk—auto workers and retirees—must give up salaries, pensions, and health care. What’s up with that?

Rep. Thad McCotter (R, Livonia, MI) summed it up best in an interview with WRIF radio’s Trudi Daniels.
Why is the United States, as a whole, so cavalier and calloused to the fact that their national auto company, that their world-driving engine of progress is going bankrupt, and they don’t seem to care.
In the interview, Rep. McCotter also called into question the double standard applied to the auto industry compared to Wall Street. He also questioned the disparity of so-called bonus contracts compared to union contracts. There’s an expectation for UAW workers to give concessions, but AIG’s bonuses had to be paid because they were a contractual thing. Like me, McCotter also doesn’t understand why Wall Street gets billions in bailouts but Main Street (the automakes) hardly get any assistance. And, he speaks to the fact so-called “legacy” costs actually means retirees, an expense that transplants, at 10 years and younger, don’t have. Most importantly, McCotter frames this issue as about people, a perspective mostly missing from the debate so far.

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