UAW-GM Labor Deal a Fitting End to a Successful Government Intervention

Despite What Conservatives Say, the Auto Industry Bailout Rescue Worked

At some time in the not too distant future an objective analysis of the Obama Administration (one term or two, that is to be decided later) will conclude that the policy of rescuing General Motors and Chrysler was a resounding success.  It may be the premier event of the Obama Presidency.

The rescue of GM and Chrysler was not a “bailout”.  General Motors was not bailed out, the shareholders lost 100% of their equity.  What did happen was that the government took control of the bankruptcy process, injected enough funds into the company to allow it to continue to operate and turned management of the company over to competent individuals.  They obtained concessions from the UAW who in return agreed not strike.  Both management and labor behaved admirably.

On Friday GM and the UAW reached a tentative agreement on a new labor contract.

The deal will create a new profit-sharing formula and tie workers' pay to vehicle quality, these people said. GM also agreed to reopen an assembly plant in Spring Hill, Tenn., which had been idled as part of the auto maker's restructuring.

A key goal of GM's heading into the contract was to create a new system of worker compensation more directly tied to performance.

The union sought to increase worker pay and add union jobs. Pay for entry-level workers starts at $14, roughly half that of veteran employees. That starting wage will rise by $2 to $3 under the pact, a person familiar with the deal said.

So instead of the loss of hundreds of thousands of manufacturing jobs, GM and the UAW have salvaged an American icon.  And the next time a Conservative says government has never, ever created a single job, or that government cannot help the economy, or that government needs to stay out of the way of business, just smile and point to Detroit’s auto industry.  Conservatives won’t get it, but GM management and employees will.

As for Ford, it avoided the government rescue because before the crisis the company realized that just because your great-grandfather started the company and your last name is Ford, that doesn't mean you are qualified to run the company.  So Ford brought in outside management, people who knew how actually run a business, and they borrowed enough money to get the company through the transisition from losses to profits. 

Conservatives argue that government wants to step in and run the economy, but the entire history of the auto industry and the rescue of GM and Chrysler and the non-rescue of Ford demonstrates the falsity of this claim.  Government steps in only when it is absoutely necessary, and sometimes, contrary to Conservative and popular opinion, it is right to do so and is successful.