UAW Is Driving Detroit Off a Cliff
The coddled union won't make concessions on its industry-killing contract.


Henry Payne

Detroit, Mich. — Who killed the auto industry and plunged the U.S. into a depression? Senate Republicans did. That’s how Washington Democrats are trying to frame the failure of Thursday night’s Senate vote on a Detroit Three bailout bill.

“The people on the other side of the aisle think American working men and women are paid too much,” bellowed Michigan’s Debbie Stabenow from the Senate floor.

But, in fact, Senate Republicans — led by Bob Corker of Tennessee — had proposed a bipartisan, compromise bill that would not only have saved the bailout, but put the Big Three on the road to long-term recovery. As of 8 pm Thursday, the Senate buzzed with anticipation that a deal was imminent.

And then the United Auto Workers snuffed it.

Corker’s amendment demanded concessions from the UAW as tangible evidence that the industry was willing to make fundamental structural reforms before risking taxpayer money on loans to failing businesses. But the UAW refused to accept pay parity with non-union foreign automakers by the end of 2009. That pay scale — among the best hourly wages in America at $26-an-hour plus benefits, totaling $48-an-hour — was not good enough for the coddled union, who demanded that their current $73-an-hour contract package be paid until it expires in 2011.

The stunning defeat came after a determined effort by Sen. Corker to resuscitate a bill that appeared dead only 12 hours before. Corker — contrary to Democratic caricature — does not want the Detroit Three “to fail and destroy 3 million jobs,” as the dubious Democratic mantra goes. Corker is also not “un-American” or a “traitor.” Yes, his state is home to Nissan’s U.S. headquarters as well as some Volkswagen operations. But it is also home to GM’s Spring Hill plant, one of the most modern in the world.

Corker understands that Chapter 11 is the best tool for restructuring Detroit and he does not want to give it up as a “big stick,” as he calls it, to prod the automakers to real reform.

To that end, the former business owner drafted an alternative that established far tougher conditions than what Democrats (and the White House, for that matter) had offered — including mandatory bankruptcy by March if GM and Chrysler (Ford is not in need of immediate assistance) hadn’t met benchmarks to make their companies profitable.

Writing for the Detroit News on Thursday, Corker demanded “the same types of conditions a bankruptcy judge might require but without some of the stigma that accompany a formal bankruptcy.” Those conditions include sacrifices across the board, including slashing bondholders’ returns, dividend restrictions, and UAW concessions on wages and work rules to put them on a level playing field with their non-union competitors.

His amendment concludes: “Funding will immediately go out to companies but they must achieve a reduction in debt load by March 15, 2009 and then additional funding for UAW agreements in place by no later than March 31, 2009. Failure to adhere to any one of these conditions by any such date will result in the requirement that the company file bankruptcy under Chapter 11.”

“They like it,” Corker said after meeting with Detroit Three representatives late Thursday. Sen. Kit Bond (R-Mo.), a bailout proponent, said the Corker bill “may be the best deal we can get.” The White House, trying to pack its bags and kick the issue down the road to Obama, surrendered to Democrats Wednesday. But after seeing the Corker amendment it re-grew a spine and reportedly supported the compromise even as administration officials stayed out of Capitol Hill negotiations.

Some analysts were still unsure that any solution outside of Chapter 11 would work. Professor Lynn LoPucki of UCLA Law School, said “Senator Corker’s plan is a paper tiger. He talks tough but he proposes to give GM billions now — before any of these conditions is met.”