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More Importantly, Why Did the Janesville Plant Close?



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Following Paul Ryan’s invocation last night of the Janesville, Wisconsin General motors plant closing, much of the political chatter today has been about when the plant closed. Was it closed in 2008, as Democrats believe? Was it 2009, as Paul Ryan asserted in his speech last night? Could it still be open today if Barack Obama had taken sufficient action?

Yet it seems nobody is talking about exactly why the plant closed down. While plant closings are always complex issues, two main issues (both somewhat embarrassing to the Left) played a large role: the heavy burden of organized labor and misplaced government intervention in the automotive marketplace.

As George Will wrote at the time, by 2005, GM had essentially become a health-care company that also happened to make automobiles. That year, GM offered $5.2 billion in health care annually to 1.1 million workers and retirees, with retirees outnumbering active workers by 2.5 to 1. When the federal government bailed GM out to the tune of $50 billion in 2010, the United Auto Workers got a 17.5 percent share of the government’s majority stake.

Certainly, Janesville wasn’t immune to union influence with regard to wages and benefits. This 2008 article by the Janesville Gazette documents the history of labor strife at the local GM plant, including a 2007 strike protesting the lack of a national contract. The strike ended 40 hours later, and included a product commitment for Janesville — yet the factory would completely shut down a year and a half later.

Aside from organized labor problems at the national and local level, state government also placed a large bet on a product produced at the Janesville plant that would soon become obsolete. In October 2005, Democratic governor Jim Doyle announced a $5.4 million grant to GM to train workers how to make new Chevrolet Suburbans, Tahoes, and GMC Yukon XLs and Yukons. “I appreciate the company’s strong presence in Wisconsin and its willingness to make lasting investments in the plant that increase its competitiveness and productivity,” Doyle said at the time. “I am committed to building on the state’s long-term partnership with GM,” he added.  But soon, gas prices would rise dramatically, and the economy would collapse, cutting demand for gas-guzzling SUVs.

In a sense, this was a reverse-Solyndra scheme; rather than propping up a “green” energy company, the Wisconsin government artificially buttressed one that was more and more dependent on cheap fossil fuel. But once fuel economy became an issue with consumers, the company couldn’t adapt in time to save itself. Doyle’s grant had trapped the company making 20th-century cars in a marketplace rewarding 21st-century technology.

It is easy to see why Democrats want to argue about when the plant closed and not why it closed. Both the crushing weight of employee benefits negotiated by unions and the failed state stimulus plan don’t comport well with their narrative.

— Christian Schneider is a columnist for the Milwaukee Journal Sentinel.



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