Moraine, Ohio

When I first ask Vinny if he can spare a few minutes to talk to a reporter, he reacts as if I’d offered to sell him a genuine Rolex watch. “Oh no,” he says, backing away. “I’ve been a victim of media bias before.”

I don’t know what passes for media bias in Moraine, Ohio, so I proceed with caution. I offer a few assurances, and finally Vinny, proprietor of Vinny’s Bar and Grill, agrees to talk to me — but not until the lunch rush subsides. He turns away and darts around the room like a gecko in cargo shorts, greeting every customer in the restaurant.

And for a restaurant in a town that’s supposed to be dying, it’s a pretty good crowd. As it thins out, Vinny sits down and tells me about his bad experience with the media. “Good Morning America called me out of New York City because they were coming in to do a story,” he says. He assumed they picked this small town outside of Dayton for the same reason I did: General Motors is closing an assembly plant just down the road on December 23, and Moraine is bracing for the economic impact.

About a month before the election, the people from GMA came to Moraine and interviewed Vinny, but they cut him out of the segment that aired. He thinks it’s because they didn’t like his politics. “I said . . . the Democrat would probably help me the most today, but life is about potential, so the candidate on the Republican side, I feel, would give me the most opportunity for gain in the future,” he says. “But I never got on.”

In ABC’s defense, the segment that aired wasn’t biased — it was just trite. It was a standard election-year piece in which voters in a hard-hit town were asked which candidate would help them the most, then neatly divided into stock categories (“wants change” vs. “values experience”). Joel Morrow, a GM employee who worked at the Moraine assembly plant for 14 years, told ABC that he had never voted for a Democrat, but that he planned to vote for Obama because “I feel like [the Democrats] are for the middle class.” Another GM employee said he supported McCain because “I’m looking for experience.”

The only explanation ABC offered for the Moraine plant’s demise was that high gas prices had killed demand for sport utility vehicles, which were all the plant produced. This is true as far as it goes. But high gas prices are not the reason GM, Ford, and Chrysler are now begging Congress for a stay of execution. The Big Three have asked for $25 billion in loans, which could keep them solvent for perhaps another year, and the Democrats seem inclined to give it to them. But a deeper look at what’s happening in Moraine reveals why such an approach is doomed to fail.

Any successful business must be able to respond to fluctuations in demand for its products, but GM’s job-security agreements with its unions make that process burdensome and costly. The workers at the Moraine plant belonged to IUE-CWA, an electrical workers’ union. As a result of the plant closure, IUE-CWA was able to negotiate buyouts of $70,000 to $140,000 for any worker who voluntarily quits. Other workers were made eligible for early retirement.

A few days after the election, I run into Morrow in the parking lot of the Moraine plant. (When I tell him I am a reporter, he says, “Aw, Christ.”) I ask him what’s going to happen to the plant’s 1,400 remaining employees. “More than 50 percent are taking the buyout, maybe a third are doing some sort of retirement, and some are staying and hoping to transfer,” he says. He says he’s hoping to transfer.

GM employees who stay with the company and are laid off will qualify for GM’s supplemental unemployment benefits, meaning that GM will make up the difference between their former wages and their state unemployment checks. When those checks run out, GM will pay these workers 95 percent of their former wages for up to two years, depending on seniority. Workers with at least ten years of seniority are eligible for the Job Opportunity Bank Security program. This is the notorious jobs bank that allows laid-off workers receive their regular hourly pay to sit around and work crossword puzzles or read the paper. If GM offers them an opportunity to transfer to another plant, they have the right to turn down a limited number of such offers. And if no offer is made, they can stay in the jobs bank until they retire. GM currently has around 1,400 workers nationwide in the jobs bank.

Peter Morici is a professor of international business at the University of Maryland. In late November, he testified before the Senate Banking Committee, alongside the CEOs of the Big Three automakers and United Auto Workers president Ron Gettelfinger. “The real problem here is that [Banking Committee chairman Chris] Dodd doesn’t understand the scope of the severance payments that the UAW gets,” Morici tells me. “They go in the jobs bank and they stay there forever. My feeling is that [the Big Three] are at fault for letting the jobs bank continue after these last labor negotiations and agreeing to $105,000 buyouts. The whole situation is absurd.”

John Heitmann, an automotive historian at the University of Dayton, agrees. “We can’t really compete when we have those kinds of contracts,” he says. “It’s the health care, it’s the seniority, and it’s the work rules. In flush times, when life was good and you could sell many different vehicles and particularly trucks at very high profits, GM could survive like that. But it was just a matter of time before things caught up with them.”

The Big Three and their unions argue that in 2007 they signed new contracts bringing wages and benefits down to more realistic levels. Once the health-care provisions of these contracts take effect in 2010, they say, they will be out from underneath the crushing liabilities that have saddled them with so much debt. “They talk about all the things they gave up,” Morici says. “But their contracts are so complex, you could give up half the things in the contracts and they would still be burdensome.”

The new contracts took steps toward closing the compensation gap between the Big Three and their foreign competitors, but left in place the job-security guarantees and work rules that have rendered the Big Three sclerotic and unable to adjust to shifts in demand. Imagine the U.S. auto industry as an emergency-room patient with a severed artery and cholera. The 2007 contracts stopped the bleeding, but the Big Three are still very sick.

The cure, according to Morici, is bankruptcy. “My feeling is that these guys haven’t adequately explored Chapter 11, because they don’t want to,” he says. Bankruptcy would force concessions from the automakers’ unions, but the Big Three are pushing hard to avoid it. They claim that bankruptcy would necessarily mean liquidation and thus economic calamity. To back this up, they produce surveys purporting to show that 80 percent of Americans would not buy a car from a bankrupt auto company, for fear that the company would not be around to service the warranty or provide parts.

Morici counters that warranties could be secured by third parties and parts purchased from aftermarket dealers (companies that build parts solely for use as replacements). “You’d probably have more than one company in Chapter 11,” he says, “and people will quickly realize that they’re going to emerge much as the airlines did, because we can’t get along without them. The Japanese transplants don’t make enough cars.”

The “Japanese transplants” are the factories that Honda, Toyota, and Nissan have built in the midwestern and southern U.S. whose non-union workforces and proximity to growing markets position them better to weather the economic storm. Bankruptcy for the Big Three could clear the way for foreign automakers to purchase some of their assets, and the media have buzzed with speculation that some Chinese firms might do the same. Heitmann recalls the fate of Leyland Motors in Britain, which was nationalized and then broken up in the 1970s and ’80s after a failed bailout attempt.

“There are GM lines — the Corvette, the Chevy, possibly the Saturn — that are going to continue,” Heitmann says. “But who owns them is going to be really interesting. It could be like in Britain, where Morris Garage — MG — ended up [being bought by] a Chinese firm [and] called Modern Gentleman over in China.” The possibility of a Chinese firm’s buying up GM product lines troubles Heitmann, but it also belies the notion that bankruptcy would mean an automatic liquidation of the U.S. auto industry.

Even so, the Big Three are going to have to reduce capacity in the face of shrinking demand, and some communities like Moraine are going to have to deal with plant closures. Economic resources will be allocated to more efficient uses as part of this process, and resourceful communities will focus on the future. Moraine is already looking for ways to redevelop the plant site once GM is finished decommissioning it. Vinny, the small-business owner in Moraine, is optimistic that it could be turned into a mixed-use project that will bring new business to the area.

“This is still not a dead zone, contrary to what everybody thinks,” he says. GM and its suppliers may be leaving town, but that just means he has to work harder to promote his business by hiring bands and courting the University of Dayton basketball crowd. “For me to stay out there, I’ve got to do forward thinking,” he says. “I’m the kind of person that feels for people’s plight. I want to help people who want to help themselves. However, nobody is going to help me but me and my customers.”