Obama and General Motors: Obama’s “Short Changing” of America’s Workers

President Obama maintains that the Federal government doesn’t intend to make automakers General Motors and Chrysler “wards of the state”. His actions, of requiring a “better business plan”, “painful concessions”, a “better restructuring plan” while forcing GM CEO and Chairman Rick Wagoner to step down, has some wondering if the government’s actions imply more than “lending” a hand and will lead to yet another business being owned by the government. What I see is the beginning of the “short changing” of American workers, through outsourcing and “concessions”.

The Obama GM bailout is also contingent on concessions from the United Auto Workers in the form of slashing their “Voluntary Employee Beneficiary Association union retiree health-care fund” by half, from 20.4 billion to 10.2 billion.

Obama also stated that Wagoner’s departure “was not a “condemnation” of the chairman — rather a “recognition that it will take a new vision and new direction to create the GM of the future”.

The calls for restructuring, getting rid of GM’s CEO and President, the requirement for better business plans, the concessions from auto workers, and the requirement of “new vision and direction”, seem to imply that the government is playing a “defacto” game of ownership in regards to GM and Chrysler. While I’m not an expert on lending billions of dollars to businesses, I don’t believe I’ve seen a lender require a business to deep six the CEO before forking over the dough, require a “new vision”, nor workers made to make concessions.

The government has been busy playing Monopoly on the tax payers’ dime, acquiring “stakes” in companies that have already received government bailouts such as 80% of giant insurer AIG and acting as “conservatorship”, or “temporary public ownership” of mortgage giants, Freddie Mac and Fannie Mae.

If, by some random act of God, or change in the winds of fortune, the government were to acquire GM and Chrysler, I thought it would be interesting to take a look at an instance where a government ran a motor company, East Germany’s infamous Trabant.

East Germany’s government produced car, the Trabant.

“The Trabant was an East German car-like vehicle. In reality, it was more like a lunch box with the starter motor of a lawn mower as engine. It could accelerate from 0 to 100km/h on the same day and was the only vehicle known to man, that had the squashed insects on the rear window rather than the wind screen.

While most of the Known World never knew about the Trabant, it was very popular in East Germany. In fact it was so popular, that the waiting period for delivery was slashed to only three weeks. However it still took a year for the car to reach it’s destination.”
–Unencyclopedia.wiki.com

Rated by Time magazine as one of the “50 Worst Cars of All Time”, the 1975 Trabant was
the car that “gave Communism a bad name”:

“This is the car that gave Communism a bad name. Powered by a two-stroke pollution generator that maxed out at an ear-splitting 18 hp, the Trabant was a hollow lie of a car constructed of recycled worthlessness (actually, the body was made of a fiberglass-like Duroplast, reinforced with recycled fibers like cotton and wood). A virtual antique when it was designed in the 1950s, the Trabant was East Germany’s answer to the VW Beetle — a “people’s car,” as if the people didn’t have enough to worry about. Trabants smoked like an Iraqi oil fire, when they ran at all, and often lacked even the most basic of amenities, like brake lights or turn signals. But history has been kind to the Trabi. Thousands of East Germans drove their Trabants over the border when the Wall fell, which made it a kind of automotive liberator. Once across the border, the none-too-sentimental Ostdeutschlanders immediately abandoned their cars. Ich bin Junk!”

More on the production of the Trabant:

“In 1953 the order to design a small passenger car was sent to the Zwickau Automobile Works. Two years later the P70 made its first appearance in East Germany. It had a two-stroke, 22 horsepower engine and its body, due to a shortage of sheet metal, was made of plastic as much as was practical. This vehicle would become the forebear of the culture icon known as the Trabant. The vehicle commissioned by the East German government to succeed the P70 was named Trabant (satellite) in the enthusiasm that followed the successful launch of Sputnik I in October 1957. The first vehicle rolled off the production line on 1957-11-07 and was a P50 model with a 500cc engine, 18HP, front-wheel drive and a maximum velocity of 90 km/h.

By the end of 1957 only fifty P50s had been built and production during the next few years wasn’t much faster. Some updates were made after its debut and it was first upgraded to include a four-speed gearbox and the engine’s output was raised to 20HP. In 1962 the P50 was replaced by the P60 which boasted 23HP and a 600cc engine.”

The Trabant became an invaluable source of humor:

-What does the designation “601″ stand for?
-600 people order it, one gets it.

A cop stops a Trabant motorist and looks at him suspiciously: “Citizen, you have no speedometer. How do you expect to follow the speed limit?” To which the motorist replies: “Comrade Officer, I can do that without a speedometer. When I’m driving 20 km/h the windshield vibrates. At 30 the seats shake; at 50 the doors rattle and at 80 my teeth.”

-How do you double the value of a Trabant?
-Fill the tank.

1969 Trabant commercial

Production of the Trabant ended in 1991. According to an article in the New York Times, A Red Menace That You Can Drive Yourself, the price of car was $3,000, which was pretty penny for a socialist wage earner, while the wait time was astronomical, that once an order was placed, it took up to 15 years to get the car delivered.

In 1953 workers in East Germany went on strike after the government offered workers a “new pay deal” of wage cuts of “up to one third” unless they “increased productivity by 10 percent”. According to Socialistworker.0rg, the “employees insisted that productivity must come first”.

“The initial number of striking workers swelled to 300,000 while the police and military refused to step in and quell the “revolt”.

The government had to make concessions. Wage cuts were cancelled and some wages increased. Later these were reversed. The spectre of 1953 continued to haunt East Germany’s rulers. Archives show how the regime was obsessed with studying public opinion. As the old Russian saying puts it, they spent half their time finding out what people were thinking, and the other half trying to stop them thinking it.”

It’s quite interesting to note that the regime was “obsessed with studying public opinion” and that the government spent half the time “finding out” and the other half, “trying to stop” what the public was thinking. Which calls to mind our government and politician’s “obsession” with polls, and the attempt by the government to label tax payers–which are truly the “workers” of this country–who were “upset” about the recent $125 million bonuses given to AIG workers with bailout funds, as being unduly “angry” and having a “mob mentality”.

Twenty five thousand Russian troops were brought in to squash the East German worker uprising in 1953. Some 1800 workers were eventually executed. The East German government blamed the revolt on “”fascist provocateurs”. In 1961, the Berlin Wall was erected.

It was behind this wall that the Trabant was produced by the East German government. I found out about the Trabant years earlier after reading reviews on the worst cars ever made. I particularly remember the “legend” that, because the body was constructed of Duroplast, a composite of organic fibers and cotton, poison had to be added in order to stop rats from gnawing away the body parts before they were bolted to the car.

To be fair, while the 1975 Trabant made Time’s 50 worst cars list, there were American made cars that also made the list of car infamy, such as the 1958 Ford Edsel, not because of poor construction, but because the car became “the first victim of Madison Avenue hyper-hype”:

“Ford’s marketing mavens had led the public to expect some plutonium-powered, pancake-making wondercar; what they got was a Mercury. Cultural critics speculated that the car was a flop because the vertical grill looked like a vagina. Maybe. America in the ’50s was certainly phobic about the female business. How did the Edsel come to be synonymous with failure? All of the above, consolidated into an irrational groupthink and pressurized by a joyously catty media. Interestingly, it was Ford President Robert McNamara who convinced the board to bail out of the Edsel project; a decade later, it was McNamara, then Secretary of Defense, who couldn’t bring himself to quit the disaster of Vietnam, even though he knew a lemon when he saw one.”

Also the 1961 Corvair:

“Ralph Nader put the smackdown on GM in his book Unsafe at Any Speed, also noting that the Corvair’s single-piece steering column could impale the driver in a front collision. Ouch! Meanwhile, the Corvair had other problems. It leaked oil like a derelict tanker. Its heating system tended to pump noxious fumes into the cabin. It was offered for a while with a gasoline-burner heater located in the front “trunk,” a common but dangerously dumb accessory at the time.”

And the 1971 Ford Pinto:

“They shoot horses, don’t they? Well, this is fish in a barrel. Of course the Pinto goes on the Worst list, but not because it was a particularly bad car — not particularly — but because it had a rather volatile nature. The car tended to erupt in flame in rear-end collisions. The Pinto is at the end of one of autodom’s most notorious paper trails, the Ford Pinto memo , which ruthlessly calculates the cost of reinforcing the rear end ($121 million) versus the potential payout to victims ($50 million). Conclusion? Let ‘em burn.”

According to Edmunds, the Trabant ceased production in 1991 while 3 million cars were made.

Yet the specter of “government” run business, or having a “stake”, with requirements of a “new vision” and worker concessions, is less than “six degrees of separation” between the former East German socialist government and the current government here in the United States. Whatever label you slap on it, you still have the government dictating how a business will be run, from top to bottom, side to side, with workers stuck in the middle.

Another aspect worth mentioning: the outsourcing of jobs by companies that have received bailout funds, such as the $400 million bailout to JP Morgan Chase, where thousands of American IT jobs are now slated to be arrive on the shores of India where workers are paid a much lower wage.

India has already placed their marker squarely on the “affordable” auto map by producing and getting ready to sell the Pace at a price tag less than a 50 square inch high definition television with high end surround sound at $2500. According the New York Times, India is set to “outpace” the world’s fastest growing car producers, China.

It shouldn’t be a surprise that a company in India can produce such a low cost car given that their workers are paid a fraction of what their American counterparts earn. Ditto for the Chinese auto manufacturers and the pay scale of their workers.

Since the government has yet to raise any concerns over the shipping of IT jobs overseas by JP Morgan Chase, why should we assume that the government would limit GM or Chrysler from doing the same as part of their “new vision”?

While workers in America, the very same workers who pay income taxes which fund the massive bailouts, are being laid off or have lost up to 50% of their 401K retirement savings, they’ve yet to see any gains from the bailouts nor none of the “promised jobs”. Jobs which the Obama administration claim will be “plentiful”, and in such industries as “wind farms” and solar energy companies.

What we won’t see in the future is plenty of IT jobs, because wind power or solar power companies will need only a fraction of IT resources. IT jobs are office jobs, where trained workers, with headsets and computer monitors, are required to sit behind desks, cordoned off in cubicles. These aren’t the types of jobs where workers are required to ratchet giant blades to wind turbine towers or hoist solar collectors onto the roof of buildings. Perhaps if GM and Chrysler collapse then their former workers would be more “suited” to the shining new technologies that are environmentally based and require more manual labor skills.

Obama promised during the election that “change” was coming to America. So far, what we’ve seen is more massive bailouts to Wall Street to companies that took the money and sent it and jobs overseas.

While Obama’s “Change” is underway, some American workers, except for those on Wall Street, are finding that their “change” is the “short changed” variety, while, in the future, some may be left with what little change they have in their pocket.

By LBG

by LBG

Source – Fox News – Obama Says He Has ‘No Intention’ of Running General Motors
Source and Image – Trabant
Source – History.com – Trabant
Source – -Everything2.com
Source – Bloomberg – GM Bonds Fall on Obama Threat of Bigger Concessions, Bankruptcy

Tags: bailout, Chrylser, concessions, East Germany, GM, government, jobs, Obama, overseas, short changed, Trabant, workers, worst cars