Forum Post: What killed the auto industry?

This is an article from 2009 but considering the number of posts that I have read that are repeating the lies from this-- mayhap we can set that record straight.

In November 2008, GM opened a $300 million plant on the outskirts of St. Petersburg that will produce 70,000 cars per year. In March 2009, a venture partly owned by GM through its Korean subsidiary Daewoo, announced a plan to open a new car plant in Tashkent, the capital of Uzbekistan, to produce 15,000 Chevrolets per year and create 1,200 jobs. Alongside this international expansion, GM announced the closure of 12 plants in the U.S. in 2007. In 2008, GM added five more to the list of plant closings.

GM is on the march, but according to the folks who call $39 billion in "deferred tax credits" an asset, the UAW must get leaner, and "welfare" for blue collars workers should be axed so "unearned income" for the leisure class can get jacked up.

The $39 billion asset was a boondoggle--it never existed, not even as an unhatched egg, let alone a chicken. It wasn't a loss of cash, it was an auditor's correction of crooked bookkeeping. But it helped steamroll the union and trumpet the demand to dump legacy costs. Labor's legacy of profit was invested outside North America, but that shouldn't make the debt uncollectable. Labor deserves to benefit from the investment of its legacy profits. Labor has a legitimate lien on capital.

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SOLDIERS OF Solidarity has been saying this since 2005, when Delphi first filed for bankruptcy. Delphi transferred assets overseas. It insisted that assets outside the jurisdiction of U.S. courts were profitable, but untouchable.

When Delphi proposed to cut wages in half and eliminate retirement benefits, we warned that Delphi was the lead domino, and the wage and legacy cut would ripple through the economy. We warned that the restructuring would spiral down and the impact on the economy would be profound and permanent.

It doesn't require a degree in economics to figure out that workers making $14 per hour don't buy new cars. They don't buy homes, and they don't invest their savings in the stock market. They live paycheck to paycheck. Restricted income leads to boycott by default. The economic blowback won't end with the Detroit Three.

When GM's labor costs reach parity with Toyota, Toyota will ratchet wages down again. The automotive industry is too entrenched in our national economy not to have a cascading impact on wages throughout the country. The dominos won't stop falling at the end of the assembly line. They'll keep tumbling until every one is down.

If the Detroit Three can't sell cars to their own workers, it doesn't matter how cheap they buy labor. The market is going down. It's the paradox of thrift. When savings isn't invested at home, in production as opposed to speculation, it reduces demand and inhibits growth.

The double whammy of free trade and de-unionization in the U.S. compounded the thrift paradox. The savings extracted from cheap, non union labor was invested overseas. The companies' thrift strategy undermined their most loyal customers--employees and communities in the U.S.

Read the entire article here

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