Big Three Automakers Take Their Case To Capitol Hill
MICHEL MARTIN, host:
I'm Michel Martin, and this is Tell Me More from NPR News. Coming up, she has a number of titles to choose from, Mrs. Obama, first lady, even mom-in-chief, and Michelle Obama is also facing no shortage of opinions about how she should tackle her job in the White House.
We bring you a sample of them from four accomplished women, all mothers, with very different perspectives. It's our weekly parenting segment, and it's a special collaboration with the online publication, theroot.com. That's in just a few minutes.
But first, to today's number-one issue, the auto industry. The heads of the Big Three automakers, General Motors, Ford, and Chrysler, joined by the head of the United Automobile Workers Union make their case for federal help to a Senate committee today while, on the other side of the Capitol, the House is getting ready to vote on a Democratic plan to provide the companies with a $25 billion loan.
The collapse of the auto industry would have far-reaching effects throughout the economy. But how to help the automakers, indeed, whether to help them at all are questions that are provoking heated debate in the Capitol and around the country.
Joining us to talk about all this are Warren Brown, a columnist for the Washington Post who covers the auto industry, John Schmitt, a senior economist with the Center for Economic and Policy Research in Washington. Also, joining us from Detroit is Mary Chapman, she's an editor at large for African-Americans on Wheels magazine. She's also worked on the auto beat for both the New York Times and Newsweek. I welcome you all. Thank you so much for joining us.
Mr. WARREN BROWN (Economic Columnist, Washington Post): Good to be here, Michel.
Mr. JOHN SCHMITT (Senior Economist, Center for Economic and Policy Research): Thank you.
Ms. MARY CHAPMAN (Editor at Large, African-Americans on Wheels Magazine): Thank you.
MARTIN: Warren, if you could set the table for us. The automakers say they need $25 billion to ward off disaster. Can you give us some sense of the scope of the problem? How bad are things? What's the time line? What if they don't...
Mr. BROWN: Well, actually, they need about $50 billion. You know, the first $25 billion is something that was, in effect, contracted with the Congress last year in the 2007 Energy Bill. The first 25 billion would go towards helping, you know, the domestic automakers, you know, retool to produce more fuel-efficient vehicles. So that's one thing.
The other thing is basically, you know, how do you get to the future if you don't have a bridge to get there? And that's the second $25 billion that the auto industry is seeking as a direct low-interest loan.
The entire debate strikes me as being more than a little bit silly and hypocritical. Every single foreign car company building in the United States right now has done so with the extremely generous tax incentives and other financial incentives from the so-called business friendly states, you know, wooing those like, you know, foreign companies.
MARTIN: We can talk more about that in a minute, but I just still want to just understand the scope of the issue. What exactly do they need the money for, and why do they need it right now?
Mr. BROWN: They need it right now because, first of all, their sales have totally collapsed. You know, a combination of, you know, credit freeze as well as, you know, the crazy wild fluctuations in the gasoline crisis. That's another thing I would like to talk to you about...
MARTIN: OK. Well, we'll do it in a minute.
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MARTIN: We'll talk about that in just a minute. John Schmitt, how many jobs are involved, and what are the ripple effects throughout the economy?
Mr. SCHMITT: Well, right now, about one in 100 workers in the United States is directly employed in the auto sector kind of narrowly defined. It's much bigger if you include all of the industries that feed in and provide parts and raw materials and things like advertising and other services that are related to the auto sectors.
So, if we take the financial bailout as a sort of a reference point, I mean, why are we intervening there? It's because the financial sector has repercussions expressed throughout the entire economy. We have a similar situation here. The auto sector doesn't spread as far as the financial sector. But it spreads very far.
MARTIN: When you said one in 100 workers, do you mean 100 workers in manufacturing or 100 hundred workers overall?
Mr. SCHMITT: No. One in 100 workers overall in the United States work in auto sector. It is a huge employer. And that's just the tip of the iceberg. As I was saying, there's a lot of other workers who depend indirectly on the sector, so it's really big.
MARTIN: Mary Chapman, of course, Detroit is synonymous with the auto industry. How many jobs could potentially be at stake in the Detroit area alone? And just what's the mood there as we're having this conversation here in Washington?
Ms. CHAPMAN: The numbers, they've been ranging anywhere from 30,000 to 200,000. I mean, it's crazy what's going on. But, I mean, we're talking about a good brunt of Detroit area's black middle-class and the businesses it supports. I mean, these are the folks who buy the rental properties, the second cars, the boats.
So, when you take that tax base away in the nation's poorest black city, one with a new administration, where unemployment already hovers around 14 percent, where the housing market is already one of the worst in the nation, you know, it's hard to foresee how the city, which is more that 80 percent black, by the way, can keep going.
MARTIN: And, Mary, I'm not sure if you're the best person to answer this or someone else, but autoworkers have already made lots of concessions. Can you describe what the scope of those concessions have been? It's my understanding if you came in, say, 10 years ago, you'd be making one rate, and if you're coming in today, you're making a very different wage. Warren?
Mr. BROWN: Yeah, that's true.
MARTIN: Is that true?
Mr. BROWN: And the UAW has made a number of, you know, concessions, you know, over the years. But the problem with the UAW is not so much that it has to make concessions. The problem with the UAW is that it has consistently failed to organize, you know, all of the foreign competitive plants. And to the extent that you fail to organize these foreign manufacturers, you undermine the protective fabric of the contract that you have, you know, with the domestics. Yeah.
MARTIN: Is it, Warren, is it conceivable that one or more of these companies could simply go away?
Mr. BROWN: Of course.
MARTIN: Is that in fact...
Mr. BROWN: Yes, of course. I mean, look, you know, it's a tangible reality, and you're talking to somebody educated by Josephites and Jesuits, and, you know, we always believe that tangible reality, sooner or later, it fades.
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MARTIN: If you're just joining, we're speaking with Washington Post columnist Warren Brown, Mary Chapman of African-Americans on Wheels magazine, and John Schmitt, senior economist at the Center for Economic and Policy Research about the future of the U.S. auto industry. There's an historic relationship and Mary alluded to between African-American workers and the auto industry. Jack, could you talk about that?
Mr. SCHMITT: Sure. I think it's a really important part of this whole story, and the specific situation in Detroit that Mary mentioned is a kind of microcosm of the issue. If you go back to the end of the 1970s, roughly one in 50 African-Americans in the United States worked in the auto sector. That's an enormous share of that population.
And what's particularly important is, if you go back to that time, about 80 percent of those workers, 80 percent of the African-Americans in the auto sector, were unionized. We're talking Sweden in America. Those are unionization rates that you just don't see anywhere else. And I think that that really helped to build the black middle class in the '60s and the '70s. It's continued to keep it solid for some period of time.
Now, it's been under a lot of stress because the employment share of the auto sector has really fallen a lot nationally, and that's had a disproportionate effect on African-Americans. Similarly, the shift in the auto sector out of the union belt that Warren was talking about and into the South has meant a decline in both opportunities for blacks and the sector and a big drop in the unionization rates. It's gone from about 80 percent back in the end of the '70s to only about 40 percent today.
MARTIN: But about 60 percent of the black population still lives in the South, so presumably, African-Americans are still a very large part of the auto industry labor force.
Mr. BROWN: Yes and no.
MARTIN: Yes and no? This is Warren.
Mr. BROWN: Here's the deal. You have basically two different types, you have the first theory, you know, the first compensation that basically allows you to eat and to keep a roof over your head. That's nice. You have a second kind of compensation that helps you to dream. It helps you to think about being something else other than what you are.
The UAW for the longest time has been winning the second kind of compensation, the compensation that helps you to dream. John is absolutely right. You know, I've said many times that without domestic auto industry, you would not have had a black middle class.
And look at the longitudinal, you know, effects of that. You have people who escaped the economic apartheid of the South. And it went up to, you know, Michigan and Ohio to work in the car factories. First generation worked in the car factories.
The difference is that, under Henry Ford, it didn't matter whether they were black or white. They were getting the same thing as white folks were getting. And there's a measure of dignity, you know, in that. The second generation maybe followed their parents into the car factories. But the third, fourth subsequent generations, they're sitting behind microphones right now. You know, they are working as lawyers and doctors and so forth and so on.
So people ask me and say, you know, why are you so passionate in your support of the domestic auto industry? Well, I make no bones about it. I am passionate because this is the one industry that has basically, you know, defined us as equally competent workers getting equal pay which will helped us to develop a middle class.
MARTIN: Do you think that that should be part of the debate because there are those who would argue...
Mr. BROWN: We - America...
MARTIN: That, no, it's not that those are - that's history, and now is now, and that really, the public policy decisions should be based on what's best for the country now.
Mr. BROWN: You can no more, Michel, have a nation without its history than you can have a nation without ownership of its manufacturing infrastructure, and that would be my response to that.
MARTIN: Mary, what do you think?
Ms. CHAPMAN: Well, listen, my grandparents and my ancestors, I mean, they came here from the South. And Detroit is known as Up South, actually, because that culture has just been inculcated into Detroit's cultures. There's so much South there. So I would think that, yes, I mean, absolutely. I mean, that has to be a consideration going forward.
MARTIN: The lawmakers who will say they oppose a federal intervention say these industries aren't moving fast enough to meet the needs of the markets today. What's your response to that.
Mr. BROWN: It is the most ridiculous, hypocritical argument, you know, I've heard. First of all, all car companies do what companies do. That is that they play to market. The market, historically, in the United States has been saturated with cheap gasoline. We've been drunk on cheap gasoline.
We haven't had one Congress - well, with the exception of maybe one - who really said, you know what we have to do? We have to start getting consumers to pay the real cost of gasoline. What we have had are calls for Corporate Average Fuel Economy, which is trying to correct a two-part equation by working only one part of the equation, the production side.
Corporate Average Fuel Economy says they'll produce more fuel-efficient cars. But there's nothing on other side that says buy more fuel-efficient cars. So what do you have? What you have is technical fuel-efficiency plus the cheapest gasoline in the developed world leading to what? Increased consumer demand for the good that is provided by the technical fuel-efficiency and a cheap gasoline.
Now, the popular wisdom in the conventional media is to beat up the Big Three, the American Three, for producing nothing except trucks, which is baloney. Imagine that you are, you know, GM, fine. You're making lots of money making trucks. But in comes Toyota, and Toyota sees you making lots of money-making trucks. Does Toyota say, I'm going to give you a fuel-efficient equal? No. Toyota starts rolling in its big trucks, too. So, yeah, GM is going to try to defend his territory.
MARTIN: John Schmitt, what's your take on that? If the bailout does, pass some Republicans, some Democrats say that it's throwing good money after a bet. It doesn't solve the bigger problems of the industry.
For example, Senator Richard Shelby, the senior Republican in the Senate Banking, Housing, and Urban Affairs Committee who has emerged as kind of the chief critic of federal intervention, says they're not building the right products. They've got good workers. I don't think they've got good management. They don't innovate. They're a dinosaur. What's you're take on that?
Mr. SCHMITT: Well, I mean, I think Warren put his finger in a lot of the hypocrisy in that. I'd add, one other element of the hypocrisy is that a lot of the people opposed to the bailout are precisely located in the South, where there are the non-domestic auto manufacturers, and I think that they have an unannounced agenda behind a lot of criticisms of what's happening in Detroit and elsewhere.
MARTIN: We need to take a short break, but when we come back, we're going to continue our conversation about the future of the U.S. auto industry and the discussion around the federal bailout or loan or bridge loan to somewhere, as Warren Brown put it. That's next on Tell Me More from NPR News. I'm Michel Martin. Please stay with us.
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MARTIN: I'm Michel Martin. This is Tell Me More from NPR News. Coming up, a conversation with our moms. In a special collaboration with theroot.com, our moms talk about the role Michelle Obama should play as the first African-American first lady. But first, we're going to continue our conversation about the future of the U.S. auto industry.
The Big Three auto companies, GM, Ford, and Chrysler, are visiting with members of the U.S. Senate today seeking $25 billion. The plan has caused controversy on Capitol Hill, but it's also unsettled the hundreds of thousands of workers employed by the industry. A disproportionate number of auto workers are African-Americans. So we're asking how the bailout plan for the auto companies would affect workers overall and African-American workers in particular.
Joining us are Warren Brown, a columnist for the Washington Post who covers the auto industry, Mary Chapman, who covers the auto industry in Detroit, and economist John Schmitt. Welcome back. Mary, what's the debate in Detroit? First of all, is it surprising to people in Detroit that there is not more support throughout the country?
Ms. CHAPMAN: Detroiters, they could have seen this coming. They saw this coming, in fact. I mean, wave after wave of plant closings, wave after wave of layoffs, there's almost a fatalistic sense going on here. And, I mean, some people are upset.
There's a lot of finger pointing going on against the unions, against the manufacturers. But mostly, there's fear, fear that there won't be a bailout, fear even that there will be on the part of some autoworkers because of some likely attached conditions which may affect compensation and what have you, and, in fact, fear that Congress would be throwing good money after bad. And I sort of understand it. Having been a Detroiter all my life, it does seen in some way, Warren and guys, that the companies have not learned.
Mr. BROWN: Mary, I love you, but I'm going to disagree with you. We won't be throwing good money after bad if we start exercising some political gumption. You know, the problem is, we've been throwing good money after bad in the past because we have no industrial policy. We have no energy policy.
For example, you know, it is one thing to say that you're going to encourage car companies, you know, to produce more fuel-efficient vehicles. But if your statutory pricing policy on gasoline is that we continue to have the cheapest gasoline in a developed world, you have thereby undermined, you know, the technical mandate that you've given the companies, you know, in regulation. What we need is an energy policy that works in tandem...
Ms. CHAPMAN: Ha. Good luck.
Mr. BROWN: With industrial policy.
Ms. CHAPMAN: I don't think the congressional will as there, Warren.
Mr. BROWN: That's not the fault of the car companies then, is it?
MARTIN: We talked about the pros and cons of some of the other ideas being floated. The White House alternative is to let the car companies take $25 billion in loans previously approved to develop fuel-efficient vehicles, use that money for more immediate needs. There's also an idea to propose - I think Senator Barbara Mikulski, a Democrat of Maryland, she proposed tax breaks for people buying cars between now and the end of the year. Thoughts about those, do those make sense?
Mr. BROWN: You know, Michel, the great defect of the democracy is that it's often run by the most incompetent people. And, I'm sorry, Congress sort of impresses me as being that way. You know, on the one hand, I mean, money is fungible.
So, yes, so if you take the money out of the fuel-economy stuff, and you put it into the bridge loan to get through these hard times, then you have the Democrats screaming and hollering, you know, about, well, gee wiz. Now, they're not going to produce more fuel-efficient vehicles. That's nonsense. If the Democrats want more fuel-efficient vehicles, you know, put a four-dollar floor on the price of regular unleaded gasoline. You'll get more fuel-efficient vehicles.
MARTIN: OK. What are you going to do to come out of your shell, Warren, really? What can we do to get you to be more - to get you to be - John Schmitt of all - Mary and Warren are journalists, so they're not really in the business of making predictions, so I'm going to put you on the spot and ask you to make one.
Mr. SCHMITT: Well, I think that the key issue here is that the auto industry operates in a context of a lot of other policies, and Warren was really getting at that. And I think we have a possibility over the next few years to change the environment in which the auto industry operates and make it a lot more high functioning.
So if we get a real energy policy in this country, that could work well to send some long-term signals for how the industry should adapt and grow and change in a way that's productive.
MARTIN: What is your sense, though, of the appetite for an intervention at this point?
Mr. SCHMITT: Well, I don't know. And another important bit of context that I think we're going to see some big movement on in the next year or two, at least I hope so, is healthcare policy. Because one of the biggest constraints on the sector right now, the domestic sector, is that this overhang of high employee benefits that create, you know, some difficulties for the Big Three.
If we have some real movement on universal healthcare, we start to get our healthcare costs under control, I mean, that can make a difference for the industry going into the future. So I do think that the broader context here is really important for the future of the industry.
The next couple of months is going to be difficult, but I think there's got to be some momentum that says this is an absolutely crucial industry not just of the history of the country, but to the present, and we've got to do something. If we're willing to bail out Wall Street, if we're willing to save the financial sector, we have to do something for our manufacturing base, especially the crown jewel of the manufacturing base.
MARTIN: I said I wasn't going to do this, but, if you feel comfortable doing so, I would like to ask you, do you - what is your prediction on whether there will be an intervention or not, Warren?
Mr. BROWN: I think that the current ruse of basically trying to break the unions, which is what this is all about, which is why you have a lot of the Democrats in the South not necessarily supporting, you know, a bailout of the industry. The idea is to continue to put as much pressure as you possibly can on the UAW, to basically make the UAW, you know, a non-entity. Make no mistake about it, that is the underlying strategy. You know, that's going to continue.
But - and the UAW is going to have to make a decision because, you know, the fate of the UAW is not only controlled by the lawmaker. It is controlled by consumers. Every time a consumer says, I'm going to pay for that non-union Honda versus, you know, a union-made Buick, he or she is basically fraying the fabric of the UAW.
MARTIN: But that train has left the station, hasn't it? People are no longer making consumer decisions based on those issues...
Mr. BROWN: Michel, simply because a train has left the station doesn't necessarily mean that it has arrived.
MARTIN: To my question, what is your prediction about whether there will be an intervention or not?
Mr. BROWN: There'll be an intervention.
MARTIN: Mary, final thought from you.
Ms. CHAPMAN: I think so, too. I don't like the idea because, again, I just don't think management has learned its lesson. I don't think the political will is there. However, I don't think Detroit can afford to wait. There's not a lot of love for automakers outside the Great Lakes, so I suppose that Detroit in particular can't afford to lose any momentum. We can't wait for the next administration.
MARTIN: John Schmitt, given the presence of the industry throughout the economy, I don't think most people realize how many jobs are tied to the auto industry. Why do you think most people don't know that?
Mr. SCHMITT: That's a good question. I think we've become so focused in the last 25 years or so on the financial sector, which is now falling in part all around us, that I think we've really lost sight of the role that the manufacturing sector has played in creating a middle class for people. You know two-thirds of the United States doesn't have a four-year college degree, and a lot of United States that is in that group is in the middle class. And one of the most important reasons for it is the history of manufacturing, which has created jobs that have decent pay, healthcare, pension, and some other benefits.
MARTIN: We have to leave it there. Warren Brown is a columnist for the Washington Post. John Schmitt is a senior economist with the Center for Economic and Policy Research in Washington. They were both kind enough to join us here in our studio in Washington D.C. Mary Chapman is editor at large for African-Americans on Wheels magazine, and she joined us from Detroit. I thank you all so much for speaking with us.
Mr. SCHMITT: Thank you.
Mr. BROWN: Thank you.
Ms. CHAPMAN: Thanks, Michel.