Keeping The UAW Off The Picket Lines

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In the game of chess over how Detroit can be saved, one of the moves has been to try to keep the UAW from striking. A strike could end any chance that GM (GM) and Chrysler could restructure before their government loans run out around the end of March.

From the UAW’s standpoint, the chance it might strike is its only real leverage in a process which aims to cut thousands of its member’s jobs and take away a number of benefits.

The government has set up a system to keep the UAW in a corner.

According to the AP, "Newspaper reports say General Motors Corp. and Chrysler LLC would be in default of their multi-billion dollar federal bailouts if their workers go on strike and could be forced into bankruptcy."

The possibility of default creates a Mexican stand-off which probably will not prevent a walk-out. The UAW has a great deal to lose by giving in to demands that should bear much of the cost of "saving" Detroit. It has little to lose by leaving the bargaining table if it is pushed too hard.

The government’s threat of shoving GM and Chrysler into bankruptcy over a labor stoppage is empty. The economy is now so troubled that the new Administration and Congress cannot risk a serial failure of US auto firms which by some estimates could leave more than one million people out of work. Even the $750 billion stimulus package could not fill that hole. The destruction of the American car companies is one of the only discrete events that could push the economy into a "depression", a period when unemployment pushes above 12% or 13%.

GM and Chrysler are up against the fact that creditors, suppliers, and labor believe that the companies have been put into the "too large to fail" category along with large banks. That belief is almost certainly true because the economy has gotten so much worse since the firms went to Congress to beg for relief. The burden of the problem has shifted from the car companies themselves to the government which will do almost anything to fund saving jobs while it works on creating new ones.

Douglas A. McIntyre