In the 1950s the slogan of US capitalism was “what was good for General Motors was good for America”. This was when General Motors (GM) was the biggest, most successful and most admired (at least by other capitalists) multi-national in capitalist history. But that was at the height of the post-war boom when, in “the greatest secular boom in capitalist history” as J.K. Galbraith dubbed it, GM had 54% of the US car market. With the end of that boom in 1971 the US and the world have been faced with a now hidden, now open, economic crisis which has had to be managed in one way or another. For the last fifteen or so years the chosen way has been massive speculation based on the issuing of debt on the basis of nominally (but ever-increasing) valued “assets” which have little relation to actual economic reality. From its peak of 1979 when it employed 853,000 workers world-wide (618,365 in the US) GM was already in massive decline. In 1987 Ford sold more cars than GM for the first time since the Wall St Crash and by 1995 GM’s market share had fallen to 31%. In 2000 it cut 10,000 jobs in the US and Europe, but this was still not enough so in 2005 a further 30,000 jobs went. In 2007 it announced that it intended to cut more jobs by 2011 in order to save $4-5 billion a year but this plan was not completed before the full force of the financial crisis hit GM with a double whammy. In the first place GM’s plans to reschedule its massive debts hit a brick wall and the collapse of credit and the subsequent job losses throughout the US economy hit sales further. What was bad for America was now worse for General Motors.

The State to the Rescue

Last year the US Government offered GM a $13.4 billion loan because it could not allow a huge manufacturing firm which had 6000 dealerships and supported hundreds of thousands of other jobs in automotive parts etc to go to the wall. But GM could not fulfil the terms of the loan (which would have also meant mass sackings). When its chief executive Rick Wagoner revealed that losses for 2008 were an astounding $30.9 billion he was forced to resign in March 2009. Since then the US Government has loaned GM a further $6 billion just to keep going whilst the new management have tried to get its creditors (those holding GM bonds) to accept a shares instead of repayments. The bondholders refused the offer and so on 1 June, General Motors like Chrysler before it, filed for bankruptcy, or rather, Chapter 11 bankruptcy protection.

In this though it is slightly different from Chrysler which has now less than 10% of the US market. Chrysler (as the article from Battaglia Comunista which follows demonstrates) was too weak to survive on its own so, in order to salvage some jobs, the US Government has allowed it to use Chapter 11 protection to give it time sign up a deal with FIAT which has been presented as a sort of merger but is in fact a simple takeover of Chrysler by FIAT. All that will be left of Chrysler will be the name which will be used by FIAT as a means of penetrating the US market. GM on the other hand is much bigger, still has over 20% of the US market (half of twenty years ago) and is a more complex problem since it has vast overseas holdings.

The plan though is to roughly follow the Chrysler route. GM will now hive of most of its assets and about a quarter of its debts into a “new” GM. The remaining plants and properties will remain in Chapter 11 to be sold off for what can be got for them. As with Chrysler existing shareholders and creditors (including many workers’ pension funds) will lose the most as the process of sell-off will take years as GM creditors battle it out to cut their losses. This neat trick will allow GM to shed $27 billion of its debts. The state will guarantee the deal. Indeed the state is the deal since 72.5% of the shares will be held by the US and Canadian governments. 10% will be left for bondholders though existing shareholders will receive only a nominal amount of shares in the new company.

A further 17.5 % will be held by the United Auto Workers healthcare fund. This is significant since GM has bought off wage deals in the good years by offering generous healthcare benefits for all past and present workers (which would not have to be redeemed until later when the management thought the unchecked expansion of the firms would pay for it - does this sound familiar?). The whole thing snowballed so that in the past 15 years GM has had to pay out a colossal $103 billion in healthcare retirement benefits. Now the deal is that the union will take this costly scheme off GM’s hands (and will, no doubt, wind some of its provisions down).

Protecting National Interests

In Europe the battle has been on, not to save GM so much, as the race by each state to ensure that it would suffer the least from the demise of the former world car leader. The original favourite to takeover Opel and Vauxhall, the German and British GM brands was FIAT. Its boss Marchionne had already signed up the Chrysler deal (see article which follows) and hoped to do the same for GM in Europe. He called it “a marriage made in heaven” and for the bosses it was. His aim was to claim that FIAT was becoming a world leader but the price of this would be the shutting down of the least profitable FIAT plants in Naples and Sicily. We have already recorded the resistance of the workers in Pomigliano near Naples to their redeployment ⁽¹⁾ and in the articles from Battaglia Comunista we report on some updates on the situation there. Marchionne’s plan was however thwarted when GM at the last minute demanded $424 million in short term finance to keep its European operations going. Marchionne refused to pay. The result was that Magna International, the Canadian car parts firm financed by Sberbank (or the Russian Savings Bank, chief shareholder the Russian state) became the preferred bidder. To sweeten the pill the German Government offered nearly $2 billion to enable GM Europe (especially Opel) to carry on. But all GM Europe’s ten plants are set to make a loss of around $3 billion this year so massive restructuring has to take place. Before entering Chapter 11 GM announced that it would need to shut at least 3 European plants to return to profitability. The German Government, ever keen to defend its manufacturing base, which was so critical of the British for bailing out its financial sector, are fighting tooth and nail to ensure that these plants don’t include any of Opel’s four in Germany. Given that Magna has already indicated that it intends to push production towards the Russian plant of GM, the workers in Antwerp, Luton and at Ellesmere Port are now in a much more fragile position. Luton has already been reduced to van production and Ellesmere Port has been on a four day week throughout this year, despite the fact that it has been awarded the production of the new Astra. The British Government, which has doled out hundreds of millions to keep the financial sector afloat, has been very coy about the same support for manufacturing, including the car industry. Indeed Industry Minister Mandelson’s only public comment has been to say that the new GM deals will lead to job losses but that Vauxhall production will continue in Britain. This could mean agreement to close van production at Luton. This is more certain given that LDV which had not built any new vehicles since Christmas was finally declared bankrupt on 8 June with the loss of 850 jobs in its Birmingham factory plus 3000 more at suppliers, mainly in the West Midlands. As LDV is owned by Oleg Deripaska (the Russian millionaire who invited Mandelson to his yacht) whose company Gaz is the main van producer in Russia. Magna’s backers Sberbank have already announced it will sell on its holding in GM to Deripaska, so the future of Luton looks bleak.

Workers Pay the Price

As the article from Battaglia Comunista makes clear the real victims of the wheeling and dealing in the car industry will be, as usual, the workers. The massive over capacity is not just a result of this financial crisis but the irrational operation of the capitalist system which constantly demands increased productivity and growth in pursuit of profit even when any rational observer can see that this will only end in collapse. However the car market has been particularly inflated over the last few years through the house price boom as people have cashed in equity in order to buy consumer goods. Now that has hit home with a vengeance and in Britain car production in April 2009 was less than 45% of that of the year before. Commercial vehicles collapsed even more as less than 35% of the year before were produced. Much of this is down to the halt of production at LDV but Ford Transit is now on a four day week and around 850 jobs have been axed in Southampton.

Elsewhere the story is much the same. Some might remember that 850 BMW workers at the Mini plant in Oxford lost their jobs in February but a further 300 have gone there since and the story is the same nearly everywhere. Toyota has cut pay by 10% and cut 200 jobs plus one shift at Burnaston, with production being suspended for 5 weeks between February and April. Jaguar Land Rover plans 1000 job cuts and has already imposed a four day week and a pay freeze (i.e. a 20% pay cut). Nissan, supposedly the most effcient plant in Europe, shed 1000 jobs in January and cut a shift. The “good news” here is that they are taking on 150 temporary workers for 4 months to deal with the demand from the car scrappage scheme! Honda has suspended production since the beginning of the year and its workers have voted for a 3% pay cut to try to keep their jobs. The cuts even extend to the luxury car market with Bentley stopping production for seven weeks then cutting 450 jobs and one shift as well as pay by 10%. Aston Martin have sacked 600 and the firm is now on a three day week.

And getting back to General Motors, Vauxhall have offered nine month sabbaticals on 39% pay to their Ellesmere Port staff, extended the Christmas break to 40 days and reduced the working week from 38 to 30 hours. In January and February production was suspended on one day out of three. In some cases across the industry workers have actually ended up working on some days without pay as they were deemed to have already been paid for work that was not carried out because the management closed the factory!

In the current situation where the negotiations between bosses, unions and governments goes on behind closed doors many workers are just sitting and waiting for the worst. Many Ellesmere Port workers, for example, largely believe that because they have the production of the new Astra, the Magna buyout of GM Europe will save their jobs. They are unaware of Magna’s plans to move production eastwards. For the moment, despite obvious tensions, as witnessed in the criticism of the German Government for putting German jobs first, the European governments are trying to ensure the minimum of pain for their economies. This is not because they want to defend workers’ jobs per se but because the social and economic costs of the loss of these jobs will be enormous.

The Left and the unions of course come out with the usual combination of nationalism (the nationalism of the Opel unions in particular was as bad as Unite and the GMB at Lindsey) ⁽²⁾ and calls for nationalisation. They don’t seem to realise that nationalisation is already virtually what exists already and that the state in very country is looking for ways of deflecting the worst of the crisis elsewhere. This is what all the negotiations are really about. What is certain is that everywhere in Europe and the US thousands of jobs will go in the car industry. Car workers may end up like the workers at JCB who accepted pay cuts supposedly to save jobs, but were then told after a few months that not only were the jobs not saved, but the whole plant was to shut and they had made sacrifices for nothing. In some cases the workers may have one card to play if the plant actually contains machinery that the firm has not already written off but wants to move elsewhere. This was what accounted for the partial success of the 600 Visteon workers, a components subsidiary 60% owned by Ford. They were laid off by Ford on 1 April this year. Ford tried to wriggle out of the deal to recognise their employment rights (by saying they did not work for them anymore as Visteon was formally a different firm) so the workers occupied Visteon’s three factories. They were not fighting for their jobs, but, like the workers at Republic Windows and Doors in the US, for their redundancy benefits which the firm was trying to avoid paying. Visteon workers held out for more than 6 weeks and only ended the occupation when Ford promised to pay. The struggle the workers carried out was imaginative (trying to involve workers elsewhere) and also had to come up against the unions who offered no practical help and largely distanced themselves from the fight. ⁽³⁾ The Visteon workers showed that workers have no need to passively await the fate that the “suits” of unions, management and government are cooking up for them behind the closed doors to the corridors of power. The system is bankrupt - it is time we fought for something better.

(1) See Revolutionary Perspectives 46 and 47, or our website: leftcom.org .

(2) See “Unite or Divide? Nationalism and the Unions” in Revolutionary Perspectives 49.

(3) For a thoughtful and perceptive account and analysis of the struggle we can do no better than recommend the article of the supporter of the struggle to be found on libcom at libcom.org .