Grand Theft Auto: How Stevie the Rat bankrupted GM

by Greg Palast

Screw the autoworkers. They may be crying about General Motors’ bankruptcy today. But dumping 40,000 of the last 60,000 union jobs into a mass grave won’t spoil Jamie Dimon’s day.

Dimon is the CEO of JP Morgan Chase bank. While GM workers are losing their retirement health benefits, their jobs, their life savings; while shareholders are getting zilch and many creditors getting hosed, a few privileged GM lenders – led by Morgan and Citibank – expect to get back 100% of their loans to GM, a stunning $6 billion.

The way these banks are getting their $6 billion bonanza is stone cold illegal.

I smell a rat.

Stevie the Rat, to be precise. Steven Rattner, Barack Obama’s ‘Car Czar’ – the man who essentially ordered GM into bankruptcy this morning.

When a company goes bankrupt, everyone takes a hit: fair or not, workers lose some contract wages, stockholders get wiped out and creditors get fragments of what’s left. That’s the law. What workers don’t lose are their pensions (including old-age health funds) already taken from their wages and held in their name.

But not this time. Stevie the Rat has a different plan for GM: grab the pension funds to pay off Morgan and Citi.

Here’s the scheme: Rattner is demanding the bankruptcy court simply wipe away the money GM owes workers for their retirement health insurance. Cash in the insurance fund would be replace by GM stock. The percentage may be 17% of GM’s stock – or 25%. Whatever, 17% or 25% is worth, well … just try paying for your dialysis with 50 shares of bankrupt auto stock.

Yet Citibank and Morgan, says Rattner, should get their whole enchilada – $6 billion right now and in cash – from a company that can’t pay for auto parts or worker eye exams.

Preventive Detention for Pensions

So what’s wrong with seizing workers’ pension fund money in a bankruptcy? The answer, Mr. Obama, Mr. Law Professor, is that it’s illegal.

In 1974, after a series of scandalous take-downs of pension and retirement funds during the Nixon era, Congress passed the Employee Retirement Income Security Act. ERISA says you can’t seize workers’ pension funds (whether monthly payments or health insurance) any more than you can seize their private bank accounts. And that’s because they are the same thing: workers give up wages in return for retirement benefits.

The law is darn explicit that grabbing pension money is a no-no. Company executives must hold these retirement funds as “fiduciaries.” Here’s the law, Professor Obama, as described on the government’s own web site under the heading, “Health Plans and Benefits.”

“The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits.”

Every business in America that runs short of cash would love to dip into retirement kitties, but it’s not their money any more than a banker can seize your account when the bank’s a little short. A plan’s assets are for the plan’s members only, not for Mr. Dimon nor Mr. Rubin.

Yet, in effect, the Obama Administration is demanding that money for an elderly auto worker’s spleen should be siphoned off to feed the TARP babies. Workers go without lung transplants so Dimon and Rubin can pimp out their ride. This is another “Guantanamo” moment for the Obama Administration – channeling Nixon to endorse the preventive detention of retiree health insurance.

Filching GM’s pension assets doesn’t become legal because the cash due the fund is replaced with GM stock. Congress saw through that switch-a-roo by requiring that companies, as fiduciaries, must

“…act prudently and must diversify the plan’s investments in order to minimize the risk of large losses.”

By “diversify” for safety, the law does not mean put 100% of worker funds into a single busted company’s stock.

This is dangerous business: The Rattner plan opens the floodgate to every politically-connected or down-on-their-luck company seeking to drain health care retirement funds.

House of Rubin

Pensions are wiped away and two connected banks don’t even get a haircut? How come Citi and Morgan aren’t asked, like workers and other creditors, to take stock in GM?

As Butch said to Sundance, who ARE these guys? You remember Morgan and Citi. These are the corporate Welfare Queens who’ve already sucked up over a third of a trillion dollars in aid from the US Treasury and Federal Reserve. Not coincidentally, Citi, the big winner, has paid over $100 million to Robert Rubin, the former US Treasury Secretary. Rubin was Obama’s point-man in winning banks’ endorsement and campaign donations (by far, his largest source of his corporate funding).

With GM’s last dying dimes about to fall into one pocket, and the Obama Treasury in his other pocket, Morgan’s Jamie Dimon is correct in saying that the last twelve months will prove to be the bank’s “finest year ever.”

Which leaves us to ask the question: is the forced bankruptcy of GM, the elimination of tens of thousands of jobs, just a collection action for favored financiers?

And it’s been a good year for Señor Rattner. While the Obama Administration made a big deal out of Rattner’s youth spent working for the Steelworkers Union, they tried to sweep under the chassis that Rattner was one of the privileged, select group of investors in Cerberus Capital, the owners of Chrysler. “Owning” is a loose term. Cerberus “owned” Chrysler the way a cannibal “hosts” you for dinner. Cerberus paid nothing for Chrysler – indeed, they were paid billions by Germany’s Daimler Corporation to haul it away. Cerberus kept the cash, then dumped Chrysler’s bankrupt corpse on the US taxpayer.

(”Cerberus,” by the way, named itself after the Roman’s mythical three-headed dog guarding the gates Hell. Subtle these guys are not.)

While Stevie the Rat sold his interest in the Dog from Hell when he became Car Czar, he never relinquished his post at the shop of vultures called Quadrangle Hedge Fund. Rattner’s personal net worth stands at roughly half a billion dollars. This is Obama’s working class hero.

If you ran a business and played fast and loose with your workers’ funds, you could land in prison. Stevie the Rat’s plan is nothing less than Grand Theft Auto Pension.

It doesn’t make it any less of a crime if the President drives the getaway car.

******

Economist and journalist Greg Palast, a former trade union contract negotiator, is author of the New York Times bestsellers The Best Democracy Money Can Buy and Armed Madhouse. He is a GM bondholder and card-carrying member of United Automobile Workers Local 1981.

Blundering Into Bankruptcy
by Ralph Nader

May 29, 2009

Dear President Obama and GM Chairman Henderson,

The hour is late. You seem bent on an orchestrated bankruptcy for General Motors on June 1, 2009. Before any irreversible moves are made– the GM/task force reorganization plan should be submitted to Congress for deliberative review and decision. There are several major concerns with a precipitous bankruptcy declaration that have emerged over the last several days.

First, the previously understood rationale for bankruptcy—namely obstinate bondholders–no longer applies. Recent developments indicate that GM and the auto task force have revised the proposed allocation of equity in a restructured GM, and reached agreement with at least the most prominent bondholders. Although a June 1 bond payment is due, it certainly seems that that payment could easily be wrapped into the new bondholder offer, as effectively will be the case if GM enters bankruptcy.

With the bondholder problem moving toward resolution, or at least now clearly resolvable, there is no evident rationale for bankruptcy other than an unstoppable momentum of some hidden agendas. Given the high stakes, including job losses, communities devastated, the effects on consumer confidence in the GM brand and the socio-economic impacts of potentially excessive downsizing, a last chance to avoid the tyranny against the weak that is a Chapter 11 bankruptcy court.

Second, the matter of how GM’s holdings in China will be treated in bankruptcy continues to demand attention before any filing. Kevin Wale, President and Managing Director of GM China, told CNN that “Our business is run as separate joint-ventures here in China in partnership with SAIC … so we’re profitable, we fund our own investment and we would be largely independent of any action that took place in the US.” Yet the GM assets and profits in China must be included in any bankruptcy proceeding, and available to creditors, claimants and litigants who could, conceivably, petition to take the company into Chapter 7 liquidation.

Has GM clearly presented to the government its valuable holdings, large profits and contractual obligations in China as part of its assets in any bankruptcy? The task force has indicated some uncertainty about these questions.

Third, proceedings in the Chrysler bankruptcy have highlighted the manifold injustice being perpetrated on victims of defective Chrysler products — and likely also to be perpetrated on victims of GM products. In the Chrysler proceeding, top Chrysler officials have acknowledged that they were ready and able to do a deal with Fiat that established successor liability for the emergent Fiat/”good Chrysler” company. In the course of bankruptcy or in preparing for bankruptcy, however, they reversed course, apparently just because they could. Now, hundreds of Chrysler victims are on track to have their claims extinguished, unless the bankruptcy judge or other court overrules this element of the bankruptcy plan.

There are many differences between the bankruptcy of the private company, Chrysler and the pending GM bankruptcy, but the GM restructuring plan is similar to Chrysler in the anticipated creation of a bad/old GM and a new/good GM that emerges without liabilities. Does the government as the major owner of GM plan to follow the Chrysler approach? Has President Obama and his Task Force given consideration to the suffering of real adults and children that will follow from such a move?

Not to mention the political backlash.

One such real person is Amanda Dinnigan, a 10-year-old girl from Long Island, New York. Amanda was injured by an allegedly faulty seatbelt in a GMC Envoy that snapped her neck in a crash. Her father, an ironworker, estimates her healthcare costs at $500,000 a year. Her lost quality of life will obviously be tragic. Will a discretionary decision not to establish successorship liability in a discretionary (voluntary) bankruptcy leave Amanda and her family — and thousands of others like them with no access to justice?

If the Obama officials intend to proceed with maneuvers effectively to extinguish their claims, they should at least talk to some of them first, and confront the human consequences of such actions.

The GM/task force bankruptcy plans appear geared to saving the General Motors entity — but at a harsh and often avoidable cost to workers, communities, suppliers, consumers, dealers, and the nation’s auto manufacturing capacity which will move faster, post bankruptcy, to China.

At this late stage we again urge President Obama to reconsider the bankruptcy filing plans, and to enable deliberative and meaningful Congressional review — as many Members of Congress are seeking — of the restructuring plans before irreversible steps are taken.

After all, Congress is more than a potted plant. The “first branch” legislated, after public hearings, the 1979 Chrysler bailout and the complex Conrail restructuring a few years later.

A Crude Weapon of Mass Devastation
Ralph Nader
June 1

Today's bankruptcy declaration in federal court by General Motors is an avoidable, crude weapon of mass devastation for workers, dealers, auto suppliers, small businesses and their depleted communities. For GM's voiceless owners -- the common shareholders -- it is a wipeout.

The proximate cause of the bankruptcy was supposed to be the inability of GM and the government's auto task force to reach an accommodation with GM's bondholders. But late last week, the bondholder problem was moving toward rapid resolution, and was clearly resolvable. Why then are GM and its multibillion government financier proceeding with bankruptcy?

The bankruptcy and the GM restructuring plan are the product of a secretive, unaccountable, Wall Street-minded government task force that assumed power because of a Congressional abdication of historic magnitude. By all rights, the restructuring plan should have been submitted to Congress for deliberative review and decision.

There is little doubt that GM's chronic mismanagement and the deep recession require restructuring and scaling back the auto giant. But the bankruptcy and restructuring plan appear poised to do so in ways that will needlessly harm the stakeholders meant to be helped by Washington's rescue of GM?

Many, many jobs will be lost that could be preserved. There is reason to question whether too many plants and brands are being closed -- a matter that should have been taken up in Congress. Just the closing of hundreds of (GM and Chrysler) dealerships will cost more than 100,000 jobs. These sacrificed jobs will fray communities and impose enormous expenses on government entities that will have to provide unemployment and social relief, while suffering lost tax revenues.

The unionized workforce will see the wage and benefit structure slashed -- even though auto manufacturer wages make up less than 10 percent of the cost of a car -- so that new jobs at GM will no longer be a ticket to the middle class. This will drag down the wage structure of the entire auto industry -- exactly the wrong direction for the country.

America's manufacturing base will be further eroded, as GM pursues its Grand China Strategy -- increasing manufacturing outside of the United States, and increasingly from China, for import back into the United States. Unanswered questions persist about how GM's valuable operations in China, and unrepatriated profits, will be treated in bankruptcy, or excluded from bankruptcy.

Victims of defective GM products may find themselves with no legal avenue to pursue justice. In the Chrysler bankruptcy, with complete disregard for the real human lives involved, the Obama task force and auto company have maneuvered effectively to extinguish the product liability claims of victims of defective cars.

In a worst case scenario for the GM bankruptcy -- involving an extended court proceeding or severe impairment of consumer confidence in the GM brand -- all of these problems will be magnified. Again, given the path to resolution with the bondholders, this is an avoidable gamble.

The GM/task force bankruptcy plans appear geared to saving the General Motors entity -- but at a harsh and often avoidable cost to workers, communities, suppliers, consumers, dealers, and the nation's manufacturing capacity. It will also prove to be a complex political nightmare for President Obama.

With the company entering bankruptcy, the next challenge will be to ensure that the government exercises its ownership rights to undo and mitigate, to the extent possible, these damages. Among other measures, this should involve revisiting the serious drag-down, concessionary wage terms imposed on the United Auto Workers; demanding a moratorium on GM's outsourcing of production of cars for sale in the United States; and establishing successorship liability for the new GM, so that victims of dangerous and defective GM cars can have their day in court.

The GM bankruptcy
1 June 2009

General Motors—once the largest and most profitable corporation in the world—will file for bankruptcy protection in a New York City court this morning. The collapse of the 101-year-old Detroit automaker is the largest industrial failure and third largest bankruptcy in US history.

The bankruptcy of what was long the iconic symbol of the power of American industry signifies the failure of not only one company, but of American capitalism as a whole. It is a milestone in the decline in the global position of US capitalism and the crisis of world capitalism. It poses in the starkest form the need for the working class to advance a socialist alternative to the profit system.

President Barack Obama and General Motors CEO Fritz Henderson are expected to make public statements after the filing. Despite their assurances of a “quick” and “orderly” bankruptcy and a “new start” for the company, the action will have a devastating effect on GM’s 230,000 global employees and the millions more who will be hit by plant shutdowns, the closing of more than 1,000 dealerships and the wave of failures of auto suppliers that is expected to follow.

GM, which has already announced plans to cut 47,000 jobs worldwide, including 23,000 of its remaining 62,000 hourly employees in the US, is expected to announce plans to close between 12 and 20 more plants. Communities in Michigan, Indiana, Ohio and other states already suffering high levels of unemployment, home foreclosures and poverty will be driven into even deeper crisis.

The bankruptcy of GM is an historic event. The rise of the automaker in the first half of the 20th century paralleled the ascent of American capitalism and the global predominance of US industry. With its massive size, innovative management methods and global reach, GM defined the modern American corporation. With 850,000 hourly and salaried employees, including half a million in the US, GM was the largest private employer in the world, second only to the state-owned industries of the former Soviet Union.

In the decade following World War II, Detroit’s Big Three automakers—GM, Ford and Chrysler—were making four out of five of the world’s cars, with GM producing half of them. In 1955, the largest foreign competitor, Volkswagen, was only slightly bigger than GM's own German subsidiary, Opel, and Toyota was producing only 23,000 cars in Japan, compared to 4 million manufactured by GM in the US.

Over the last three decades, a sea change has taken place. In the late 1970s, faced with growing competition from abroad, a falling rate of profit in basic industry and the militant resistance of workers determined to defend the gains won in past struggles, the American ruling elite embarked on a deliberate policy of deindustrialization.

Sections of industry deemed insufficiently profitable were starved of investment and then shut down in order to free up capital for increasingly parasitical forms of financial speculation. This coincided with a corporate-government offensive against the working class, involving union-busting, strikebreaking, labor frame-ups and the use of plant closures and layoffs to undermine the militancy of the working class and impose cuts in wages and benefits. This offensive was carried out under Democratic as well as Republican administrations.

The key to its success was the treacherous collaboration of the United Auto Workers and the AFL-CIO, which betrayed a series of bitter strikes in the 1980s and worked to suppress all forms of working class resistance while promoting corporatist policies of union-management “partnership” and economic nationalism. The political expression of this betrayal was the continued subordination of the working class to the Democratic Party and the two-party system of the US ruling elite.

The government-dictated bankruptcy of GM marks a new stage in the ruling class offensive against the working class. After this next round of restructuring, GM expects to have only 38,000 hourly workers and a maximum of 34 factories left in the United States, compared with 395,000 hourly workers in more than 150 plants at its peak employment in 1979. The billions in wage and benefit concessions extorted from workers since the early 1980s were used, not to invest in the company’s long-term viability, but to finance stock buybacks and other measures to boost “shareholder value,” i.e., to enrich Wall Street investors and GM executives.

After decades of declining market share and some $90 billion in losses since 2005, the final nail in the coffin was the financial crash of 2008 and drying up of credit, which have led to a collapse of car sales in the US and internationally and what many analysts expect will be a wave of bankruptcies and mergers that will leave no more than five or six global auto companies left standing.

By driving Chrysler and now GM into bankruptcy, the Obama administration is seeking to exploit the economic crisis to carry out a fundamental realignment of class relations in the US. This involves a further downsizing of basic industry and a sweeping and permanent reduction in the living standards of workers in every sector of the American economy.

Acting on behalf of the most powerful financial interests, the Obama administration plans to use the bankruptcy courts to spin off and liquidate GM’s unprofitable brands, dealerships and factories. A “New GM”—largely owned by the government—will be shrunk to a fraction of its current size and freed from any obligation to pay decent wages, pensions or retiree health benefits. Once ample profits can be guaranteed, the government will sell the company back to private investors at a bargain price. The New York Times web site reported Sunday night that administration officials briefed reporters and stressed that the government, which will own 60 percent of GM stock, intends to leave management of the company in private hands.

While handing out trillions in public assets to Wall Street, the Democratic administration has demanded that auto workers accept the destruction of all of the gains won in the course of decades of bitter struggle.

The wage and benefit concessions imposed on auto workers—with the direct complicity of the United Auto Workers—will freeze wages, eliminate cost-of-living increases, substantially reduce break time and holidays and strip retirees of medical benefits, including dental and optical care. The companies will expand the use of low-paid entry level and temporary workers and workers will be stripped of the right to strike or even to vote on the terms of the next labor agreement until 2015.

The UAW, which will be handed 17.5 percent share of the “New GM,” will be retained as a labor police force to suppress any resistance to poverty wages and brutal exploitation. With billions in shares and a seat on the corporate board of directors, the UAW apparatus will have a direct financial stake in collaborating with the Obama administration in the further slashing of labor costs.

Any serious struggle in defense of jobs and living standards must take as its starting point a decisive break with the UAW and the building of independent committees of rank-and-file workers, in the factories and communities, to organize and coordinate a fight by US workers and their brothers and sisters internationally.

The organization of strikes, factory occupations and mass demonstrations must be guided by a new political strategy. There must be an irrevocable break with the Democratic Party and the fight to establish the political independence of the working class.

In opposition to the Obama administration, the working class must advance its own solution to the crisis of the capitalist system. The vast productive forces of the auto industry cannot be left in the hands of financial speculators and corporate

executives, or a government that serves their interests. The auto industry and the banks must be nationalized under the democratic control of working people so that economic decisions can be made in the interests of society as a whole.

The ruling class plans to use the assault on auto workers to set a precedent for sweeping attacks on the jobs and living standards of the entire working class. This demonstrates the need for the greatest unity of the working class and the bringing together of every struggle—against unemployment, home foreclosures, attacks on education and other vital services—into a single political struggle. Its aim must be the establishment of a workers’ government and the socialist reorganization of the economy to meet human needs, not private profit.

Jerry White

http://wsws.org/articles/2009/jun2009/pers-j01.shtml

GM bankruptcy will devastate communities

In conjunction with its Monday bankruptcy filing, General Motors announced that it will shutter nine more plants and place three others on indefinite suspension. GM will also break contracts with more than 2,100 auto dealerships. The closings and layoffs were dictated and worked out in their detail by the Obama White House and its Auto Task Force.

The closures will devastate cities and towns in Michigan, where half of the shutdowns will take place, and in Indiana, Ohio, Delaware, Tennessee and Virginia. Somewhere between 18,000 and 20,000 workers will lose their jobs, according to GM. These workers will be turned out into the worst job market since the Great Depressions. In addition, scores of auto dealerships will shut down across the US.

Particularly hard hit will be the state of Michigan, the long-time home of GM. Michigan already has the highest unemployment rate in the US.

Six plants will be closed in the industrial state. The Pontiac Truck and Bus plant will close in October. Powertrain factories at Livonia, Flint and Ypsilanti will be closed by December 2010. A Grand Rapids stamping plant had already been slated for closure, and will shut down this month.

GM’s Pontiac stamping and Lake Orion assembly plants will be placed on “standby.” Workers could be called back in the unlikely scenario that demand for GM vehicles increases. One newspaper reported that idled workers would receive 75 percent pay for a “limited amount of weeks.”

Separately, GM laid off 64 workers at its Grand Blanc Weld Tool Center near Flint, Michigan.

Jeff, a worker at the Pontiac assembly plant, explained to the World Socialist Web Site how he learned of the closure. “They told us this morning,” he said. “One guy from management gave us a spiel about GM going into bankruptcy and then said he was sorry to inform us that this was one of the plants being closed down in October. The union didn’t even come to the meeting. They didn’t give us any information on buyouts. We don’t know anything.”

Justin, another worker at Pontiac assembly, said that he was devastated by the looming closure. “I’ve got three kids to feed,” he said. “I’ve got to find a way to take care of them.”

The state of Ohio will lose a GM service and parts warehouse in Columbus, a powertrain factory in Parma by the end of 2010, and a stamping plant in Mansfield some time next year. A stamping plant will also be closed in neighboring Indiana, at Indianapolis.

The last auto plant on the East Coast will disappear with GM’s closure of its Wilmington, Delaware assembly plant, which produced cars for Saturn and Pontiac, two GM lines that will be sold off and likely vanish. On May 1, GM closed down its powertrain plant in Massena, New York. A service and parts warehouse will also close outside Boston, Mass.

Two factories will close in the South. An assembly plant in Spring Hill, Tennessee will be idled. A powertrain factory in Fredericksburg, Virginia, will close. In addition, a warehouse distribution center will be shut down in Jacksonville, Florida. The Shreveport, Louisiana plant that produces Hummer SUVs was not slated for closure, but its demise is likely as GM is attempting to sell off the brand.

By the end of 2010, GM will have only 34 US plants, down from 47 at the start of the current year.

Additionally, GM will close almost all of its factories for 11 weeks this summer in order to cut down production.

The idled plants in Spring Hill, Tennessee, and Lake Orion, Michigan, along with a previously closed plant in Janesville, Wisconsin, will likely be pitted against each other in competition for production of a new subcompact car, according to media accounts.

The shutdown of the Pontiac Truck and Bus plant, also known as Pontiac East Assembly, will devastate the city of Pontiac, Michigan, which is already impoverished by decades of factory closings and layoffs. About 1,100 workers will lose their jobs.

Pontiac will lose about 20 percent of its current tax base, or about $10 million, said Fred Leeb, the city’s emergency financial manager appointed by Michigan’s Democratic governor, Jennifer Granholm.

Leeb was quick to announce that Pontiac’s working class will pay the price for the shutdown. “We fear that we are going to have to cut even more deeply,” he told the Detroit News. “And there will be concessions to ask from the (city) unions.”

The Detroit News notes that the consequences of the Pontiac closures will spread. “The ripple effect is expected to be felt not only in city tax coffers, but with homes that remain unsold on the market, and storefronts and office spaces—including in the downtown business district—that remain vacant,” it reports.

Orion Township Supervisor Matthew Gibb told the Detroit Free Press that the town would be hit hard. “We have a $6.2 million operating budget and we’ll be lucky to get to $5 million on the revenue side next year,” he said. “Something as simple as the library depends on it.”

The local political elites in Michigan are vying with each other to shift the burden of GM’s bankruptcy on workers in neighboring cities. Democratic Detroit Mayor David Bing has announced he will consider a package of tax incentives to keep GM’s corporate headquarters in the city to fight off a rival bid from nearby Warren, Michigan.

Mansfield, Ohio will lose its Ontario GM plant and about 1,200 jobs. With about 50,000 inhabitants, the city is already confronting a $1 million budget shortfall for the current year.

About 700 GM workers will lose their jobs in Indianapolis. Fewer than 6,000 GM factory workers will remain in Indiana. As late as 1981, there were 48,000.

Jeff, who has worked for five years at Pontiac Truck and Bus, said he doubted the mass layoffs would launch a rebirth of the industry, as President Barack Obama has claimed.

“This is not going to save the industry,” he said. “They spun off Delphi and laid off thousands and it didn’t stop the bankruptcy. There were bad management decisions, but the banks made conditions for the auto industry to fail. Nobody is buying vehicles; there’s been a 50 percent decline. How can people buy cars if they’re losing their jobs and homes?

“Wall Street got trillions from the government. All those guys in finance get their bonuses. It’s pathetic. Now someone is going to the bank on GM and Chrysler. It’s going to be the investors and people who are already rich, not me and you.”

http://wsws.org/articles/2009/jun2009/gmba-j02.shtml

Obama administration targets the working class
30 May 2009

The expected bankruptcy filing Monday by General Motors—for decades the largest US corporation and one of the country’s biggest employers—marks a turning point for both American capitalism and the American working class. Its significance is not only economic and financial. It is also a political milestone. The US government set the June 1 deadline which has forced the bankruptcy filing.

The Obama administration holds the whip hand, having advanced $40 billion in bailout funds to the auto bosses, and the White House will effectively control GM, holding 72.5 percent of its stock and appointing a majority of its board of directors. In return for their collaboration, the administration is awarding the United Auto Workers executives a 17.5 percent stake in the downsized GM.

In compelling GM to file for bankruptcy, Obama is giving the signal to all of corporate America to attack the jobs, wages, pensions and health benefits fought for by working people in the course of more than a century. The full power of the US government is being used to set an example of making the working class pay for the crisis of capitalism.

Not since Reagan fired the striking PATCO air traffic controllers in 1981, giving the signal for a wave of corporate union-busting and wage-cutting, has an administration intervened so openly to attack the jobs and living standards of American workers. That assault—aided and abetted by the trade union bureaucracy—led to a permanent reduction in the social position of the working class. Similarly, the current government-corporate offensive is aimed at fundamentally restructuring class relations in the US. There is to be no return to the conditions that existed prior to the current economic crisis. The aim is nothing less than the destruction of all that remains of the gains won by previous generations of workers and the impoverishment of the entire working class.

Tens of millions voted for Obama and the Democrats last November in the hope that the Democratic Party would reverse the policies of the Republican Party and the Bush administration: militarism, attacks on democratic rights and the destruction of the living standards of working people. But the promises of “hope” and “change” have proven to be illusions.

Trillions have been turned over to Wall Street in the form of loans, guarantees and cash handouts from the Treasury and Federal Reserve. But what have the first four months of the Obama administration brought for the working class? Economic figures published this week suggest the answer:

• Some 13.5 million people are unemployed, according to the Bureau of Labor Statistics. In addition, another 6.7 million people were working fewer that 35 hours a week in April because of “slack work or business conditions,” and more than 2.1 million are classified as “discouraged” and not seeking work. That brings the total unemployed or underemployed to more than 22 million people.

• A recent survey of 518 large companies by Hewitt Associates, a human resources consulting firm, reported in the New York Times Friday, found that 16 percent of employers had cut pay and 20 percent had cut hours or imposed furloughs, far higher figures than in previous recessions.

• The Mortgage Bankers Association reported that 5.4 million of the 45 million US home loans were either delinquent or in foreclosure in the first quarter of this year. The 12.07 percent delinquency and foreclosure rate is expected to rise sharply under the impact of rising unemployment.

• Subprime and adjustable-rate mortgages are no longer the principal driving force of the foreclosure crisis. In the first quarter of 2009, the foreclosure rate for prime fixed-rate mortgages doubled compared to a year before, to 6.06 percent, and these loans for the first time make up the largest share of new foreclosures.

• Home prices dropped 18.7 percent in March, compared to the year before, according to Standard & Poor’s Case-Shiller Index, covering 20 large metropolitan areas. A research note by Ian Shepherdson of High Frequency Economics predicted weaker consumption as a result: “Were this pace to continue, the loss of housing wealth this year would be roughly equal to the entire GDP of China.”

• Credit card defaults are nearing the 10 percent mark for the first time in the 20-year history of Moody’s Credit Card Index, hitting a record 9.97 percent in April, the fifth consecutive monthly record. Further increases in unemployment are expected to drive credit card defaults higher through the second quarter of 2010, Moody’s predicted.

It is critical for working people to understand the political meaning of these figures. Obama has summed up his economic philosophy as putting an end to unsustainable levels of consumption spending. It is clear whose consumption is to be cut: Not the luxuries and perquisites of the super-rich, but food, shelter, clothing, transportation, education and other basic necessities of the broad masses of working people.

This reality underlies the most under-reported policy decision of the Obama administration this week. Its flat refusal to provide a bailout for the state of California, which now faces bankruptcy because of two decades of tax cuts for the wealthy, enacted by Democratic and Republican state legislators, has left the state without sufficient revenue to pay for essential services. The White House is essentially telling Republican Governor Arnold Schwarzenegger to intensify an austerity policy that has already resulted in widespread furloughs and pay cuts for state employees and the closing of state offices.

Working people must recognize the Obama administration for what it is—the spearhead of an assault by the financial aristocracy. Obama’s policies are not the result of inadequate understanding or bad advice. He is a conscious and willing political servant of the multimillionaires, doing what is necessary to defend their class interests both at home and abroad.

The defense of jobs, living standards and basic democratic rights begins with a decision to break with the Democratic Party, oppose the Obama administration, and build an independent mass political movement of the working class, based on a socialist and internationalist program.

Patrick Martin

http://wsws.org/articles/2009/may2009/pers-m30.shtml

http://s.wsj.net/public/resources/images/OB-DT703_infoGM_CV_20090528174008.jpg

MAY 29, 2009

Key Players in the Overhaul of General Motors: Steven Rattner (http://online.wsj.com/article/SB124355502425864623.html?mod=googlenews_wsj)
Rattner Occupies Contentious Role As Deal Maker

By NEIL KING, JR.

No one has played a more central or contentious role in the auto bailout than Steven Rattner, the 56-year-old former Lazard LLC banker, a co-founder of private-equity firm Quadrangle Group, has long sought a post in Washington, hoping to convert his involvement on Wall Street and in Democratic circles to a high position within government. But Mr. Rattner has drawn some controversy, having surfaced in a pension-fund pay-to-play scandal in New York.

Mr. Rattner's approach has been one of blunt force and big dollars, using the power of the Treasury and the president's bully pulpit to cajole bondholders and unions. His plan to pour as much as $40 billion in new money into GM and Chrysler ups the ante for an administration that is now gambling much of its prestige -- and hundreds of thousands of jobs -- on its plan to remake Detroit.

Mr. Rattner says that he has brought to his basement office at the Treasury Department the same deal making standards employed outside of government. Of the Chrysler deal, he says that Mr. Obama gave "a clear directive" to treat the negotiation "commercially and to take a tough but fair approach with all parties involved."

With the hardest slogging almost over, the big question is whether Mr. Rattner will remain in Washington to take on another challenge. He was billed from the start as not just a car czar but as an overall economic adviser to Treasury Secretary Timothy Geithner. White House officials say they are keen to keep fellow task force member Ron Bloom, whose deep ties to organized labor have proved pivotal in the GM and Chrysler talks. Mr. Rattner's future appears less clear.

The ruling class plans to use the assault on auto workers to set a precedent for sweeping attacks on the jobs and living standards of the entire working class. This demonstrates the need for the greatest unity of the working class and the bringing together of every struggle—against unemployment, home foreclosures, attacks on education and other vital services{like healthcare, cl}—into a single political struggle. Its aim must be the establishment of a workers’ government and the socialist reorganization of the economy to meet human needs, not private profit.

Yep.

They faced the machine guns in Flint, they faced the goons in Dearborn. They built the country. They have been betrayed.

Not only have "they" been betrayed, we have all been betrayed. It is only the very few at the top that are profiting from this, and they are represented by their goon: Mr. Obama.

Not only have "they" been betrayed, we have all been betrayed. It is only the very few at the top that are profiting from this, and they are represented by their goon: Mr. Obama.


Amen sister.

LaborNotes has some interesting pieces on the auto "rescues" and is always a good reminder that the ruling class extends to the leaders of the majority of unions in the first world.

http://labornotes.org/auto

LaborNotes has some interesting pieces on the auto "rescues" and is always a good reminder that the ruling class extends to the leaders of the majority of unions in the first world.

http://labornotes.org/auto


Hi Djinn. You make an important point. UAW leadership stabbed the workers in the back. This nonsense of the union owning shares in the company is being trumpeted as "giving the workers a stake." What a cruel joke. It puts union leadership on management's side, that is what it does.

LaborNotes has some interesting pieces on the auto "rescues" and is always a good reminder that the ruling class extends to the leaders of the majority of unions in the first world.

http://labornotes.org/auto


Hi Djinn. You make an important point. UAW leadership stabbed the workers in the back. This nonsense of the union owning shares in the company is being trumpeted as "giving the workers a stake." What a cruel joke. It puts union leadership on management's side, that is what it does.


Is there and organized opposition to Leadership in the UAW, any chance the would renounce The Leadership, taking a large chunk of the membership wildcat?

Is there and organized opposition to Leadership in the UAW, any chance the would renounce The Leadership, taking a large chunk of the membership wildcat?


Same situation as everywhere else. A few lone voices in the wilderness, isolated, marginalized and relentlessly attacked, and the bulk of the people traumatized and intimidated.

12 families an hour are leaving Detroit. This is worse than the Dust Bowl migrations.

They faced the machine guns in Flint, they faced the goons in Dearborn. They built the country. They have been betrayed.


We have been betrayed. There is no "they."

They faced the machine guns in Flint, they faced the goons in Dearborn. They built the country. They have been betrayed.


We have been betrayed. There is no "they."


Yes.

I meant the sacrifices of those who went before us.

Is there and organized opposition to Leadership in the UAW, any chance the would renounce The Leadership, taking a large chunk of the membership wildcat?


Same situation as everywhere else. A few lone voices in the wilderness, isolated, marginalized and relentlessly attacked, and the bulk of the people traumatized and intimidated.

12 families an hour are leaving Detroit. This is worse than the Dust Bowl migrations.


Pretty much. Some Locals voted the deals down but they're marginalised as those who want magic ponies, as being "bitter" rather than having legitimate coplaints.