The Crisis In the Auto Industry

Sara Horowitz, founder of the Freelancers Union, talks about the demise of GM and the future of unions.

The Crisis In the Auto Industry Question: How will auto workers fare after the bailout? Sara Horowitz: What I find particularly upsetting is not just what’s happening to people who have been working their whole lives in the auto industry but also that the United Auto Workers founded by the Ruether Brothers to me were kind of like that Harvard and Yale of the labor union movement. And it’s really a testament to them that auto workers were able to work and have careers and really be middle class and really do well. And in the middle of all of these situations in our whole economy is essentially this view that there’s something in that that’s not workable. And I think some pieces of that may very well not be workable and some pieces of that I think are showing what the next face of our economy is going to look like. And by that, I mean if you look at Detroit as one of our large economic centers in this country, you had a whole group of people who could afford a lot of things and paid a lot of taxes and supported a whole lot of other industries all brought to you in large part by the United Auto Workers. And so, we have to be careful that we don’t kill the patient by curing one piece of this problem. So, I think it is a good thing that the Obama administration is recognizing that this is really a nuance. This isn’t just about fixing the auto industry per se but that it’s a whole ecosystem and system together. Question: What’s the best solution to the crisis in American manufacturing? Sara Horowtiz: Of course, I wish I had a very short answer to that but my hunch is that because this is called “Big Think, Big Ideas” that we’re realizing that you can’t expect a certain rate of return on manufacturing in the auto industry and expect to have one in America. That is that we can’t have private equity rates of return of 18% to 35% and that we’re going to have to be thinking that there’s something important about having certain industries and there’s going to be a governmental role in keeping these alive, that it’s crucial that we make things in America. And I think this is the beginning of that realization. I think that people are starting to see there’s something important here. I think sometimes, people think this is just about bailing out the auto industry beginning, middle and end, and done. I think hopefully, there are people who are saying, “Wow! There’s something deeper here that we need to understand, that government can be a source of capital or can subsidize some parts of capital or can bear some piece of the risk” because we recognize that it’s really important to have a middle class in America. And I think that’s really what’s at stake. We may very well come out of this but the question is are we going to come out of it looking like Argentina with a very small group of rich people and a very large group of everybody else, and I don’t think that’s what America is about. Question: Did labor kill the auto industry? Sara Horowtiz: I just think that’s just factually wrong. If you say that there are elements in terms of the costs of health and pensions, which I think is true. Then, that’s a piece of it. It’s also a piece of not having a government strategy that says “we don’t care that Americans may very well”, when asked, say they want the biggest behemoth cars that they can get their hands on, but that’s not why we have government leaders. And that one of the reasons why people want bigger cars is because other people have big cars and it’s not just because they’re pigs. You know, I have a child and I know that when I go out and I want to make sure she’s okay and when kids are very young, you have to make sure that the air bags are one thing and another thing, and having everybody having SUVs is just like a big arms race and government has to start saying that that’s not acceptable. And those are the kinds of things that I think we need to do, is to start having some public policy about what’s acceptable, what isn’t acceptable. If you’re still going to go out and need to have a big hulking automobile, you should be paying a lot of extra fees associated with that. I think we need to be looking at the incentives and the disincentives. Question: Is there any defense for massive bonuses? Sara Horowtiz: Now, I really feel bad because $20 million just doesn’t buy what it used to, but what I think is more profound, I think it’s really easy to just be angry of all these CEOs. We’re so angry at them and they live in Greenwich, Connecticut and blah, blah, blah. But we set up the rules of the game and when I say “we”, I mean like the citizens allowed this to happen over the last 25 years that we said the job of any good CEO is to get maximum return on investment, period. It doesn’t matter sort of how they do it. And if any of them show restraint, then we’re going to punish them. And you saw that that happened with the CEO of Home Depot who now looks like a genius. But in the last five or seven years, he said, “I think it’s important to pay people wages that are good, solid wages with benefits,” and there’s been a whole debate about was that okay, was he maximizing shareholder returns. So I think that we really have to stop and say, “Did we set up the rules of the game so that these people just played it that way?” And then, I thing having said that—and I think that really is the bulk of it, I think that we as a society have to hold ourselves responsible for certain things and that part of that is that we really believed that was in our right to really use up the earth’s resources in a way and be very wealthy and have state-of-the-art kitchens and fancy things. These corporate CEOs were just the worst of it. But it’s something that I think we see all over the place and I think it’s a culture of greed that I think is bad.