OBAMA, THE U.A.W. AND GM: TWO FLEETS TO THE WIND

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With all the talk of the impending, Obama-backed “part-out” of General Motors (perhaps the new smaller GM will be truthfully known as “Government Motors”), some contrarians are betting that Obama and the Car Czar Central Committee are just bluffing.

The Wall Street Journal’s Holman W. Jenkins, Jr. is apparently one of the “no bankruptcy” contrarians.

Why?

Even a "prepackaged" filing runs too much risk of a judge imposing more "sacrifice" on the UAW than the administration is prepared to tolerate.

GM bondholders understand this: They've been intransigent precisely because they calculate the UAW is too important to Democratic electoral politics for Mr. Obama to risk losing control of the reorganization process to a bankruptcy judge.

The GM bailout has become a political operation run out of the White House. It will stay that way.

Jenkins also succinctly identifies the real problem “the UAW captivity”

That captivity, imposed by the 1935 Wagner Act, is the sole relevant factor distinguishing the Detroit Three from the world's other auto makers. The result is downright weird: "Our" auto companies operate in a world that's less "American," in a sense, than the Japanese and German companies that come here and enjoy a free labor market.

And as Truth With Speedzzter readers already know, the “captivity” is reinforced by the byzantine regime of Corporate Average Fuel Economy Standards (CAFE). Jenkins explains:

The Wagner world was given a second lease on life by a peculiar feature of Congress's 1975 fuel economy law. Known as the "two fleets" rule, it effectively forces Detroit to make its cheap small cars in high-wage domestic UAW factories, even if it means losing money on every car. The rule has no fuel-economy function. Its only purpose is to shield the UAW monopoly inside each Detroit auto maker from global labor competition.

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The UAW's Mr. Gettelfinger had testified, coyly, during Congressional hearings that failing to renew two fleets might cost 17,000 auto workers jobs building small cars. He didn't say that two fleets is in fact the fulcrum by which, for the past 30 years, the UAW has been able to defeat globalization.

Then Senator Obama, of course, voted in lock-step with Ron Gettlefinger in support of the “two fleets” CAFE standard.

The “two fleets” rule has also led to other bizarre market disruptions since 1975, such as the expatriation of assembly operations for V8-powered cars (which leaves Ford’s Mustang and GM's Corvette variants as the sole-surviving U.S. assembled RWD V8 automobiles). Even if GM and Chrysler wanted to build "pony cars" in the U.S.A., the "two fleets" calculus would prevent it.

A bankruptcy judge can’t do anything about the inane “two fleets” standard. But he can attack the very thing that “two fleets” was meant to shelter.

If GM ends up in a “prepackaged” bankruptcy, the U.A.W.’s “captivity” could be slammed (or at least painfully trimmed) by a bankruptcy judge. The “let’em fail” chorus has repeatedly reminded us over the past six months that the airlines have shed unions in bankruptcy. Even though Ford has renegotiated with its “captors” (and even extended them a seat at the big table), the Glass House Gang is certainly worried that the new, post-bankruptcy “Mini General” will receive a more competitive labor deal from the bankruptcy court.

Jenkins and GM’s bondholders are betting that Obama – who certainly doesn’t want to repeat Jimmy Carter’s one-and-done tenure in office – will ultimately do the U.A.W.’s bidding and keep GM out of bankruptcy court.

Of course, one wild-card in this scenario is the union-backed “card check” legislation, a/k/a the Employee Freedom of Choice Act. Obama and the Big-Labor-sycophantic Democrats see this as the “magic bullet” for almost instant unionization of the Japanese invader assembly plants in “Right to Work” states.

Truth With Speedzzter suspects that Obama wants to keep GM on life-support long enough so that the horrible, anti-secret ballot “card check” law can be passed and the U.A.W. will have an opportunity for an expansive new revenue stream.

If the U.A.W. gets this arm-twisting gift from the Obamacrats, the U.A.W. could possibly have a stronger argument against the bankruptcy court’s rejection of GM’s “pattern” contract. Right now, the court would be looking at GM’s “scab” competition as setting the market price for assembly labor. GM’s platinum-plated labor agreement clearly exceeds the prevailing market price. Thus, the court could easily reject it. In Ron Gettelfinger’s probable dream world, "card check" unionization of the Japanese invader plants could slash Tokyo’s cost advantage on U.S. assembled vehicles and would result in a quick windfall for organized labor. It would also drive up the prevailing market price for assembly labor and protect the U.A.W.'s other contracts.

Whether all of this would actually work is conjecture.

But no one should forget that Obama could not have won election (and cannot win re-election) without the strong support of organized labor. And notwithstanding his breezy rhetoric, its unlikely that he won’t continue to “dance with the ones who brung him.”