Canadian Auto Worker’s play for permanent public ownership in autos

To the delight of skeptics, market uncertainty has not stopped government shareholders in Canada and the United States from successfully selling off the first tranche of their $60 billion equity/loan bailout of General Motors. Indeed, as Canadian Auto Workers President Ken Lewenza exclaimed, it was “a roaring success in financial terms.” Anticipating that governments may be able to recoup their entire investment, he reasserted that the rescue was both necessary and successful. In an essay published in the National Post, however, he leaped from there to a far more contentious position: rather than sell off the rest, the Government of Canada should retain a permanent equity position in General Motors in order to establish a “more stable Canadian automotive footprint going forward.” Click on: http://www.financialpost.com/todayspaper/Keep+foothold/3859706/story.html

Egging on debate and framing his position as steady-as-you-go common sense, Lewenza stuck out his chest and asserted: “Of course, free marketers will howl about creeping socialism. They are the same naysayers who denounced the rescue effort in the first place . . .”

Let’s have a national debate and let’s hear the arguments without deceitful stereotypes.

First, his vision was not shared by those who designed the bailout and then stood up to its critics. Stephen Harper, Barack Obama, and Ontario’s Premier Dalton McGuinty financed an emergency rescue, not a permanent partnership structure for the North American auto industry. Each saw the bailout as a lesser evil to the loss of a million jobs. And each assured competitor companies, legislatures, and taxpayers alike that they were not turning government into a profit-seeking manufacturing enterprise.

Second, Lewenza’s proposal—that Canada keep a minority share of an American multinational manufacturer in a fiercely competitive multinational industry—isn’t “creeping socialism” by any known definition. To those reasonable folks who assume that an idea accused of “creeping” must have some merit: don’t be fooled. Lewenza’s idea is not socialism, compassionate pragmatism, or even fascist syndicalism. It is not designed for the common good—it’s a protectionist gambit for one special interest in Canada.

Third, he doesn’t aim to change the new corporate culture of General Motors or the North American auto sector. He acknowledges that the successful initial public offering will continue to repair GM’s public reputation—“not just with financiers, but with consumers.” However, keeping the taxpayer at the table (along with, hopefully, one government board member on a twelve-member board) won’t make the company more effective or credible in Canada. It would only leave the taxpayer that much more vulnerable to being hit up again—and leave the CAW with the illusion that it was still negotiating with a privileged employer. While he suggested cheekily that what’s good for GM isn’t necessarily good for the whole country, he wants to implicate Canada more deeply in its future prospects. 

Fourth, using a little public ownership in one automobile company to, supposedly, anchor a “fair share” of production in Canada is probably self-defeating and futile. Without accepting the implicit defeatism of the suggestion that Canada may not continue to get more investment than the “fair share” provisions of an antique Auto Pact that was negotiated some 40 years and four or five investment cycles ago, continuing public equity in one company would inevitably add to the business risk calculations of other companies interested in investing aggressively in Canada.

Fifth, while Germany and other countries have blended public and private ownership in manufacturing, Lewenza doesn’t try to argue that their results are better. Amongst the major developed economies, in fact, North America’s privately owned and operated manufacturing sector is still spectacularly productive and innovative. Its ruthlessness and volatility is not everyone’s cup of tea—but it works.

Activist government in North America is part of the auto industry’s history and prospects. However, wouldn’t it be best to restore manufacturing generally rather than compromise its  internal dynamics with meddlesome public ownership?

GM Bailout and understanding Harper and Obama

Their worst critics have them right. Stephen Harper may want to turn working families over to the mercies of global capitalism, and Barack Obama may want Washington to direct the destiny and socialize a greater share of the profits of corporate America. Okay, their secret dreams seem to be under control. But, when we’re not watching, are they not busily advancing their respective radical agendas? It would be intolerably boring to leave these concerns to history. Extravagant accusations will continue. However, sometime facts come forward that undermine both dark notions.

The nationalization of General Motors surely will stand as a dramatic policy departure for both countries and should tell us much about the ambitions of both leaders. In a preview of his pending book, “Overhaul” Obama’s “car czar,” Steven Rattner, is emphatic on one important element in the negotiations: it was the Canadian team that insisted on job guarantees, in fact, the US government saw the idea as “excessive interference” and reluctantly went along—“we gave them that and took one for ourselves.” (http:www.theglobeandmail.com/report-on-business/managing/the-lunch/obama-car-czar-steven-rattner/article 1738667)

Context is important. Harper faced centre-left parties that would go ballistic if he didn’t drive a hard bargain. And Obama didn’t really have to worry about a Republican opposition that was generally disdainful about the very idea of bailing out the auto industry (and had already voted the money necessary to do it). Nevertheless, the United Auto Workers, whose jobs were up for grabs, provide vital political support to Obama and none to Stephen Harper. The job guarantee provision, nevertheless, was apparently at Canada’s behest.

Those convinced Obama is a closet socialist will face another awkward moment later this fall if he actually follows through with his plan to start selling off government shares in General Motors. This will not win him new friends within the UAW. But it will offer an important signal to the market place that he wants to return to the broad pre-recession role for the federal government in the American mixed economy—one of public regulation and private risk-taking. Ironically, Stephen Harper will then have another chance to be an economic conservative, compliments of Barack Obama.