The bankruptcy of General Motors is an historic event. The collapse of the 101-year-old Detroit automaker is the largest industrial failure and third largest bankruptcy in US history.
The action will have a devastating effect on GM’s 230,000 global employees and the millions more who will be hit by plant shut-downs, 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.
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. And 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.
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 deindustrialisation.
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, labour frame-ups and the use of plant closures and lay-offs 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 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.
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 website reported Sunday night that administration officials briefed reporters and stressed that the government, which will own 60 per cent 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 labour agreement until 2015.
The UAW, which will be handed 17.5 per cent share of the “New GM,” will be retained as a labour 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 labour costs.