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Obama draws criticism over Chrysler's plan to end Kenosha work |
| Sat May 9th, 2009 |
Milwaukee Journal Sentinel
By Craig Gilbert and Rick Romell of the Journal Sentinel
"I don’t want to run auto companies... . The sooner we can get out of that business, the better off we’re going to be."
- President Barack Obama, April 29
And the better off Obama will be politically.
To understand why, consider the outrage and anguish over Chrysler's decision to close its 800-employee Kenosha engine plant - as it opens a similar factory in Mexico and gets $12 billion in taxpayer help to restructure.
Democrats and Republicans in Wisconsin are not only assailing the troubled automaker over the move but, in some cases, are faulting the Obama administration for allowing it to happen.
"Given the tremendous emphasis in this administration on helping Wall Street .&ensp.&ensp. there ought to be at least equal emphasis on protecting American jobs staying in the United States," Senate Democrat Russ Feingold said.
Senate Democrat Herb Kohl, describing a recent conversation with Steven Rattner, leader of Obama's auto task force, said Obama aides have told Wisconsin officials that "they leave those kinds of decisions to automobile management, (that) 'It's not our job to try to micro-manage everything.' "
Kohl's response to that argument: "Not good enough."
The Kenosha case underscores the policy and political dilemmas built into the government's rescue of General Motors and Chrysler, two manufacturers with major operations abroad.
Does intervening to promote U.S. plants over foreign plants amount to "micro-managing"? Does it defeat the purpose of stabilizing the teetering companies by adding to their costs? Or does failing to intervene leave taxpayers subsidizing the shipment of jobs overseas?
"It's such a politically fascinating and politically charged question," said Brett Smith, assistant research director at the Center for Automotive Research in Ann Arbor, Mich.
The administration clearly thinks it is saving thousands of U.S. jobs by rescuing Chrysler, but it views the Kenosha situation as a kind of fait accompli. The new Phoenix V-6 engine line for which Kenosha competed is to be manufactured at two new plants in Michigan and Mexico that have been built and are almost ready to go.
Long-sealed fate?
Administration officials and some analysts see Kenosha's closing as the product of plummeting demand and business decisions Chrysler made well before the restructuring.
"The problems in the American auto industry were not created in a day and they won't be solved in a day, but they were problems that came to President Obama on Day One," White House spokeswoman Amy Brundage said.
"As he has worked to save Chrysler and the tens of thousands of American jobs that depend on it, he has acknowledged that American workers have made incredible sacrifices. Because of the decisions made by the company many months ago and because of the economic crisis we inherited, this has hit home in Kenosha. We will stand with these workers and do everything possible to support them during this time."
Kenosha isn't the only facility Chrysler plans to close; seven other U.S. factories are to be shuttered permanently. But the tight connection between the Kenosha plant's fate and the new engine factory in Mexico sets it apart politically.
"This," said Rep. Gwen Moore, a Milwaukee Democrat, "is the United States of America vs. Mexico."
Republican Rep. Paul Ryan of Janesville, whose district includes Kenosha, said: "I think it's totally appropriate for taxpayers to be asking two questions: Are we going to get our money back in the first place in this deal? And should we be using taxpayer money to subsidize new jobs in Mexico instead of Kenosha?"
GOP Rep. Jim Sensenbrenner of Menomonee Falls, in a letter to Treasury Secretary Timothy Geithner on Thursday, said, "If you grant Chrysler any additional bailout funds, you are using taxpayers' hard-earned money to send jobs to Mexico."
Kenosha's advocates also noted that as Chrysler closes eight U.S. factories, its three plants in Mexico will keep running. And another is to join them soon: the new Phoenix engine factory in Saltillo.
Feingold suggested Kenosha's fate is at odds with Obama's rhetoric about ending government incentives to move jobs abroad.
Obama, he said, has emphasized "not using the tax code to outsource jobs. This whole idea of helping these companies had to do with keeping jobs in the United States."
Whatever the merits of their case, Kenosha's advocates stand little chance of succeeding, some observers said.
"You have to try," Smith said. "But the realistic view is you're not going to make a difference, especially in these incredibly difficult times."
One problem facing Kenosha: It doesn't seem to be getting much help from the national United Auto Workers.
In a letter last week to senators and congressional representatives, the union objected strongly to GM's using taxpayer money to expand foreign production as it closes U.S. factories. But in the section on Chrysler, it said nothing about shutting Kenosha as the engine plant in Mexico gears up. In fact, the letter offered no criticisms of Chrysler's restructuring plan at all.
"It's a Wisconsin fight to keep Kenosha open," one observer said.
$8 an hour vs. $55
And beyond the internal decisions of the UAW, Kenosha is up against a tough set of business realities.
An automaker's labor costs in Mexico total $7 or $8 an hour, compared with more than $55 an hour in the United States, Smith said. For a plant of, say, 500 employees, that could be a difference of well over $40 million a year. It would cost more to haul engines to Michigan from Mexico than from Kenosha, but at least some of the engines made in Saltillo could go to a truck-assembly plant already operating there.
It's hard to argue that Chrysler, if it wants to run profitably, should make engines in Wisconsin rather than Mexico, Smith said.
The timing of the recession also has worked against Kenosha.
In 2007, Chrysler decided to build factories in Saltillo and Trenton, Mich., to produce the Phoenix. Plans for a new engine plant in Kenosha, meanwhile, were scrapped, but the company said it would retrofit the existing factory for Phoenix production, with the retooling to begin in mid-2010.
That, a Chrysler official said at the time, would ensure engine work at the Kenosha plant at least through its 100-year anniversary in 2017.
"Start planning your centennial," the official said.
Then the recession hit, car sales plunged and Chrysler found itself with more than enough capacity for the Phoenix in Michigan and Mexico. Retrofitting of the Kenosha plant hadn't even begun because the factory still had to make the V-6 engines that the Phoenix will replace.
Transfers possible
The Kenosha employees won't necessarily be out of work after the plant closes, presumably by late next year.
Chrysler expects to offer jobs elsewhere to virtually all employees at factories that get shut down, Chief Executive Officer Bob Nardelli said in a letter to Gov. Jim Doyle last week.
John Drew, regional representative with the UAW, said that assuming there are indeed openings, people would have to pull up stakes and relocate.
"It is something," he said. "But it's not a solution for everybody."
And for Kenosha, he said, "The thing is, once the jobs are gone, the jobs are gone." |
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