Reshaping the Governance Compromises: The North American Auto Makers after the Bailout

Abstract:

On March 30th, 2009, President Obama announced one of the greatest transfers of resources to a given industry in contemporary capitalism and certainly the greatest in the auto industry’s history. The bailout plan included $ 60 billion to GM and Chrysler, $ 17.4 billion as emergency loans by the Bush administration, and resources directed to the sector’s financial institutions, for a total $ 85 billion. These interventions signed how emblematically important the ‘Big Three’ are for American capitalism, and how far the financialization of the economy has gone. Furthermore, the rescue program was unique in that created new governance compromises among state, management and labor across frontiers with arrangements between US, Canadian and Mexican public agencies on one side, and firms, the UAW and the CAW on the other. These granted the UAW significant equity shares of GM and Chrysler along with the US and Canadian governments while simultaneously imposed strict union/management negotiations to reduce labor costs. In the Mexican case, local governments where compelled to provide financial help to auto plants and unions to freeze wages.

Despite these far reaching scopes of the bailout program for labor, state and firm´s governance compromises, scholars have paid little attention to their particular features and implications. Also, there is not a comprehensive evaluation of the balance of forces that this process has brought about, nor of its evolution and current state. In particular, whether systems of corporate governance support or not longer term information sharing, intrafirm and interfirm collaboration, margins management, bargaining powers, trust building and risk sharing, and the innovative capacity of their global networks.
This essay will contribute to fill this gap. Based on interviews with management and labor representatives of the three firms in North American countries, this essay purport to build a more complete, equilibrated and up to-date explanation of the bailout process and outcomes in terms of the above governance compromises.

Alex Covarrubias. Center For North American Studies. The College of Sonora, Mexico. Visiting Professor GIS-GERPISA. acova@colson.edu.mc
Bertha Vallejo. Tilburg University – Development Research Institute (IVO). bvallejo@uvt.nl