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The Autoworkers are in a better condition than the steel workers of the Bush era

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by - 5/27/2009 6661 Views

Automotive Industry poised for momentum under Obama administration

bushobama.jpegNo other industry is as close to the politics of the United States as the auto and steel industries. At the moment however, the auto industry is at the center of attraction, thanks to the strong response of President Barack Obama to the bankruptcy of the Chrysler LLC. But, the situation was different during the first term of George W. Bushes’ presidency. At that time, the steel industry went through crisis thanks to his policy. Now, the experts are eager to make a comparison between the crisis which the steel industry faced then and the crisis which the auto industry is facing now.

There seems to be a ‘night and day’ difference between the ways the two Presidents have acted under pressure, believes Lester B Lave, a professor of economics at the at Carnegie Mellon University in Pittsburgh. Other experts too, believe that the condition of the autoworkers now is much better than that of the steel workers who were in a similar crisis a decade ago.

President Bush decided to put taxes on the steel imports in America. This decision enraged many of his supporters and expert economists. Still, the policy came in to being even after Bethlehem Steel Corp. along with dozens of other manufacturers went bankrupt in 2002. These companies cancelled the health coverage and pensions of as many as 350,000 retirees. Meanwhile, most of the firms were bought out of the crisis cheaply and eventually consolidated in leaner operations.  

The initiatives taken by Barack Obama are however, different. His policy for the Chrysler has already been praised as a favorable one for the United Auto Workers. His bankruptcy deal for the Chrysler comprised of a 44.6 billion note and 55% stock. This will cover the health care of the retirees, while the pensions will remain intact.  

According to Lave, the reorganization is giving the unions the best deal. The same note was found in the voice of Leo Gerard, the president of the United Steelworkers of America. In an interview, he said that this is the first time, when they have got a President who supports their demands.

However, not everyone is happy with the decision. Some experts believe that this policy of the Obama administration will eventually fail since the approach has not made any attempt to minimize the legacy cost. Peter Morici of the University of Maryland believes that Chrysler will not be competitive with the deal. While comparing the previous case, he said that during the steel bankruptcy the companies got rid of the stuff. But this time, they will not be able to do that.  

However, the experts agree that the situation is different. According to Nariman Behravesh, chief economic expert in IHS Global Insight Inc said that this is no time to show tough love. Still, there are certain similarities. Both the incident was fanned by the up rise of Asian manufacturers as well as nonunion competition at the domestic level. Just like the mini mills in the steel industry, the three big automakers too were hampered by transplants like Toyota and Honda. However, the Obama administration has avoided purging legacy cost that played a crucial role in the previous crisis.    

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