Steven Rattner

President Obama is visiting the General Motors plant at Lake Orion today with South Korean President Lee Myung-bak to celebrate both the passage of the South Korean free trade agreement and also the evident success of his auto rescue program. But there is an interesting irony about today’s visit. The small car that is being made at the Lake Orion plant – the Chevrolet Sonic – was originally scheduled to be made in South Korea, where its predecessor was made. That was because with a traditional Detroit cost structure, cars like the Sonic cannot be made profitably in the U.S. But as part of the new agreement with the United Auto Workers in connection with the 2009 auto rescue, the U.A.W. agreed to permit 40% of the workers in the facility to be paid so-called “Tier II” wages, roughly half of what a traditional U.A.W. member earns. Those Tier II employees will be paid $14 per hour to start. That’s less than $30,000 per year – far from the traditional middle class pay of the auto industry. So while the U.S. gained 1,800 jobs, they came at a significant price.