The war in the auto plants never ended. It flared up and died down, but it never ceased. Management and labor circle each other like sumo wrestlers searching for an opening. Like any war, it ignores honesty, human dignity and common sense. Like any conflict, it leaves collateral damage.

As a supervisor at Ford Motor Company’s largest transmission plant, I fought on the front lines. Despite leaving the auto company many years ago, the factory skirmishes were a key factor in the industry’s disastrous decline in the 1980s, and likely continue to play a part in the failures of the industry today.

The factory foremen had one big gun: Form 4600. It was the stepwise disciplinary tool that could take an employee up the punitive ladder to termination. Many supervisors rose in the management ranks not because of job performance, but by virtue of their 4600 tally. The auto industry rewarded tyrants rather than qualified managers with integrity and an ability to successfully lead.

The UAW arsenal easily outgunned management. Production was sabotaged. Critical employees were absent when high production was most needed. Tools mysteriously disappeared. Bad quality was run purposely. The weakest, least desirable employees were protected with the full power of the labor contract. When management and the UAW stood eyeball to eyeball, management always backed down – they had too – productivity and profitability hung in the balance.

The Ford factory was operated by two warring gangs. Clearly, this business model is doomed for failure.

The spark that ignites the factory battles is ever changing, but the underlying philosophy “us against them” remains the same. Foremen lead by oppression, intentionally making the work environment as uncomfortable as possible for the hourly employees. They justify these conditions with high salary. The UAW fights back the only way they can – production sabotage.

My time in the trenches still haunts me. One particular occasion I was assigned the task of scrutinizing a single employee’s every move for an entire eight hour shift. My only assignment was to nail him with something, anything, by the end of the day. The orders were clear. At the end of the shift someone would lose their job – it would either be him or me. What good was a supervisor who could not nail one single employee after observing him for eight hours?

Like a voyeuristic watchdog I was expected to follow the man to the rest room, noting how long he took to relieve himself, hand count and record his hourly output, follow his every move…

One employee brought his snub nose .38 to work with the explicit intention of murdering me. Fortunately he was so drunk that he left the gun under the seat of his car, and fell into a drunken stupor at his work station. The UAW saved his job despite repeatedly showing up for work intoxicated.

There were the regular bathroom sweeps – teams of supervisors and security guards periodically raided restrooms to ensure nobody was resting. Anyone caught not standing at a urinal or sitting on a commode was slapped with a 4600 disciplinary form.

The Coffee Pot War during the midnight shift was particularly noteworthy. Management confiscated and held hostage the only coffee pot available to the hourly employees, reportedly because they were taking too many breaks. This ill-conceived plan was designed to punish the workers and increase productivity. Things quickly turned sour. Machines stopped running properly. Production dropped. A critical tool that was needed for all the machines went missing. Squads of supervisors and security guards raided lockers, searched cars in the parking lot, and overturned trash cans. Foremen and UAW committeemen screamed in each others faces. Production came to a standstill. The critical tool could not be found.

The Coffee Pot War raged for days. Bleary eyed supervisors, fighting fatigue, faced the possible shutdown of assembly plants in four states because they were running out of transmissions. The foreman of that department had a nervous breakdown, and was carried out of the plant by mental health workers. In desperation, management returned the coffee pot. Within a few hours the missing tool showed up as mysteriously as it had disappeared. Production returned to a normal level.

These never-ending battles on the factory floor ushered in the quality control nightmare of the 1970s that caused 33 states to pass “Lemon Laws” designed to protect American car buyers from the Big Three. The wars destroyed confidence and trust in American built cars, which marked the beginning of the end of the U.S. auto industry. It opened the door for smaller, weaker, less experienced foreign auto companies to come to our shores and beat us at our own game. The wars drove the final nail in the coffin of Detroit.

General Motors and Chrysler are on the anvil of history. United Auto Workers President Ron Gettelfinger holds the hammer and will determine whether they emerge more competitive or shattered in pieces and sold to foreign investors.

In December, George W. Bush granted $17.4 billion in temporary loans on the condition those firms convert two-thirds of their debt into equity. Another condition was to persuade the UAW to accept stock for one half of what these companies owe to fund retiree health care and align wages, benefits and work rules with those of the Japanese automakers operating in the United States.

GM and Chrysler must complete these negotiations by March 31 or repay the money and face bankruptcy.

At U.S.-based Toyota factories, workers receive about $25 dollars an hour and good health care benefits. But they don’t retire at 50 after 30 years or get as much time off and huge severance packages. Toyota does not endure the medieval work rules and job classifications imposed by UAW contracts.

Most other Americans would be happy to get Toyota pay, benefits and working conditions. If Gettelfinger continues stubborn resistance to a better package than most Americans enjoy, then Detroit automakers will continue to require government subsidies or not have enough profits to invest and compete in hybrid and other new technologies that will transform personal transportation over the next decade.

Eventually, Washington will tire of their begging, they will march through bankruptcy, and their factories will be sold off to Japanese, Korean, European and Chinese automakers.

If Gettelfinger takes the Toyota package, then Washington should take a hard look at policies that can promote U.S. automaking as effectively as do industrial policies abroad.

This would include addressing undervalued currencies in Asia — currencies kept cheap in foreign exchange markets by government intervention in Japan, China and elsewhere.

Over the last two decades, Japan has kept the yen at least 30 percent undervalued against the dollar, and this provided Toyota with an average subsidy of at least $2,000 on every car it sold in the United States.

Through 2004, the Bank of Japan directly purchased dollars in currency markets to keep the yen undervalued, and since, it accomplished the same by keeping Japanese interest rates very low. This encouraged the so-called “carry trade,” where private investors borrow yen, use those to purchase dollars and then invest in short-term U.S. securities to exploit higher U.S. interest rates.

Now, the Federal Reserve has dramatically reduced U.S. interest rates, and the yen has risen closer to its true market value against the dollar. Japanese officials appear poised to again intervene directly in currency markets to restore Toyota’s unfair advantage, and Washington should take whatever steps are necessary to head off such Japanese protectionism.

In addition, Washington should take assertive steps to encourage production of fuel-efficient vehicles in the U.S. and create a strong export industry.

Washington could offer incentives to car buyers to trade in gas guzzlers for more fuel-efficient vehicles — the newer and the bigger the clunker and the more fuel-efficient the replacement, the more dollars the car buyer would receive if the guzzler is destroyed. This would raise the price carmakers receive from selling more fuel-efficient vehicles and boost car sales.

Washington could provide substantial product development assistance to U.S.-based automakers and suppliers. The latter include Toyota, Nissan and Honda, as well as the Detroit Three, battery makers and other suppliers to accelerate the production of innovative, high-mileage cars.

The condition for assistance would be that beneficiaries do their R&D and first large production runs in the United States, and share their patents at a reasonable cost with other companies manufacturing in the United States. The huge U.S. market would help attract producers from around the world and rejuvenate the U.S. auto supply chain.

Such smart industrial policies would contribute to national efforts to reduce CO2 emissions and reduce oil imports.

Finally, individual Americans should open their minds. Many are considering trading in trucks and SUVs for sedans and are naturally attracted to the Toyota Camry and similar import brands. Visit a Ford or Chevy showroom and test drive a Fusion or Malibu and be pleasantly surprised. Those are high-quality, affordable and reliable vehicles.

Washington is giving Detroit a second chance, and Americans should give its cars a second look.

President Bush has agreed to lend GM and Chrysler $17.4 billion on the condition these firms complete a plan to accomplish financial viability.

The agreements set goals for automakers: converting two-thirds of their debt into equity; paying company stock to fund one half of the Voluntary Employee Benefits Associations, which fund retiree health care benefits and remove these costs from future liabilities; aligning wages, benefits and work rules with U.S. Nissan, Toyota or Honda operations.

These goals are generally consistent with the conditions I outlined as necessary for the Detroit Three to achieve viability when I testified before the Senate Banking Committee on November 18. For example, laid off workers could no longer sit in the Jobs Banks collecting 90 percent of pay and benefits indefinitely and engaging in productive activities like pinochle.

Financial viability requires projecting a positive net present value, taking into account all current and future costs. It does not require a positive cash flow by March 31. In fact, wage and benefit cuts only need be accomplished by December 31, 2009.

Given the depressed auto market, a positive cash flow cannot be accomplished soon, and GM and Chrysler will be asking for more federal loans when they table their plans by March 31. If the auto market stays depressed into 2010, Ford will likely seek assistance. Given the likely duration of the recession, loans of well over $100 billion will be needed. Much of those could prove gifts, with the loans never truly repaid.

Unless the automakers significantly reduce their debt, jettison retiree legacy liabilities, and align wages, benefits, work rules with those of Japanese transplants, they simply cannot hope to be consistently profitable.

Yet, the agreement permits the automakers to vary from those conditions if they can still demonstrate a net positive present value. Enter the accounting magicians.

UAW contracts are exceedingly complex. GM and UAW leaders have mastered obfuscating the consequences of their pay structure and work rules. Calculations of net present value will importantly hinge on forecasts of future car sales and wages paid by Toyota, Nissan and Honda. A few quick pen strokes and a lousy business plan can be made a winner, with costs to taxpayers in unpaid loans only becoming apparent years later.

Barack Obama owes organized labor a huge debt for his November victory. UAW President Ron Gettelfinger can be expected to try to sell Obama labor agreements that appear to create more concessions than are real and leave the Detroit Three in the red going forward.

Fooling Obama would create loans the Detroit Three never can really repay.  The government could force payment at the expense of the next creditors in line—the large U.S. banks—but the federal government is already subsidizing their losses.

One way or the other ordinary citizens who don’t earn nearly the pay and benefits autoworkers receive would be paying taxes to subsidize their rather generous lifestyles, much as taxpayers are financing the bloated bonuses at large New York banks requiring federal dole to stay afloat.

President Bush has punted the auto mess to his successor, and one of three outcomes is possible:

1. President Obama can require the automakers and UAW to come up with a contract ordinary mortals can understand, eliminate all the foolish job classifications and work rules, and establish pay rates that make the Detroit Three competitive.

2. Obama can push the automakers into a prepackaged Chapter 11, perhaps by providing some financing to ensure suppliers are paid and companies can continue to operate, and let a bankruptcy judge impose the essential conditions of the Bush agreement.

3. He can let the Detroit Three continue their profligate behavior, providing subsidies masquerading as loans.

Obama faces the same kind of tough choice Bush did when he lavished generous subsidies on agriculture at the beginning of his presidency. If Obama caves to union pressures and chooses to subsidize the automakers, other unionized industries will line up. Market discipline will not apply to the eight percent of private workforce represented by unions, and damn the majority that really elected him.

For full coverage of the auto industry, click here.

For previous debate entries by Peter Morici, click here.