New Auto Contracts:
The Dead End of "Partnership"

Nov 20, 1993

During the fall of 1993, the UAW (United Automobile, Aerospace & Agricultural Implement Workers union) signed contracts with Ford, then Chrysler, and finally GM, the so-called Big Three.

All three contracts carried a 3% wage increase the first year, plus 3% bonuses the second and third year. But all three also carried a "diversion", that is, a reduction of 32 in Cost-of-Living Adjustments over the 3 years of the contract to help the companies pay the rising costs of their medical insurance bills. That figures out to 2/3 of the 3% wage increase the average production worker got. The remaining 1/3 of the 3% increase will almost certainly melt away, since the current COLA formula does not keep full pace with inflation. (Business Week estimates that COLA currently covers only 90% of inflation).

All three contracts continue to guarantee that workers laid off for more than 36 weeks during the term of the contract would be placed in some job. Contracts also continue the "attrition formula" which "guarantees" that the companies will replace one of every two workers who die, quit or retire. To say it more clearly, the UAW continued to accept the plans of the companies to go on "restructuring", that is, cutting back on jobs. Those currently employed have a promise of benefits if they are laid off—although these special funds can run out—but they also have a promise of a steadily increasing intensity of work, when they are not laid off.

All three contracts carry increases in the basic pension for new retirees from the current $1800 a month to $2,030 by the end of this contract. Both parties say they hope this will encourage more workers eligible to retire to do it. For the new workers to be hired in, however, all 3 contracts contain "two-tier" provisions which reduce the hire-in rate for production workers to 70% of the standard wage rate. Over three years, new hires can theoretically reach full pay, catching up 5% each six months. In reality, no one could reach full pay in three years, since six months time is not calculated on a calendar basis, but on weeks actually worked. Before anyone reaches full pay, this contract will expire; what the next one brings—or takes—is anyone’s guess.

To Protect Whose Well-being?

What is clear, and what all the business press has said, is that these contracts are designed, above all, to ensure the well-being of the auto companies. And they take into account the different kinds of "well-being" that each company needs.

Ford and Chrysler are poised, for the first time in 15 years or more, to start hiring in sizeable numbers. Starting significantly earlier than GM did in this process of "restructuring", that is drastically reducing the size of their work force, Ford and Chrysler have now reached the point, after a decade and a half, that they have no backlog of laid off workers they must recall before they can hire. Business Week predicted that they will be hiring "aggressively". This two-tier wage agreement was handed to them just in the nick of time!

Ironically, the UAW leadership pronounced, as a selling point for this pact, that the union had gained, in return for two-tier, a promise that the companies would hire new workers. They certainly will—and try to get rid of older, that is higher-paid, workers to boot!

For GM, which started into its "restructuring" later than did Ford or Chrysler, the two-tier wage for new hires is a dead letter, at least for the term of this contract. GM intends to go on with drastic cuts. It has already announced it will cut 67,000 more workers over the three years of this contract, coming on top of the 62,000 it already cut over the term of the last contract. If that holds, GM will have cut almost 130,000 out of the 330,000 hourly workers it had in 1987. The Detroit Free Press commented, "In essence, Bieber [UAW President Owen Bieber] told GM he won’t stand in the way if the company can figure out how to match Ford in productivity and reliance on outside parts companies."

But this still left the temporary wage differential which two-tier would give to Ford and Chrysler. To "even the playing field for GM", the UAW agreed to two particular provisions, applicable only to GM. It agreed that laid-off GM workers must accept transfers to plants 100 miles, and even more, away from their homes, under pain of losing their jobless benefits. (The old limit, which still holds at Ford and Chrysler, was 50 miles.) This will undoubtedly force many workers to get another job while they await recall, thus reducing GM’s liability for jobless benefits.

The GM contract also included a provision for a two-week vacation shutdown in July. Ford and Chrysler contracts already carried provisions allowing individual local unions to accept or veto such shutdowns. But the GM provision is for a company wide shutdown. Even though such a shutdown gives everyone a "prime time" vacation, most workers don’t want it, because they lose a couple of weeks of downtime. The auto companies regularly shut down their plants for a week or two at this time anyway to change over to the new models. This had been always considered as a lay-off, with the workers paid out of the companies’ jobless benefits funds; this contract now treats the same downtime, required by the company for its production schedules, as the workers’ vacation and holiday time, paid for out of the workers’ own vacation pay. This will obviously reduce their time off. Business Week estimates that this provision alone gave GM an estimated 170 million dollars a year.

Partners

For decades, the UAW leadership, like that of the whole AFL-CIO, believed that the well being of the workers was tied to that of the company. Over the last decade, the unions may have explained this class collaborationist policy more openly, talking about teamwork, partnership, win-win situations. But, in fact, the unions have long acted as though the corporations and the workers could march together, to the benefit of both. When the corporations were recalcitrant, as some were, the unions may have been forced to resort to a strike, sometimes even a long and determined strike. But overall the unions saw themselves as part of a union-management partnership. They believed that the workers could go on doing well as the result of this partnership.

In the first two post war decades, U.S. capital flooded the world, taking over the world’s markets from the European and Japanese imperialisms which had all been thrown backwards by World War II. The imperialist spoils of that war went to its one real conqueror: the U.S. and its "multinational" corporations. When confronted by a section of the working class determined to push for improvements, the corporations were ready to give some crumbs.

The auto workers, with their militant history and readiness to strike again, stood in the forefront of struggles for wages and extended benefits. The UAW came in with one contract after another, each one with a new program of protections and/or benefits: yearly automatic 3% wage increases, quarterly automatic cost-of-living adjustments (COLA), pensions to be added to social security, medical insurance, supplemental unemployment benefits to be added to state payments, dental and vision insurance, etc.

The union itself prospered. It had good contracts that other unions envied, and those contracts were a selling point when it began to organize workers outside the auto industry, and even outside of heavy industry. The UAW, which grew to more than 1.5 million members, with almost 900,000 of them in the Big Three alone, seemed to be sitting on the top of the world.

But the auto industry, and more generally the capitalist class, was sitting higher still. Much higher. They were the ones who accumulated the real wealth produced in this country, as well as in big sections of the rest of the world. The crumbs they gave to workers in the U.S. were more than compensated for by the social peace they gained in the heart of U.S. imperialism’s empire.

By the 1970s, the so-called "permanently expanding economy" began to suffer some contractions. A small downturn in 1970 foretold the much bigger ones of 1974-75 and 1979-82. The partnership began to show strains. The first signs of it appeared early. In 1970, GM forced the UAW into a 100-day strike, essentially just to keep the COLA formula from falling severely behind inflation, which by then was severe.

The contracts of 1973 saw the last important gain in auto: so-called 30 and out, which allowed workers to retire after 30 years of work and 55 years of age—eventually, after 30 years of work, no matter what age.

But then, the first massive lay-offs began in 1974. Over the succeeding years, the lay-offs went so deep that the supplemental jobless benefits ran out or were reduced at different times at each of the three companies.

In 1979, Chrysler demanded and the UAW agreed to "break the pattern"—that is, Chrysler, which claimed to be in bad shape, was given a few breaks from the contract agreed to at Ford and GM. In 1980 came the Chrysler contract reopener and the first big concession contract—that is, a whole program of give-backs in wages and benefits, as well as plant closings and lay-offs. Doug Fraser, then UAW president, argued that Chrysler workers’ only hope of keeping their jobs was to help "their own" company return to profitability. At the time, this was a "special case". Chrysler was on the verge of bankruptcy, or so it was said.

But then Ford plead special circumstances. And after Ford, came GM. They, too, got contract re-openers, receiving a similar package of concessions from the union.

Suddenly the terms of the partnership had changed. The workers could no longer expect to improve their situation simultaneously with that of the companies. They were called upon for sacrifices, in exchange only for the hope that by "reviving" their company’s fortunes, they would thus, eventually of course, revive their own. The UAW searched for ways to help the companies increase their profitability.

The UAW accepted a veritable hemorrhaging of jobs, which decimated its own membership. All three companies, but especially Ford and Chrysler, began to close plants and farm out parts production to the so-called "independents". They purchased parts from smaller, already existing companies, who traditionally paid somewhat lower wage rates. And they helped encourage the establishment of non-union parts plants paying even lower wages. By 1989, the hourly wage at a Big Three parts plant was $15.68 an hour; the average at a unionized "independent" parts plant was $10.51; at a non-union "independent" parts plant, it was $8.04. Today, Chrysler buys 70% of its parts from the independents. Ford gets 55% from these independents. GM, which fell behind in this game, only 30%. In 1978, only 15 years, ago, 295,000 workers were employed by the independents, and 240,000 at the Big Three in parts manufacturing. Today, 330,000 workers are employed by the independents, and only 150,000 at the Big Three. The change is even more striking when we compare the unionized parts plants—Big Three and independents—with the non-unionized plants. In 1978, the unionized plants had 393,000 workers, and the non-unionized only 142,000. Today, there are 235,000 unionized and 245,000 non-unionized in parts plants.

But the loss of jobs at the Big Three did not come only, or even predominately, from outsourcing. The biggest job loss was due to the drive for productivity which the Big Three carried on inside their own plants, while pushing the independents to do the same inside their plants. In 15 years, the whole auto industry lost almost 200,000 jobs, going from 1,020,000 total jobs in 1978 to 825,000 in 1993. But not only has total vehicle production, taking autos and trucks together, not gone down to keep pace with this job loss, it has actually gone up. Auto, in fact, has one of the highest rates of productivity increases in industry.

The productivity increases inside the Big 3 plants themselves are even higher than what pertains throughout the whole auto industry. The fact that jobs shifted to the smaller independents, which in general were much less productive, obscured the level of speed-up at GM, Ford and Chrysler themselves. The Big Three’s assembly and other basic plants—which have farmed out much less work—saw employment decline from 488,000 in 1978 to 345,000 today.

Whatever difficulties the auto companies might have had, they have done well over these last 15 years. Spectacularly well. Ups and downs they had—auto, after all, is a highly cyclical industry—but, overall, they amassed enormous profits and broadly increased their capital holdings. In the 10 years from 1982 to 1992, Ford’s assets grew faster than those of any other U.S. company except for General Electric. GM’s assets grew faster than any other company except for GE, Ford and American Express, whose assets are essentially financial. As for Chrysler, this "poor relation": it had reversed its situation so much that it turned a profit in 1992, a bad year for auto, one in which Ford and GM both lost money. Its stock price went from a low of $9 a share in 1990 up to $58 in 1993—a little bit ahead of the general market trend!

When the auto companies were going through their well publicized difficulties, they immediately called for sacrifices from the workers. But when their fortunes turned up, those of the workers did not keep pace. In fact, as the 1993 contract shows, the workers are still making sacrifices.

When You Don’t Fight, You Can’t Win

The UAW negotiated the 1993 contract in a year when it can’t even pretend the auto companies are in need of special assistance. The three companies together reported profits of just under four billion dollars for the first half of 1993, compared to a loss of 313 million dollars during the same period last year. Chrysler, in fact, set a record for second quarter profits. And GM, which today is supposedly the weak one, turned a profit for the first half of the year, despite big tax write-offs on the books for all the plants it intends to close in its "restructuring" drive.

Despite all this, and despite what the auto companies were demanding—that is, more job losses and this two-tier pay system—the UAW leadership never once raised the possibility that the workers should prepare for a strike. They never suggested that they were ready to lead one. In fact, when Bieber announced that the UAW had a contract with Ford, he proudly declared, "We didn’t have a single nut missing in a car. We didn’t lose one single opportunity to keep producing cars." In fact, the last major Big Three strike proposed by the UAW leadership was the 1970 GM strike. Since then there has been a short Ford strike in 1976, and an even shorter Chrysler strike in 1985. Other than that, a few "mini-strikes".

No wonder the working class is today pervaded by a sense that it is no longer possible for workers or their unions to do anything to stop the juggernaut of the companies’ drive for profit. No wonder the auto workers voted to accept this contract, even though they seemed to feel that two-tier was really a rotten thing. It’s bad enough when workers must give up anything. But to give it up without a fight is the worst possible thing. It is deeply demoralizing, and that weighs on the future possibilities for making a fight.

It’s not true that workers must accept whatever the companies demand, without any hope of resisting. The recent 7-week strike carried out by workers organized in the UAW at Blue Cross/Blue Shield of Michigan shows that workers can gain something when they put up a fight. It wasn’t a massive strike, involving only 3600 workers, with only a solid minority of them active in the strike. But, by striking, these clerical workers forced BC/BS to give them 5% more in wage increases than it had wanted to, a total of 13% over 3 years; and they doubled their signing bonus, from $500 to $1,000. They got protection against rapid discipline for use of their sick time. But this strike certainly cannot be called a real victory. Their sick time policy was rearranged in a way that helped some workers, but it harmed others. In another time period, a strike like this wouldn’t be remarkable at all. But in a time period when the unions seem to have given up all pretense at fighting, the workers at Blue Cross, who are part of this same UAW, proved that workers don’t have to accept whatever the companies demand—if they are ready to stand up for themselves. But, then, these were workers who had already gained confidence in their own forces from their 12-week strike in 1987, which forced the company to back down from its intention to take even bigger concessions from them.

Whatever difficulties there are to make a fight in this period, the workers at BC/BS showed that the problem of fighting is first of all a problem of morale, and also of whether workers have a leadership that proposes a fight to them.

Even the Strongest Can’t Stand Alone

When questions arose about the two-tier provisions of the 1993 contract, Owen Bieber defended it by saying, "There aren’t many jobs floating around out there where you can get that kind of money and full free health insurance."

Of course, that’s true. But it is also a symbol of the fact that no union, no matter how strong, can protect its own members forever, when other parts of the working class go unprotected.

The UAW long broke ground for the American labor movement. Auto workers were the real spearhead of the drive for the CIO and they carried out in subsequent years some of the most militant strikes to make further gains. Once something was established in a Big Three - UAW contract, other sections of the working class often gained the same thing or, more commonly, a reduced version of the same thing. Of course, this was most true of the unionized working class, especially in heavy industry; but there were also those companies like IBM or GE which deliberately kept pace with UAW contracts, as a means of preventing union organizing.

This kind of extension helped obscure the fact that these gains were not generalized across the working class, and even not throughout the auto industry itself. And it obscured the fact of how divided the working class really was: into separate unions, organized in separate industries, or even separate companies or separate workplaces.

A very large section of the working class went untouched by this prosperity. Those working in small unionized companies couldn’t begin to hope for something like a Big Three package. The same was true for most of those working in the service sector, unionized or not. And beyond them was the layer of the working class which drifted between incidental work and perpetual unemployment.

Effectively, the working class has been divided into many tiers: not only according to their wages, but also to their benefits, or, more commonly non-existent benefits. Today’s figures for medical insurance coverage illustrate the problem. Over 37 million people in this country have no medical coverage at all, not even hospitalization, and almost all of these are working, or the families of people working.

Nonetheless, UAW activists, as well as those from similarly well-situated unions, assumed that over time their wages and benefits would spread to ever bigger layers of the working class, that the main problem was simply a problem of extending the system of union contracts to the unorganized. For several decades, in fact, the main argument unions made when they tried to organize the still unorganized was that a union contract guaranteed better wages and benefits. And the unorganized workers for the most part believed it.

But as the expansion ground to a halt, unemployment grew, the least privileged came under heavy attack. And this eventually put the more favored at risk.

Small companies, including the unionized independent auto parts companies, began to install two-tier systems to lower their wage bill. Some bigger companies followed. In 1983, the airline industry forced two-tier on ground service workers at United and American. Today, it takes nine years for someone hired in at $7 an hour to reach the top pay scale of around $17 an hour. Retail grocery stores began to pick up on this arrangement. Within three years time, the United Food and Commercial Workers union had signed 87 such contracts. In 1985, the International Brotherhood of Teamsters accepted a master freight agreement divided into a two-tier pay. By 1986, 1,700,000 workers had come under some version of two-tier.

Even inside the Big Three itself, the standard of equal pay for equal work was beginning to crumble.

Some of the earliest battles in auto had been fought in order to gain the same pay rates for everyone—or at least one rate for production workers, another for skilled workers. And auto was one of the earliest industries where women, for example, were finally able to be hired in at the same wage rate as men, and where black workers were hired in at the same rate as whites. Over the years, the broad production category has been divided into more specialized categories, but although there came to be a few cents (literally) difference between these various categories, production work still carried essentially a single wage rate. The rates for skilled workers were more complicated: those hired as apprentices worked their way up a scale as they went through training; others doing the work without a journeyman’s card worked at a reduced rate. But overall, by contrast to the vast differences within the skilled trades outside of auto, or even the vast difference between skilled trades and production work in other industries, auto was a kind of bastion for this idea of one, across-the-board pay rate. It was one of the fundamental ways by which the UAW had sought to prevent divisions from growing up inside its own ranks.

For decades, the newly hired took only 90 days to gain the full rate of pay; this was the same time required for them to gain seniority, that is, the guarantee that they could not be fired without cause, and if laid off must be recalled before anyone else could be hired.

But this single pay rate, which the union saw as a mark of labor solidarity, was breaking down. In 1982, the period of time required to gain the full rate was increased to 18 months, from the previous 3 months. This extension was justified by the argument that work was becoming increasing "complex", with more time required to learn it. The hire-in rate was also set at 85% of full pay, rather than what had effectively been about 89%.

Then came more cracks in the wall of solidarity. In 1987, Ford set up its steel-making operations as a separate company, Rouge Steel, attracting some outside capital in the process. Ford argued that the old wage rates were not "competitive" with those in the rest of the steel industry, since they had been set at auto scale, and not those prevailing in steel. The UAW, pleading this as a "special case," signed a contract which established a permanent two-tier system, not only for wages, but also for pensions.

In that same year, Chrysler took over AMC plants, including the Evarts Plastics plant, whose wages were less than half of those prevailing at Chrysler. The UAW accepted that this plant, now wholly owned by Chrysler, would continue at its old wage rates.

Perhaps Caterpillar was taking note of all these changes. In 1992, it proposed, among other things, to establish a hire-in rate of less than half the existing wage rates, with a permanent gap to remain between the two tiers. Caterpillar is the major producer of agricultural and construction equipment in the country, and was at that time very profitable. It was organized by the UAW and its wages and benefit system had mirrored that of auto. In this case, the UAW did try to lead a strike, which collapsed however after 5 months when Caterpillar threatened to fire all strikers who did not return to work and replace them with the scabs who had been working. The UAW ordered strikers back, and the company imposed its own settlement.

Certainly, the UAW did not agree to this drastic change. But its agreement to break down the single pay rate elsewhere did nothing to discourage Caterpillar’s demands. More importantly, the fact of many tiers in the working class, and of an ever increasing army of unemployed, left the UAW in a difficult situation to defend its contract. To do so, it would have had to organize a fight which brought other Caterpillar plants out, and which tried to pull other sections of the working class into the fight. But this, the UAW leadership did not do.

What Kind of Policy?

It might be said that the 1993 auto contracts didn’t take very much away from current workers—or at any rate, from those who will keep their jobs. And the two-tier provision is not as severe as some in other industries. But it ought to be obvious that two-tier is a sword pointed right at the jobs of current workers. The companies themselves now have a big incentive to get rid of as many older workers as possible—forcing them to retire before they want, firing them on pretexts, making life generally difficult for them. And why should the new hires feel any sense of solidarity with the older workers when the older ones come under attack—these are the same workers, after all, who were ready to protect themselves at the expense of the new hires. But, of course, what’s even worse, is that everyone knows that the 1993 contract is not the last chapter in this book. This certainty of still worse days ahead is the logical result of the corporatist and class collaborationist policies of the UAW leadership.

The UAW once appeared not only as the backbone of American labor, but also as its leader. But in the 14 years since 1979, the UAW has lost half of its total membership, today standing at 770,000 members, with less than 500,000 at the Big Three. And even for the apparatus of the union, this has meant disaster. Fewer members means less dues, fewer staff, fewer organizers. The leadership of the UAW has not been able, finally, even to protect itself and its own narrow interests, much less the interests of the workers once organized in the UAW.

It’s not possible for one section of the working class to protect itself alone—no matter how militant its traditions, no matter how favorable its situation. Certainly, for a period, one section of the working class can benefit even while other sections do not. But this more "privileged" section becomes more and more isolated from other workers. If they want to protect themselves, they must find the way to break out of this isolation.

The unions, who have always proposed that the working class can defend itself section by section, give no way out for the working class today. To find that way, of course, it’s necessary to decide first of all to fight. But it’s also necessary to carry out the fight at the level of the whole working class against the whole capitalist class. This is not just a question of support for each other’s fights, although this is essential—it ought to be elementary, in fact, although it often isn’t. It’s also a question of having a totally different policy in view, of really deeply understanding the dead end into which the corporatist policies of all the unions have brought us. Those who start from there will figure out the ways to get past the organizational divisions and legal prohibitions which today segment the struggle of the working class.