The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

United States:
Auto:
Using Delphi's Bankruptcy to Batter down Wages and Benefits at Every Company

Apr 13, 2006

At the end of March, the top UAW leadership negotiated a "special attrition plan" with General Motors and Delphi – a series of incentives to be offered to every GM and Delphi worker to get them to retire early or to take a one-time lump-sum payment to leave their employ.

While newspaper headlines trumpeted the idea that workers had hit the jackpot, it was anything but. Workers who take the pension will go out with less than what they would have gotten if they had waited and, moreover, a retirement laden with uncertainty, given Delphi's bankruptcy and GM's hints about bankruptcy. If, for example, either GM or Delphi were to throw their pensions over to the Pension Benefit Guarantee Corporation – as so many other companies in bankruptcy have done – any worker who retired before age 65 would suffer a significant reduction in their pension. Lower seniority workers who took the buy-out would be opting for unemployment with no pension, no medical care and only a heavily taxed buy-out check in their hands.

Even workers who were tempted to take one of the offers looked at the deal with misgivings. The president of the UAW local at Delphi's Coopersville Michigan plant reported that very few of his members were ready to sign on to the deal: "Trying to retire from Delphi just doesn't make sense to a whole lot of people. How can you trust them?"

The goal of this "offer" was not to assure a decent retirement to Delphi and GM workers; it was to lure out of the plants workers who today earn $27 an hour, so Delphi can replace them with new hires earning $14 an hour – the new hire rate which the UAW leadership agreed to in April 2004. Given the complicated arrangements that still exist between GM and Delphi, jobs opened at GM by the attrition offer would be filled by current Delphi workers "flowing back," giving Delphi even more possibilities to fill its plants with replacement labor, earning $14 an hour.

No wonder so many workers expressed disgust – they were being asked to throw themselves on the scrap heap so Delphi could, at one blow, cut its wage bill in half.

A Couple of Friendly Divorces Produced Two-Tier Wages

GM's spin-off in 1998 of its parts plants into Delphi, a supposedly independent company, was the beginning of a ramped-up attack on the wages and benefits of auto workers. In 1999, in an invitation sent to prospective investors, Delphi explained its "divorce" from GM in this way:"The company believes that its complete separation from General Motors will enable it, over time, to increase competitiveness by establishing local work rules and practices more consistent with those generally prevailing in the automotive parts industry." The first contract with the UAW in 1999 may have maintained the terms of the GM contract for the next four years at Delphi, with GM subsidizing an unspecified part of the wages and benefits. But the separation was aimed at severely stepping up the intensity of work, reducing employment, and reducing wages and benefits in the parts plants.

The next contract in 2003 ushered in the beginning of a permanent multi-tier wage span. While the news media constantly talked about the need for lower pay in the parts plants – otherwise, how could they compete! – the union leadership bragged that it had maintained the existing pay scale for Delphi workers who had come from GM plants. They barely mentioned, however, that they had agreed "in principle" to establish a lower wage rate for workers Delphi would hire in the future. By voting for the contract, workers were authorizing the UAW leadership to negotiate this lower rate with Delphi without coming back for another vote. The lower wage "in principle" turned out, in practice, to be just over 50% of the current Delphi workers' rate.

In 2003, even before the actual rate was known, many Delphi workers argued that this "two-tier" arrangement would give Delphi a weapon to use against the workers whose wages were protected. For purposes of the vote – and defying logic – the UAW leadership counted Delphi workers as though they were GM workers. In other words, their votes got lost in the much larger number of GM workers' votes. The UAW leadership was able to pretend that Delphi workers had happily ratified their contract!

A similar evolution took place at Ford and Visteon, the parts plants which Ford spun off into a separate company less than a year after Delphi was created. While the details varied, the same basic mechanism was at work, establishing the principle of lower wages and benefits at the parts plants for new hires, while maintaining wages and benefits for the Ford workers who suddenly were working for Visteon. This was similar to what Ford had earlier done with workers from its steel division when those plants were spun off into a separate company – several times, in fact.

Delphi and Visteon are the battering rams with which the whole auto industry hopes to break down the edifice of wages, benefits and working conditions that auto workers had fought so hard over decades to erect.

All these changes were pushed through, with the majority of workers – out of fear or fatalism perhaps – not opposing them. But in all the companies there were workers who argued that a multi-tier wage rate at the spin-offs was the beginning of the end for decent wages and benefits for everyone, including in the GM and Ford plants.

It Takes Three to Tango at Delphi

At the end of March 2006, only a week after GM and Delphi had announced the "special attrition" plan to lure workers out of the plants, Delphi issued a threat aimed at scaring them out. For all those workers who didn't agree to leave Delphi, the company proposed to cut wages to $22 an hour in July 2006, and $16.50 an hour in September 2007, with wages going down to $12 an hour when GM stops subsidizing them. Most benefits would be reduced or eliminated. GM said it agreed "in principle" to help subsidize this deal but the details were yet to be worked out. UAW leaders were reported to have told Delphi they couldn't take the proposal to their membership – in its current form! But they offered to continue discussing the matter.

At which point, Delphi finally went into the court where it had filed its bankruptcy, asking for a hearing on its proposal to throw out the whole existing union contract. And, just to show that it wasn't really GM's creature any more, it asked the court to throw out its contracts with GM for parts. The court gave it a date in early May for arguments to be filed, with a probable date in mid to late June for a ruling.

In response, the UAW leadership issued a statement: "In the event the court rejects the UAW-Delphi contract and Delphi imposes the terms of its last proposal, we will almost certainly be forced to take a strike-authorization vote."

Delphi's Chairman, Steve Miller, responded expressing "confidence" that he could reach "a wage-cutting deal" that would avoid a strike. GM's Chairman Rick Wagoner expressed "confidence" that he could facilitate a "negotiated settlement" between the parties before the deadline. And UAW Vice-President Richard Shoemaker expressed confidence in Wagoner, saying, "I think he is sensitive about the impact these things have on employees."

And there you have it, in a nutshell, the complicated con game these "confidence men" have been playing since last summer.

Three times since Delphi first began to demand concessions, it has put a "final offer" on the table, only to be turned down by the UAW leadership, only to threaten to go to court, only to delay on its threat, only to start the whole process all over again. Each "final offer" was less atrocious than the previous one – but only slightly less. And each threat issued by the UAW leadership that it could call a strike was accompanied by a slightly more optimistic hint that things could be worked out through negotiations.

Not once during this whole time did the UAW leadership bring these proposals out to the Delphi workers in order to discuss what workers might do. And they certainly never proposed that workers mobilize to fight against this attack right now, nipping it in the bud. When workers at some Delphi plants proposed a "work-to-rule" campaign aimed at slowing down production, UAW President Gettelfinger remarked that it might be a good idea – only to have a UAW spokesman quickly withdraw the union's support for the proposal.

All this maneuvering between GM, Delphi and the UAW leadership is nothing but a scam, aimed at frightening Delphi workers with such horrible demands, one after the other, so that when the real concession deal finally comes down, they may feel they have no other choice but to accept it.

And the business press knows it. Tom Walsh, business analyst for the Detroit Free Press, recently observed: "So what if UAW leaders threaten a strike that could destroy Delphi and cripple its biggest customer, General Motors Corp.? Relax, because until the last moment before the clock strikes 12 – and we"re not there yet – UAW leaders must raise a ruckus to show rank-and-file workers that they are squeezing every possible penny out of Delphi and GM."

Will the scam work? Who knows? But the threats made by Delphi and the policy of the union leadership seem to have provoked the growth of an opposition among Delphi workers, centered around a few long-time militants who had pushed the work-to-rule campaign. Under the name, "Soldiers of Solidarity" (SOS), they have organized a series of small demonstrations – in Flint, in Detroit at the auto show, at Delphi headquarters, at the Detroit Economic Club when Delphi's Miller spoke, as well as a series of organizing meetings in different areas, ranging from Rochester, New York, to St. Louis, Missouri. So far, their active numbers may be small, but their existence nonetheless reflects an anger that is simmering in auto plants. A knowledgeable business writer for the Oakland Press (Michigan) described the situation this way at the end of January: "When and if a concession deal is ever negotiated at Delphi, Gettelfinger will need the support of local union officers to get it ratified. However, many of the local union officers are discouraged or simply want no part of a fight with SOS, which picked up a huge amount of energy from the backlash against Delphi Chairman Robert "Steve" Miller's call for huge wage cuts. Members of the UAW's top executive board have said it will be very difficult to undo the damage from Miller's assaults on the union contract back in October and November."

Some Delphi workers have said that GM and Delphi are both stocking parts in anticipation of a strike. If the UAW leadership decides to issue the order, it wouldn't be the first time that union leaders pulled people who are angry out on strike in order to let them cool their heels a while.

Waving Delphi's Threats in the GM Workers' Face

The second shoe dropped in November, when GM and UAW leaders announced an agreement to cancel workers' wage increases and require retirees to pay more for medical care.

For a number of years, the Big 3 auto companies have been carrying on a publicity campaign about health care costs. If you believed their propaganda, the largest single cost in a car is for employee medical coverage – coming ahead of steel, aluminum, plastic, glass, advertising, sales promotions. They claim their wage bill for every worker includes not only $27 an hour in wages, but also $26 an hour for medical coverage. Add it up: $26 an hour, 40 hours a week, 52 weeks a year – it comes to ... $54,080 a year, without counting overtime! Amazing! By the way, an individual who went to buy that same coverage from Blue Cross, the insurance company that administers GM's medical coverage, would pay, according to Blue Cross rates on its web-site, about $7,400 a year for the most expensive family plan. Even if you add a few thousand to cover dental and vision, something doesn't add up!

But, reply the auto companies, our medical costs include not only active workers, but retirees and their families. The active workers, so the argument goes, are paying for the retired workers. And that's another flagrant barefaced lie! The money for retiree medical care and pensions was supposedly part of the companies' wage bill for those retirees during all the years they were working. For 30 years and more, the companies paid out less in direct wages because they were supposed to be putting aside money for pensions and retiree medical coverage. If that money's not there today, then someone stole it – and the auto companies and their banking partners are certainly the prime suspects!

Up until now, the concessions given up on medical coverage have not been very obvious. And, at least publicly, the UAW leadership had always pledged to hold the line to maintain medical benefits. Even when the three companies began yelling about medical costs soon after the last contracts were signed in 2003, the UAW leadership pledged not to reopen the contracts, and has repeated that pledge many times since.

Yet, lo and behold, in October 2005, shortly after fears sparked by Delphi's bankruptcy were percolating in the auto plants, the UAW leadership did reopen the contract with GM. The union supposedly became aware that GM might have to declare bankruptcy after an "independent" Wall Street financial firm examined GM's books for the UAW – as though GM would offer them the real figures, and as though any Wall Street firm would be independent of the big moneyed interests that control GM.

Of course, the "re-opening" was one-sided: GM gave up nothing; the union made all the concessions. The deal took away one of only two wage increases that active workers had gotten in the four-year contract passed in 2003; it suppressed most cost-of-living increases. It also increased prescription costs for both active and retired workers. Retirees were hit with increased co-pays on their medical insurance, increased deductibles and increased out-of-pocket expenses on medical coverage, as well as some limitations on their coverage. But the biggest concession of all was the one that was the hardest for workers to see: there was a complicated change in the way medical insurance for retirees is to be funded, replacing a "defined benefit" with only a "defined company contribution." When the company's contribution runs out, insurance premiums skyrocket. The risk is not just hypothetical. A similar deal cut by the UAW in 1993 with Detroit Diesel – when it was still part of GM – shows what can happen: its retirees were hit last year with bills for medical insurance ranging between $179 to $834 a month because the company's contribution was almost all used up.

Active workers at GM were called on to accept the concessions in their wages out of respect for the retirees, "on whose shoulders all of us stand." Respect for those same retirees was notably absent from the actions of the UAW leadership, which did not allow them a vote on this deal that reduced their benefits – promised to them for their "lifetime" right on the papers they signed when they retired!

Not So Fast ...

When the UAW leadership announced the results of the ratification vote by GM's active workers, it was obvious that many workers did not agree. The concessions supposedly passed by a 61% to 39% margin, which in itself would have been notable since the UAW usually announces passage by 85% to 90% or better. But what made the results more significant were the strong doubts raised in some locals about the accuracy of the final count. In the first place, votes on contracts are "secret ballots' – which already is undemocratic because workers don't confront each other with what they want and what they are ready to do. But the way the "secret ballot" on contracts is carried out – by contrast to the controls set up when officers are elected by "secret ballot" – gives a big opportunity for shading the contract vote if someone were so inclined. Moreover, the way the vote was announced did nothing to sweep away doubts circulating in many plants: the vote was expressed only in percentages, with no actual numbers and with no breakdown plant by plant.

What happened at GM was pale, however, when compared to Ford. Almost as soon as GM got its concessions, Ford asked for its share. The UAW leadership pushed through the vote at Ford very quickly, bringing in the concessions just before the Christmas-New Year's holiday break. With little time to do it, workers nonetheless circulated information, organized meetings, discussed the question, put out leaflets opposing it and called people to come out and vote. The concessions passed – but by a much closer vote. The announced vote was only 51% for ratification, 49%, against. And this sparked even more questions. At Ford, a number of locals that had voted down the contract released their own vote totals, and some of them were very large "NO" votes, running as high as 90% against the contract. Furthermore, there were some glaring accounts of voting irregularities.

Ford and the UAW leadership might have expected that anger over the vote would have dissipated when workers came back nearly two weeks later on January 2. If so, they were wrong. In fact, there still seems to be opposition in some locals to this contract and to the way it was voted. The opposition has taken various forms, including appeals, petitions, angry discussions in local meetings, postings on web-sites, slogans worn on t-shirts, etc. There continue to be demands that the UAW leadership provide the exact numerical totals, local by local. If the top UAW leadership had nothing to hide, you would imagine they would have done it. They did not.

However, the concessions drive did stall a bit when it came to Chrysler. Starting in early January, UAW leaders made the rounds of Chrysler plants. With workers pointing to Chrysler's big profits for last year, union leaders could only argue that it was necessary to keep to the "pattern," that is, to agree to the Ford and GM concessions. In February, Chrysler's CEO, Tom LaSorda, expressed confidence they would work out the same deal as GM and Ford "within a few days." Yet here we are, two months later, and they still haven't produced something for a vote. It doesn't mean they won't. But both DCX officials and top UAW officials had to be looking back over their shoulders at that Ford vote, knowing that they could get an even bigger "NO" vote at Chrysler.

It's possible that things will remain somewhat quiet at GM, Ford and Chrysler – and maybe even Delphi – until mid-June or later. As a number of journalists have pointed out, there's an issue complicating these negotiations, and that is the UAW convention which is scheduled for early June. The press in Detroit has speculated that GM's CEO Wagoner has been very prudent about his demands so far, and will continue to be – until after the convention, at least – because he doesn't want to make problems for Gettelfinger and other members of the UAW leadership. In any case, what with the activities of SOS and of other militants at Ford and General Motors, as well as at Caterpillar and some other workplaces which have their own grievances with the union leadership, it seems that the UAW convention might be somewhat more lively than usual.

GM's Dilemma – To Bankrupt or Not to Bankrupt?

Just when Delphi went back into court, talking about abrogating the whole union contract, GM dropped its own bombshell: it had arranged to sell off 51% of GMAC (General Motors Acceptance Corporation), its finance arm. The news certainly added to the sense that the domestic auto industry is going down the tubes – even about to disappear, to listen to some commentators.

If we can believe GM's press releases, GMAC is the only profitable part of its business. Some people said that if GM has to sell GMAC, it just goes to show that GM really is in bad shape. Perhaps, but there's a lot about this deal that's questionable.

GM, for example, is selling off the controlling interest in a company whose balance sheet amounts to 320 billion dollars, with a loan portfolio amounting to 186 billion dollars, getting only a total of 14 billion dollars for this deal, counting tax credits and money it is to be paid as auto loans are paid off. And it would have gotten the loan repayments anyway if it had kept GMAC.

Here's another odd fact: this behemoth GMAC has supposedly been bought up by Cerberus – what the press calls a "secretive" capital investment fund – whose capitalization, according to the Wall Street Journal, is only one-tenth as big as GMAC's loan portfolio.

And just to add an interesting sidelight to this whole matter: Cerberus has worked with Citigroup on a number of deals, some, like WorldCom/MCI, highly questionable. And Citigroup, which in reality is putting up most of the money for this deal, is GM's primary bank.

Whatever's going on, we can be sure it has nothing to do with what they say publicly. Just as we have no reason to put any confidence in GM's claims of being in terrible shape.

If GM were in such bad shape, would it reward its executives so well? Last year, for example, even after executives had their income "severely" cut – in order to prove that "everyone must make a sacrifice to save GM," the top five executives together gained over five million dollars, added to the nearly one million shares of stock set aside for them. That topped off a seven-year stretch, when GM's top five executives raked in 287 million dollars in salaries, bonuses, long-term incentives and stock awards. On a yearly average, that amounts to 480 times what an hourly worker makes, even with some overtime thrown in. Or, in the now infamous words of Delphi's Chairman, when he justified outrageous executive pay by a company asking to cut its workers wages by 60%, "there must be huge disparities for what people can expect for mowing a lawn versus managing a big company."

If GM were in bad shape, would multi-billionaire Kirk Kerkorian rush to increase his holdings in General Motors, buying up enough stock to own almost 10% of the company? Has he suddenly become irrational?

Nonetheless, it's not impossible that GM could declare bankruptcy. Some of the biggest companies in the country have gone that route – including not only its spin-off Delphi, but also four of the five biggest airlines in the country, nearly 40 steel companies, not to mention at least six medium-size auto parts plants. In all of these cases, the bankrupt companies continued in business, in one form or another. Their bankruptcies were not aimed at wrapping up a defunct business, but at scrapping union contracts and dumping pension plans into the lap of the Pension Benefit Guarantee Corporation.

Only a few years ago, it would have been unthinkable that a company like GM – the largest auto company in the world – could be a possible candidate for bankruptcy. Even if it were only the second or third biggest, it would have been unthinkable. But today, bankruptcy has become such a routine part of doing business, a weapon in the hands of the bourgeoisie in its fight to reduce the standard of living of the working class, that even GM toys with it.

And GM itself, even while steadfastly denying it has any intention of declaring bankruptcy, has engaged in enough activity to raise the question: finding "mistakes' on its balance sheet three times, and restating its losses for 2005 twice, before finally issuing a statement that its balance sheets for the last three years could not be considered completely accurate. The sale of GMAC could be interpreted as a preliminary move toward bankruptcy, an attempt to shelter GM's financial holdings and its profits.

Maybe GM hopes that the simple threat of bankruptcy will put a halt to any resistance from the workers to any further demands for concessions – and further demands there will be. GM has already said it, talking about the "jobs bank," the program that protects the income of laid-off workers.

Maybe the GMAC sale is nothing but another a case of financial wheeling and dealing on a grand scale.

Whatever's going on, one thing is sure: the biggest thieves in the world expect the working class to cough up the loot for it.

Like capitalists all over the world, GM is trying to increase its profit by reducing the cost of labor, cutting wages, eliminating benefits, hiring temporaries and lower paid contract workers. (Temporaries and contract workers, by the way, are one of the little-noted provisions in the "special attrition" offer.) The money GM expects to gain will not go toward facilitating production – any more than did the 43 billion dollars GM admitted to making in profit between 1994 and 2004 (or the 35 billion Ford made during that same period or the 40 billion Chrysler made). Those profits went to further increase the holdings and the wealth of those who own the biggest companies like GM. Even now, with GM cutting in half the dividend it pays on every share of stock – another supposed "joint sacrifice" – it will still be paying out at a rate that makes GM stock a "good buy," according to the Washington Post.

When times were good, the capitalists took the biggest share of the wealth. Now, when they say that times are bad for them, they are trying to take an even bigger share. The fact that stocks continue to pay out big dividends, that executives continue to get so much money shows that no matter what the situation, the capitalists intend to extract as much as they can – even if they cannibalize the company to do it.

And that is what they want the workers to sacrifice for, these vultures!

The Union and Company Go to Court ... against the Workers

The GM retirees were not allowed to vote on the concessions that reduced their medical care coverage. The only place where they could officially record their "vote" was in a court hearing, organized to put the court's stamp of approval on the deal that GM and UAW leaders had cut. The UAW leadership and GM had gone to court because legally neither of them have the right to change retiree benefits. In response to a pro-forma letter sent out to GM retirees, 1,200 of them waded through all the legalese to file complaints against the deal with the court, and 200 showed up for the hearing to oppose it, many having traveled hundreds of miles to get there.

Instead of an immediate approval by the court, the two parties got an earful from the retirees. One retiree who opposed the plan declared, "I earned my retirement and I expect to have what was promised." Another said, "we sold our youth one hour at a time." Another quoted folk-singer Woody Guthrie: "Some will rob you with a six-gun, some with a fountain pen." A retired benefits rep who had worked on GM's design staff, said "The price, maybe it's not an exorbitant amount. It's just the principle of the thing. They made a promise.... These were supposed to be unalterable." As for the UAW, a retired worker from Flint sent in the following hand written note: "The underhanded way with which the UAW went about getting it ratified shows that, here in the U.S., we no longer know how to hold a fair election."

In answer to the retirees who came to have their say, the attorney for the UAW, who should have been there representing the workers, instead stood up to defend the concessions deal. Among other things, she said, "This is the only hope that there is that GM will be able to continue to survive."

The only hope for GM's survival? What about the retirees' survival?

What a disgusting spectacle to see a representative of the union standing up to repeat every single argument and lie that GM came up with. Someone sent by union leaders to represent the workers put the union squarely 100% on the company's side against the workers. It's in keeping with the long-standing policy of top UAW leaders who systematically have tied the workers to the companies, putting the companies' interests first.

Workers who want to fight can't put their confidence in that policy or in people who stand for it.

"Privileged"? Who's "Privileged"?

At one point in the hearings, the judge actually dared to say that even with higher costs, UAW retirees will enjoy benefits better than virtually any retiree in the United States, except perhaps for some high level executives!

Yes, and so what? Why shouldn't a worker have as good a coverage as a high level executive?

In reality, the judge was only echoing an oft-heard accusation thrown out against auto workers – that they are "privileged," better off than the rest of the working class.

What an outrage ! Why should any worker have to apologize for having a barely decent standard of living, or for having medical care, or for having a pension that means they won't have to live in extreme poverty at the end of their lives? What's "privileged" about that?

The problem is not that auto workers have "privileges"? It's that too many workers are losing the very necessities of life, and too many more never really had them. Today, only 19% of the workforce can expect a defined benefit pension other than Social Security, compared to 35% in 1980. There were 11 million fewer workers who had employer provided medical coverage in 2004 than there were in 2000. The steel industry, for example, has been watching pensions disappear, along with medical coverage for retirees.

Does that mean, as the leaders of the UAW seem to believe, that there is no other perspective for auto workers than to start giving back their wages, their medical coverage and their pensions when obscenely wealthy companies cry poor?

No! Workers will have no possibilities if they don't act to defend themselves.

If workers at any of these companies – Delphi, GM, Ford, Chrysler – were to begin a fight, it might spread to other workers in the auto industry, where every worker is facing the same demands for concessions. And that would be a national event, encouraging still other workers to fight back, gaining back "privileges' for more workers.

Today, there seem to be a few auto workers who believe it's worth making a fight. If they are able to bring other workers with them, they could ignite a fight that goes far beyond themselves.

In any case, someone has to begin.