The Spark

the Voice of
The Communist League of Revolutionary Workers–Internationalist

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

Chrysler for Sale?:
The Latest "Restructuring" Attack on the Whole Working Class

Apr 16, 2007

Last February, Dieter Zetsche announced that DaimlerChrysler Corporation (DCX) was putting Chrysler up for sale. A small array of speculators, buyout artists and private equity companies began to circle Chrysler. At DCX’s annual shareholders’ meeting, one after the other, the big shareholders clamored for DCX to cut Chrysler loose, saying they considered it a drag on the parent company’s profits. Never mind that in years past, the outsized profits generated at Chrysler had buttressed DCX’s balance sheet.

Even if Chrysler is sold, DCX executives said that the two companies would continue to share purchasing, components and engineering. Similarly, when GM and Ford spun off Delphi and Visteon, the companies remained tied root and branch. In other words, any sale would be one more financial maneuver and manipulation.

Putting Chrysler on the chopping block marks another chapter in the endlessly chaotic corporate "restructuring" of the auto industry. Companies have been gobbling each other up, spitting each other out, and then merging all over again, accompanied by a constant barrage of plant closings and shifts in production.

What they all have in common is that the owners took a bigger bite out of the workforce at each step. Each change or threatened change in ownership has been used as a pretext to lay off more workers, squeeze out more productivity, degrade working conditions further, outsource, slash wages and benefits.

The fact that the same thing might happen at Chrysler quickly ratcheted up the pressure on all auto workers, not only at Chrysler. It is all part of an enormous campaign to intimidate workers only a few months before the negotiations on the national auto contract are about to begin.

The Offensive to Cut Wages

In fact, the last national autoworkers contract, negotiated in 2003, had in many ways set the stage for this latest corporate offensive. In that contract, the UAW leadership agreed to a permanent two-tier wage system at both Delphi and Visteon, which GM and Ford had spun off as independent parts makers a few years before.

For more than two decades the auto companies have been carrying out an offensive to slash wages and benefits. The company that had taken this the farthest was Chrysler, the smallest of the Big 3. Chrysler had sold-off or outsourced almost all of the work that had been done previously by its parts plants. Thus, work that had been done at the prevailing UAW wage was now done by workers at companies that pay low wages, few benefits and that are often non-union.

Chrysler had also taken the lead in beginning to slash wages at its assembly plants by getting the UAW leaders to agree to two pilot programs to allow the company to bring in low- wage labor. At Chrysler’s Belvidere Assembly, an entire shift was begun with temporary workers, earning much lower wages with few benefits and fewer rights. At the Toledo Jeep plant, the work in the body shop, paint shop and chassis assembly was farmed out to subcontractors, but done at the site.

GM and Ford began to cut the wages at their parts plants. In 1999, GM had already cut Delphi loose, and a year later, Ford had already carved out Visteon. But their workforces were still earning wages and benefits comparable to GM and Ford. So in the 2003 contract, the UAW leadership agreed to a permanent two-tier wage structure.

When it was put up for ratification, the workers at Delphi clearly opposed it. To get it passed, the UAW bureaucracy carried out a couple of maneuvers. First, the UAW leaders tried to hide the full extent of the wage cut for the second tier, saying only that it would be negotiated later. Then the UAW leaders folded the Delphi ratification votes in with those of the GM workers. The GM contract didn’t have the same permanent two-tier nor other overt takeaways as Delphi, and there was much less opposition to the contract. The Delphi workers almost certainly voted the contract down. But since their votes were folded in with the GM vote, the UAW officials announced that the Delphi contract passed. Not until six months after the vote did the UAW leaders finally announce that new hires would permanently make only $14 per hour, half of what the rest of the Delphi workers were making.

So, the Delphi and Visteon managers had their new permanent low-wage second tier handed to them, gift-wrapped thanks to their partners in the UAW bureaucracy. There was only one problem for Delphi and Visteon: they were doing little hiring, and so they couldn’t take advantage of it—yet.

Taking Aim at Retiree Health Benefits

In the summer of 2005, the auto companies took their next step, a big new intimidation campaign.

First Delphi declared that it was on the verge of bankruptcy and it needed immediate permanent wage and benefit cuts from all workers—not only new hires. Delphi threatened that if it didn’t get these cuts, the company would declare bankruptcy, get a bankruptcy judge to throw the entire UAW contract out, and cut the wages unilaterally.

Right behind Delphi’s announcement, came GM, where there was also a lot of talk about possible bankruptcy. Ford and Visteon waited in the wings.

The auto companies blamed everything on what they called "uncompetitive" labor costs. Your medical expenses, your pension costs were dragging the companies down like a ball and chain, they told the workers.

Of course, what the auto companies didn’t admit is that their health care costs are tax deductible. It means that taxpayers repay the auto companies for a big part of that cost. Another thing was that the company already takes out $1.30 per hour in diversions from COLA, or about $2,700 per year (without overtime)—money supposedly to pay for health benefits, money that goes straight into the company’s pocket. In other words, the workers are paying two, three, four times for the same benefits.

As for all those "legacy costs’—those pension benefits are part of the overall pay package, for which workers accepted lower wages and other trade-offs. When the companies say that these "legacy costs," as they now call them, are too high, the companies are admitting they did not put that money aside year after year as they were supposed to do—in other words, they stole the money. If the companies were held to the same standard as everyone else, they would be forced to repay the money and every top auto executive who took the money would be charged with contract malfeasance and fraud and carted off to prison for a long time.

Of course, the UAW leadership did not say any of that. Instead, they made a blustery show of refusing to accede to Delphi’s demands and let the bombardment of lies from the news media continue for a couple of months. Then in October 2005, Delphi went into bankruptcy court, and on that very same day, UAW leaders announced that they had agreed to re-open the contract at GM. Ten days later, the two sides announced that they had reached an agreement. There were some pay cuts for active workers. But the main target was retiree health benefits, which were hit by higher co-pays, deductibles and other out-of-pocket expenses.

Almost as soon as the new agreement was announced, resistance to the concessions among auto workers began to stiffen. The UAW leadership wasted no time in ramming through a ratification vote at GM. But the vote against the concessions was already high as information about the onerous terms of the deal began to leak out. Then the UAW reopened the contract at Ford and scheduled the ratification vote for the week before the Christmas shutdown. The re-opened contract barely squeaked by. The UAW leadership claimed that the margin in favor was 50.1% to 49.9%. And plenty of stories circulated that the vote was far from clean at many locals—which meant that the workers had most likely voted the concessions down.

There was every indication that no matter how much of a push the UAW leadership might make, any vote at Chrysler surely would have gone down to a big defeat. The UAW leadership didn’t even try.

The concessions cost the workers and retirees a lot. GM claimed that it cut its medical expenses by three billion dollars per year, before taxes—and also gained one billion dollars more in cash per year—with Ford gaining similarly on the backs of its retirees and active workers.

But the auto companies also got something much more important, a precedent. For the very first time, retiree health benefits, which were supposed to be guaranteed "for life," were reduced. This was important because it opened the way for the companies to come back in the next contract and try to cut retiree medical benefits much, much more.

Pushing Out Workers and Outsourcing Wages

After gaining their concessions in November and December 2005, the auto companies quickly shifted gears. In March 2006, GM and Delphi announced an accord with the UAW leadership that offered buyouts and early retirement packages that would allow the companies to shed tens of thousands of workers. The deal was accompanied by all the usual scare stories about how auto companies were about to go under.

It was sold as an offer that the workers couldn’t refuse: agree to get out now with something or risk being pushed out later with nothing. Similar deals were made later in the year at Ford and Visteon and this year at Chrysler. According to the UAW and the auto companies, 81,000 UAW workers in the Big 3 agreed to take the "buyouts," "the largest exodus from a single industry in decades," wrote the New York Times (April 1). Those workers were pushed out.

This opened up big possibilities for the auto companies to introduce a two-tier, three-tier or even four-tier workforce. First of all, Delphi and Visteon began to shed not just thousands of workers who took the buyout, but thousands more, who were transferred back to GM and Ford to fill the positions of workers at those companies who had taken the buyouts.

At Delphi and Visteon, the exodus from the buyouts, early retirements and transfers opened the door for the companies to take enormous advantage of the permanent two-tier wage that had been negotiated in the last national contract. Delphi and Visteon began to bring in new hires earning $14 per hour.

But GM, Ford and Chrysler, where positions were also opening up, did not have the same Delphi/Visteon contract provision for second tier, $14 per hour wages. So as a part of the buyout agreement, the UAW granted the Big 3 the right to hire temporary workers, hired at a permanently lower rate and minimal benefits—for up to two years! The companies threw the UAW apparatus a bone—dues money from the temps. But making the temps UAW members did not mean they had rights on the shop floor. Nor did they have permanent positions. They could be fired on a dime.

Looking for other ways to take advantage of their position, the Big 3 came back around and negotiated new local agreements, dubbed competitive operating agreements (COA"s), often threatening to move work out or close any plants that did not go along. As a part of the COA"s, the auto companies included the right to use subcontracting companies to fill many job classifications. In some Ford and Chrysler plants, workers hired by another company were also brought in to run the same jobs, using the same equipment, side by side with the regular workers—but being paid half the regular wages! Often, workers who had taken the buyout, were offered the same jobs they had worked before, but now of course for only half their old wage.

The COA’s also contained other goodies for the companies, including a new and more punitive attendance policy and greater latitude in scheduling workers’ shifts, letting the companies squeeze more production out of fewer plants. For example, at Ford’s new Dearborn Truck plant, the company announced that it was going from two to three shifts, working everyone four days a week, 10 hours per day. For the third shift, the schedule is to rotate workers two days on days, and two days on afternoons every week—a surefire way to destroy both the health and safety of the workforce. All this with the agreement of the union leadership. And there will be no overtime pay for working past eight hours, or for work on weekends if it is during the regularly scheduled ten-hour shift.

The Company-Union Partnership

It’s not new that the top UAW leaders agreed to concessions, that is, givebacks of wages, benefits and rights on the job that had been won in the past. Almost 30 years ago, the auto companies pushed the same kinds of scare stories as today, with the UAW leadership repeating the same arguments as the auto companies, and playing the same kinds of games and maneuvers against the workers to ram concessions through.

It began at Chrysler in 1980. Chrysler had been losing money, taking on big debts and threatening bankruptcy. The big banks said that they wouldn’t loan any more money to Chrysler, unless the U.S. government guaranteed their loans. The Carter administration and Congress said that the only way the federal government would guarantee the loans was if the Chrysler workers gave up big concessions. When the UAW leadership agreed to re-open the contract and negotiate concessions, workers reacted in opposition. But under enormous pressure from the Carter administration, Congress and the big banks, the UAW bureaucracy was able to ram the concessions through.

Once that happened, there was no turning back. Within two years, Chrysler returned to the UAW three separate times for more concessions. The workers gave up a good deal of their cost-of-living protection, automatic three percent annual pay increases and nine yearly holidays. Worse, half the Chrysler workforce was laid off, permanently for most.

This corresponded to attacks in other parts of the working class. The most spectacular event was when the federal government broke the air traffic controllers’ strike. But the rapid collapse of the UAW, the union that appeared to be the most powerful in the country, proved that the unions could be brought to give back gains registered in their contract. One sector of the working class, the coal miners, had successfully beaten back concessions in the late 1970s, through a series of enormous wildcats and strikes in which the miners successfully took on not just the coal companies, but the government and often their own union officials as well. But the miners’ example was never successfully taken up by other workers. The few strikes in other industries remained isolated and blocked.

So the UAW capitulation became the new pattern. Companies didn’t even have to claim that they were going broke in order to take concessions. In 1982, Ford and GM pushed the UAW to an early negotiated contract, both of which gained major concessions. It was the final blow. Concessions could be demanded and given up, even to openly profitable companies.

This marked a big permanent shift. Concessions became the order of the day in good times and bad. Over the next quarter-century, the auto companies chipped away at pay and benefits. Concessions were supposed to make the companies more competitive and save jobs.

To convince the workers that concessions were necessary, the UAW bureaucracy argued that the workers couldn’t keep their jobs unless the companies prospered—in other words, the workers and the bosses have common interests—and that a partnership with the company would keep jobs. So the workers took the concessions, giving the companies a free hand to cut an enormous number of jobs.

And cut they did. In 1979, there were 725,000 UAW workers at the Big 3 plus American Motors. Last year, before the buyouts hit, the number had shrunk to less than 295,000 auto workers at the Big 3, including Delphi and Visteon, a loss of more than 430,000 jobs.

Certainly, a part of the job loss came from speed-up and big increases in productivity. But the reality was that the biggest proportion of the jobs were not really cut. They were merely shifted to companies, many non-union, that paid much lower wages and benefits.

The auto companies and their wealthy stockholders made out like bandits.

Market Share and Profits

All the concessions from the auto workers made the 1980s and 1990s the most profitable in the auto companies’ history. But the companies did not plow back all the money they got from this into producing more cars. On the contrary, the companies followed the typical strategy of monopolies: they slashed production, restricted supply and raised prices. Price increases on American cars rose so fast that the term "sticker shock" was coined to describe the reaction of car buyers at the showroom. Many models of cars and trucks sometimes even sold above sticker prices.

Over the last three decades, the U.S. population has been bombarded by stories about how the "once mighty" GM, Ford and Chrysler retreated over and over again before the competition from Japan, South Korea and Europe. The message was supposed to be that the U.S. companies are no longer competitive, that they have succumbed to the forces of what is now called "globalization."

But the reality was that the U.S. auto manufacturers consistently concentrated on building only the most profitable lines of cars and trucks. Starting in the late 1970s, the Big 3 clearly decided to cede the market for small cars to foreign manufacturers because the profit margins on small cars weren’t as high as what they got by putting their money elsewhere, whether it was in trucks or in buying up other companies or using their finance companies to get into speculation. The Big 3 even stuck by this decision when gasoline prices increased rapidly and the market for small cars expanded.

Then in the 1990s, the U.S. auto companies began to cede much of the consumer market for mid-sized family cars. Of course, there were a few exceptions. In 1988, Ford had a big hit when it came out with its Taurus and Sable models. But as the Japanese manufacturers continued to update their mid-size cars, Ford didn’t bother to invest in updating its models. Instead, Ford milked them for all the profits it could. The Big 3 depend increasingly on the big fleet operators, car rental companies, taxi and limo companies, private, governmental and police agencies, for the sales of their mid-size cars.

Why bother to waste investment on producing low-margin cars, when the U.S. manufacturers could concentrate on making big SUV’s and trucks, which produce enormous profit margins—that is, about $15,000 on each SUV sold? The Big 3 car companies rode this profit bonanza as far as they possibly could—until the gasoline price hikes of the last few years began to take a bigger bite out of their sales.

So, what did the auto companies do when truck and SUV sales began to decline precipitously? They announced that they were also going to stop producing cars for the big fleet sales operators, one of the last big markets for their cars. Once again, the car companies had decided that there were more profitable investment opportunities for them elsewhere rather than car production. Their precipitous sales drop was not exactly a surprise, since they had deliberately abandoned one sector after another of the car market.

Over the years, the U.S. auto companies repeated the pattern. They didn’t lose market share. They gave it away, in order to maximize their profits.

The Dividend also Rises

Since the early 1980s, one of the biggest problems that the auto companies have faced has been what to do with all the cash that they are constantly accumulating.

The first thing they did was to buy up all or part of other auto companies. Ford bought up most of Mazda, and later on all of Jaguar, Land Rover, Aston-Martin and Volvo. Chrysler did the same with American Motors and Mitsubishi, and GM bought all or part of Isuzu, Suzuki, Subaru, Daewoo, Fiat, and Saab. It should be noted in passing that the U.S. auto makers sometimes imported those cars and sold them under their own nameplate—even as they were claiming that imports were such a threat.

Buying those companies only took care of some of the cash that was accumulating. So the auto companies went on to buy companies in other industries and went into other businesses. Take GM. In the 1980s, GM bought a couple of other major companies, Hughes Aircraft and Electronic Data Systems, paying 7.5 billion dollars in total. GM later sold those companies. At the same time, GM used its finance arm, GMAC, which had originally been set up to provide credit on autos, to construct an enormous financial and real estate empire. In 1982, a GMAC subsidiary started a separate home mortgage business that today is the seventh largest originator of home mortgages in the U.S., producing 162 billion dollars in loan origination volume. It is also the third largest seller of mortgage-backed securities with issuance of 73 billion dollars., which advertises a lot on radio and TV, is a GMAC company. In 1999, a subsidiary of GMAC paid 1.8 billion dollars to buy the commercial finance unit of the Bank of New York, putting GMAC into the commercial real estate business. There is also the GMAC Insurance Group, which owns eight property and casualty companies.

Ford and Chrysler did similar things, taking their profits from auto and using them to buy up military contractors, agricultural implement companies, banks, finance companies, auto rental companies.

Even after these purchases, these companies were still literally "oozing cash," as stock analysts said. The auto companies returned that money right back to their stockholders and top managers through increased dividends and stock buyback programs. In 1983, barely a year after the big concession contracts with the UAW were signed, the auto companies began raising their dividends regularly. In one four-year period in the mid-1980s, for example, Ford increased its dividends nine times. As a result, the dividends on auto companies’ stocks consistently earned stockholders a return of five or six percent, which was considered "robust" by Wall Street’s standards.

The increase in dividends only slowed the steady increase of billions of dollars in the auto companies’ coffers. So the companies regularly bought up big chunks of their own stock, thus boosting the value of the stock that remained in the hands of their shareholders. All through the 1980s and 1990s, all three auto companies regularly instituted stock buyback programs, usually in chunks of one, two or three billion dollars at a time.

Yet, the auto business was so profitable in the 1990s, billions more dollars kept piling up. In 1998, Daimler-Benz tried to put its hands on some of this vast wealth by buying up Chrysler, paying 37 billion dollars, and thus enriching speculator Kirk Kerkorian, a big Chrysler stockholder, by 2.7 billion dollars. Meanwhile in the late 1990s, GM bought back 18 billion dollars of its own stock. As for Ford, in April 2000 the company issued a special dividend, $20 per share, in a deal that was said to be worth over 20 billion dollars.

In 2001, at the leading edge of a new recession and auto sales downturn, Maryann Keller, a "veteran auto analyst" who also sits on the board of directors of a couple of independent parts companies, looked back at what the auto companies had accomplished over the last few years: "Between 1994 and 1999 General Motors Corp., Ford Motor Co. and Chrysler Corp. posted cumulative net income of more than $92 billion. This staggering sum reflected a dream market... Truck sales boomed; incentives dropped to an average of less than $500 per vehicle. Balance sheets carried record cash and diminishing debts...."

And what did all this buy? Says Keller, "Billions were spent each year in stock repurchase programs.... The programs merely provided liquidity for institutional investors when they were ready to sell their holdings. Instead of depressing stock prices when they put big blocks of stock up for sale, they were able to liquidate in an orderly manner by selling the auto company."

All of the sacrifices by the auto workers enriched a tiny group of investors, who grew even more fabulously rich by bleeding the companies of the wealth that the workers produced.

Obviously, the announced sale of Chrysler by its parent, DCX, the current buying and selling of the big auto parts companies by private equity and hedge funds—all this indicates how much the big financial interests are continuing to speculate.

What do these big investors intend to get out of these companies? "Private-equity investors see in Detroit’s troubled component suppliers and struggling auto giants a way to get access to enormous flows of cash...—wrote the Wall Street Journal (March 29).

In other words, the capitalists intend to steal much, much more from the autoworkers.

Tall Tales from Very Big Companies

Over the last couple of years, hardly a day has gone by when there isn’t a sob story somewhere about how badly the auto companies are doing. Pundits, experts, economists, politicians—and, yes, labor leaders—wring their hands over GM’s stated 10.4 billion dollar loss in 2005 and Ford’s 12.7 billion dollar loss in 2006.

But these companies’ own financial reports tell a very different story. First of all, almost three-quarters of their supposed "loss’ does not come from operations. Instead, it is an imaginary number. First, the car companies estimate how much the buyouts, plant closings and increased pension payouts will cost them for decades to come. Second, they estimate—or take a wild guess—about how much profits they won’t make from plants that they are closing. In other words, their estimate of loss of potential profits from plant closings is also counted towards the loss. Then they add it all together, and come up with a very big lump sum, which they call their "loss."

These companies have every reason to declare as big a "loss’ as possible. Because companies use their losses to reduce the taxes on future profits. So the bigger the "loss," the more valuable it is to these companies!

Sometimes the auto companies openly admit that they are manipulating their financial statements. In September 2006, DaimlerChrysler’s Dieter Zetsche decried the fact that Chrysler couldn’t get the same health care concessions as the UAW leadership had pushed upon the workers at Ford and GM. Claimed Zetsche, the UAW was penalizing Chrysler, which had reported 12 straight quarters of profits, for not losing money. "This is a very strange position that we should first lose 10 billion before we have the same as Ford and GM," Zetsche said. "We will not stop before we get the results we need," he vowed. Like clockwork, less than two months later, the Chrysler finance department succeeded in closing the "profit-loss gap" with GM and Ford when it reported a surprising quarterly loss of 1.4 billion dollars.

Make no mistake: these gargantuan companies remain—to say the least—extremely profitable and rich. By the fourth quarter of 2006, after GM had taken those big write-offs from their buyouts and plant closings, it reported a profit of almost a billion dollars. It should be added that despite all the talk about how Toyota is about to displace GM from its longtime perch as the top auto producer in the world, GM did manage to eke out production of a "mere" 9.1 million vehicles worldwide in 2006, and its revenues from these sales increased from 195 billion dollars in 2005 to 207 billion dollars in 2006—a record!

When GM released these figures, the news media expressed concern—because they looked too good! The headline in the Detroit News (March 7) stated the automaker’s dilemma: "Success May Trip up GM in Talks—as Turnaround Gains Traction, Automaker May Find it Harder to Demand Givebacks from UAW."

In other words, the publisher and editors at the Detroit News are worried that if GM’s profits and sales recover too quickly, it will make the Detroit News"s job that much harder—to try to scare workers into accepting big concessions this fall.

Partnership versus Militancy

It is ironic that it is the auto workers who have practically played dead over all this time. For it is the auto workers and the union they built who have some of the richest history, heritage and traditions of militant struggle—even though, from the start, the top union officials sought to form partnerships with the auto companies and restrict and contain even those first struggles.

Faced with the auto companies’ concession drive that started in the late 1970s, the policy of the UAW leaders has been to work with the companies in an overt partnership. Of course, the partnership idea was sold to the workers under the guise that the workers had the same interests as "their" company, that if the workers accepted some sacrifices now, it would pay off down the road, because it would make "their" company more competitive, and that when the company did well, then the workers would do well—or at least keep their jobs.

The balance sheet of this "partnership" could not be more clear: record profits for the auto companies, and an endless downward slide for the workers, a real race to the bottom.

No, the workers’ interests are not the same as those of their bosses. They are the exact opposite. The more the bosses exploit their workforce, the higher their profits. The more wealth that the companies accumulate, the greater the poverty and misery that they create.

Of course, what is going on in auto is not an exception. It is only one of many striking examples of what is going on in every industry in every city and town in this country. All workers are facing the same situation: a worsening offensive by capital that is enriching itself by taking progressively more and more, resulting in a social and economic disaster for the working population.

There is no answer to that offensive if workers let themselves be pulled into a partnership with the very bosses who are attacking them. There is no answer to the worsening situation until workers begin to make a fight against it. Who can say which group of workers will begin this fight? Auto workers certainly have every reason to start it. But wherever it starts, that fight can spread to other sectors of the workforce because all workers face the same attacks. And when fights begin to spread, the relationship of forces between the workers and the bosses will begin to change in the workers’ favor.

Just as in the darkest days of the past, when it seemed the working class would never gather its forces for a fight, but then did, so today the workers can do the same thing. The workers can begin to impose their own interests, that is, the interests of the vast majority of the population against a ravenous and destructive capitalist class. When they do, they will put an end to all this talk of "partnership" with the boss.