Oct 20, 2008
After months of speculation that one or more of the auto companies, particularly GM or Chrysler, might declare bankruptcy, the terrain shifted when the New York Times and the Wall Street Journal both reported GM might be cutting a deal with Cerberus, Chrysler's private equity owner. The Journal speculated that GM would get Chrysler and some unnamed amount of cash, while Cerberus would get GM's stake in GMAC, giving Cerberus full ownership of GM's finance company. The Times reported Cerberus might simply give up Chrysler, getting GM stock in exchange.
Just before the latest rumor appeared, GM's stock had sunk to just over $4 a share, its lowest point since 1949, and less than 5% of its 2000 selling price, which was nearly $94 a share. Its bond rating had sunk to junk bond status. And the market capitalization of GM, the biggest automobile company in the world, stood at only 3.9 billion dollars, little more than half that of Mattel, the maker of toy cars and trucks!
Neither of these rumors surprised the market very much – certainly not bankruptcy, which doesn't mean the end of companies. As the airlines, steel companies, and auto parts companies have all shown, bankruptcy is a much-used weapon in the arsenal of big companies as they carry out a war against the working class.
Daniel Howes, a Detroit News auto analyst, explained: "GM, Ford and, presumably, Chrysler LLC could use the courts to radically restructure their U.S. operations even more than they already have. Wages, benefits and work rules in union contracts would be streamlined, brands could be killed and dealer networks rationalized; supplier contracts could be renegotiated and the network of parts makers winnowed."
In the current situation – with credit markets frozen, and the economy rushing headlong into a serious recession or worse – the "merger" with Chrysler might give GM the same weapons, without the legal entanglements involved in bankruptcy. And it could give GM a quick way to get rid of competition for some of its most profitable models. For example, GM's Chevy Silverado pick-up competes with Chrysler's Dodge Ram; GM's three rear-drive sedans compete with two models Chrysler puts out. Ownership of Chrysler would allow GM to cut out the competition, brutally bringing the industry's capacity more in line with sales.
Sales have certainly been dismal this year, with September U.S. sales the worst yet. Total sales for the month fell below a million for the first time since February of 1993. And every company was hit hard: Nissan's U.S. sales were down 37% from last year; Ford, down 35%; Chrysler, 32%; Toyota, 32%, and Honda, 24%. GM, the focus of all the speculation, ironically posted the "best" results, a decline from a year ago of "only" 16%. J.D. Powers, which tracks the auto industry, issued a report anticipating an "outright collapse" in the global motor vehicle market in 2009.
Grant Thornton Corporate Advisory and Restructuring Services recently advised the auto companies that 3,800 dealerships, almost one in five – with a total of about 190,000 employees – should be closed to maintain the per dealer sales levels of 2007. The merger could allow GM, in Howes' words, to "rationalize" dealer networks, taking a broad ax to the Chrysler network.
Private equity firm Cerberus, on its side, might well want to dump Chrysler, an auto company it had bought in order to resell for a profit – something it can't do easily today, with credit markets frozen.
Whatever action the companies take – a bankruptcy of GM, Ford or Chrysler, a GM-Cerberus-Chrysler deal, a merger deal with another auto company like Nissan, or simply a continuation of the current "restructuring" – it will only add to the disaster already produced by the severe restructuring already carried out by the auto industry over the last few decades. With job losses and wage cuts mounting, impacting all those others whose jobs are dependent directly or indirectly on the auto industry, laying waste to whole cities and towns in Michigan, Ohio and Indiana, the auto-producing region has already been suffering through its own recession for most of the past five years. And now, faced with an ever growing crisis, all the companies are sure to go on the offensive, attempting to make the workers pay to bail them out.
The workers have every reason to respond, in the broadest possible fight, using all the weapons at their disposal, to make sure that they do not pay the cost of this crisis. They have already paid too much.
But responding militantly was the furthest thing from the mind of the union leadership. Listen to UAW President Ron Gettelfinger, who uttered only a few timid remarks: "I personally would not want to see anything if it would result in a consolidation. That would mean the elimination of additional jobs." But – as though he had no idea that the elimination of jobs was exactly the point – he hastened to add: "Until we get into an actual discussion, we just can't speculate what's going to happen. We have to know what the situation is and then deal with it. We"ve done a lot of things to help all of these companies survive. That's the one issue I"m ready to debate with anybody."
No debate about it: for decades, going back to the Chrysler concessions of 1980, which opened a new epoch for auto workers in this country, the UAW leadership has been peddling this lie that the workers must sacrifice in order to ensure their company's survival, so they can protect their own jobs. It's been, in fact, the main axis of union policy going back until 1980. But Ford, GM and Chrysler – which were once called the Big 3 – have hemorrhaged jobs.
In the whole auto industry, including but not just limited to the Big 3, there were just over a million workers in 1979. In 2007, there were about 640,000, a decline of 1/3. But, overall, U.S. production increased, going from 10.8 million vehicles in 1979, to over 12 million in 2007, resulting in a very big increase in productivity. From 1987 to 2006, for example, the Labor Department's productivity index – measuring output per hour – went up by 119% in the assembly plants and 83% in the parts plants. The simple fact is that the whole auto industry has lost jobs due to rapidly expanding productivity.
The loss of Big 3 jobs in that same time is much greater: in 1979, there were about 720,000 hourly workers at GM, Ford or Chrysler. In 2007, there were about 180,000. In addition to productivity, the shift to imports and to the transplants has played a role in this drastic reduction in jobs. But the biggest change – the real "restructuring" of the auto industry – has been the move of production out of plants owned by the big companies into those run by contractors, sub-contractors and suppliers – what used to be called the "independent parts suppliers." And with this shift has come a huge decrease in wages.
The independents existed long before 1979. In fact, in a much earlier period, many of them had simply been gobbled up by the Big 3, and turned into "in-house" producers in the GM, Ford and Chrysler empires, Fisher Body being only the most well-known example. A good share of the companies that remained independent paid lower wages, but the gap in the 1970s was not nearly so big as today. And the independent parts suppliers put out a very much smaller share of parts production than they do today, only about 25%.
Starting in the late 1970s, the Big 3 began seriously to shift production out of their own parts-making operations into the so-called "independent" parts-makers. Chrysler made most of the earliest moves, shifting some of its stamping operations to existing companies or even helping to set them up, providing them with its own presses. Over a number of years, Chrysler gradually farmed out its glass-making operations, which the UAW leadership did not oppose so long as they went to low-wage companies that accepted the union. That didn't stop Chrysler from sending most of it, over the years, to Guardian Glass and other anti-union outfits. In the case of the stamping or glass plants, the suppliers paid wages about half those earned at a Chrysler plant which did essentially, or even exactly, the same work.
In 1982, Ford transferred its steel-making operation into a wholly-owned subsidiary, Rouge Steel, only to threaten repeatedly to get rid of it. Finally, in 1989, Ford spun it off into an independent company – in which Ford retained an equity position and Ford executives were investors. Rouge Steel declared bankruptcy in 2003, only to be bought up still again. With each and every twist, the UAW leadership used the threats and changes to help the company exact more concessions from the workers.
The big, obvious move came when Chrysler moved its parts operations into Acustar, calling it an "independent" subsidiary, which it then prepared to sell as a whole. Faced with a lot of opposition in its plants, Chrysler let the union leadership announce in 1988 that the company had backed off the proposal to sell Acustar, although it would sell four plants. Chrysler continued quietly to sell off or close almost all the Acustar plants over the next five year period, and Acustar died a slow and unnoticed death.
GM and Ford moved to catch up with Chrysler. In 1992, GM proposed to sell 18 of its parts plants. Some were sold off, some shut down. Then in 1994, five GM plants were bought up by a group of investors, headed by a former Chrysler vice president, and renamed American Axle Manufacturing. In 1994, GM formed its own parts subsidiary, Delphi, keeping it as a unit of GM for five years, during which time it sold off or closed the majority of the plants making up the subsidiary, finally spinning off the remnants as an independent company in 1999, with 55,000 workers.
In the mid-1990s, Ford carried out similar operations, pushing some of its work over to Lear, which then quickly reorganized production to become a company specializing in all the parts of a vehicle interior, letting Ford effectively eliminate most of that production from its own plants. In 1997, Ford grouped most of its remaining parts plants into Visteon, an internal Ford division, spinning it off as an independent company in 2000, with 24,000 workers. "Independent" they may have been, but Visteon and Lear both built new headquarters buildings right in Ford's own corner of Dearborn, Michigan, adjacent to all the Ford headquarters buildings.
As soon as Delphi and Visteon were spun off and Lear got all that vehicle interior work, all three acted to get rid of plants and workers. They were to become conduits for moving work out of the Big 3 plants.
The union feebly protested these moves, obtaining in every contract promises from the companies to restrict "outsourcing," as well as promises to use suppliers which were "good corporate citizens," that is, had a "positive relationship with the UAW," as they put it in the 1996 Chrysler contract. None of this stopped the draining of jobs from GM, Ford and Chrysler, nor the rapid decrease in union membership in the auto industry. To give just a rough idea of that decline: the UAW lost over 2/3 of its members between 1979 and 2007, going from 1,528,000 down to 465,000.
Whatever amount of parts work has gone overseas, the biggest amount has gone into the U.S. parts industry, which is divided into a vast multitude of small plants and companies – combining, breaking apart, declaring bankruptcy, coming out of bankruptcy, getting bought up, buying up someone else, and on and on and on. In 2003, the Federal Reserve Bank of Chicago found that there were 3,416 independent parts plants in the U.S. alone, the vast majority of them owned by very small companies, producing not directly for the auto assemblers, but for other parts plants in the chain leading up to the assembly plants.
Just as an example of the tidal wave that has gushed through the parts industry, look at the Machining and Forge plant in New Castle, Indiana. For 62 years, from 1925 to 1987, it belonged to Chrysler. In 1987, it became an Acustar plant; went back to Chrysler in 1989, and then became part of a joint venture with Metaldyne in 2002, which itself had been formed out of a joint venture between Masco Tech, Simpson Industries and Global Metal Technologies – which itself had been separated from Dana Corporation when Dana went bankrupt. The workers in each of these companies faced wage and/or benefit cuts with every change in ownership.
The end result of all this is an enormous transfer of work and employment from high- wage Big 3 plants to much lower wage suppliers. In the early 1970s, only about 25% of parts employment was in plants run by the independent parts suppliers. A study put out by the UAW Research Department in 2001 estimated that after the recession of the early 1980s – during which this transfer really took off – about 40% of U.S. parts production had gone to the independent suppliers, increasing to 50% in the early 1990s and to 60% in 2000, not counting Delphi and Visteon. The gap after Delphi and Visteon were spun off has grown larger still, with some estimates putting 70% or more of U.S. parts production now done by the suppliers.
Not only has this manic merry-go-round severely reduced the number of better-paying "Big 3" jobs from year to year; it also produced a loss of jobs at the parts plants themselves. In the Midwest parts plants, 128,000 jobs were lost from 2000 to 2006 alone, 26% of the total workforce. Most of those plants produce for Ford, GM and Chrysler. But even in the South, where much of the production is aimed at the "transplants," whose production had been growing, 53,000 jobs were lost, 15% of the total. And these job cuts came before the big drop in sales.
Cutting labor costs by shipping much of their own production out, Delphi, Visteon and Lear then moved to reduce wages in their own plants, often by establishing two-tier wage scales for workers newly hired into the plants. In 2000, American Axle cut new hire wages nearly in half at two of its plants. In 2004, it extended the cuts to its other plants, while Delphi and Visteon imposed two-tier wages for new hires in all of their plants. In these cases, as is true in almost every situation where a two-or-more-tier wage scale has been accepted by the union, union leaders sold these deals as a way that current workers could protect their own wages and jobs – a pretense which soon proved to be a hollow lie. In 2007, Delphi moved to cut the wages of the older workers roughly down to the new hire rate. In 2008, American Axle did the same thing.
Delphi, Visteon and American Axle had barely wedged open the door to lower wage rates before GM, Ford and Chrysler stepped through. In 2007, the UAW leadership helped the three companies impose a contract containing two-tier wages for new hires.
In fact, there already had been two or even three tiers in these plants, as the union increasingly accepted the "outsourcing" of jobs to low-wage suppliers who carried out the work inside the same plants. For example, Chrysler's Jeep complex in Toledo was set up with three different suppliers running different sections of the main assembly plant, paying much lower wages. Inside Ford's Dearborn Truck Plant, there were lower paid "temporary workers' and lower-paid workers hired by a sub-contractor working alongside the regular Ford workers. At Chrysler's Belvidere Assembly plant, a whole shift was hired, doing exactly the same work as the other two shifts, but at a lower wage rate. And the GEMA plant set up by Chrysler, Mitsubishi and Hyundai in 2004 in Dundee Michigan, collapsed all classifications, including the skilled trades into one catch-all classification, which paid lower than production rates in the regular plants.
But with the 2007 contract, it became official: wages and benefits for new hires throughout Ford, GM and Chrysler would be at a much lower rate, reducing the companies' labor costs for new hires to less than one third the existing cost – or so a GM spokesperson bragged in a phone call to Wall Street analysts right after the contract was signed.
It was obvious, with that "incentive" given to the three companies, that they would try to hire the new lower paid workers – even in the midst of a recession like the current one. And GM did it, putting on a whole third shift, at the lower wages, at Lordstown, Ohio, even while cutting jobs at other Ohio plants.
The auto companies are not waiting for things to take their course, not especially in the midst of a brutal sales drop that means they are laying off workers, not hiring them. At the beginning of 2008, all three made a special effort to get workers in their plants to take buyouts or early retirements. GM offered the "deal" to all of its 74,000 UAW-represented workers; Ford offered it to all 54,000; and Chrysler offered it to 21,000 out of its total 45,000 work force. Unable to get a big enough response, they offered the deals again or extended them. Management at Ford's Rouge complex recently called in higher seniority workers, forcing them to have a mandatory meeting with their supervisor, then go to the union hall to listen to a pitch about taking a buyout or retirement, using the union to help twist their arms – just another way to ensure the "survival" of the company! And all three companies were granted the means in the 2007 contract to cut off unemployment coverage to laid-off workers if they refused to move to other plants, no matter how far away – a vicious way to make many of them take a buy-out or quit.
In other words, the decades-long push of jobs out of the Big 3 into low-wage, and then even lower-wage "independent" parts plants has simply circled back upon the workers at GM, Ford and Chrysler – working again to push them out into the street so that the new lower wages could be imposed across the board as quickly as possible.
The cutting of wages and benefits didn't stop with the U.S. auto companies. The UAW has repeatedly dredged up the specter of competition with the transplants. Well, here's how that competition has worked out as far as wages are concerned: As soon as the UAW negotiated the wage cuts for new hires at GM, Ford and Chrysler, Honda announced it was using the same lower wage rate for new hires into its factories.
This is the bitter meaning of the blandly innocuous statement made by Joe Hinrichs, a Ford vice-president, to the Wall Street Journal recently: "We believe the current contract gives us the tools that we need to continue to restructure our business. We have weekly, if not daily discussions with the UAW. They know our financial numbers, and they know what Ford needs to be successful."
Or to put it more directly, the UAW leadership has played a very big role in Ford's "success," which was based quite simply on an ever increasing exploitation of the workers.
The policy of the union leadership cannot take all the blame for the destruction of the auto workers' livelihood. But their policy of defending the "competitive" position of the Big 3 provided no way for the workers to confront monster companies intent on reducing the cost of labor, whether through actual wage cuts, increased intensity of work, shipping out work from company to company to company, or through bankruptcy and merger.
The nearly three decades from 1979 up until today have seen the absolute decimation of auto workers' wages and jobs – at least the better-paid jobs associated with work at the former Big 3. Today's jobs are increasingly low-wage and insecure, as the arbitrariness of work at small companies has buffeted workers from company to company, even while the auto industry as a whole during all these years has rolled up an incredible mass of profit. In the 29 years since 1979, GM declared a net profit in 22 of them, totaling 81 billion dollars; Ford, in 19 of those years, totaling 87 billion.
Where has this mass of profit gone? Up in smoke, apparently, since the companies produce figures today to demonstrate what a desperate situation they are in. All that profit is gone, just like the profits off auto production that were realized in the finance arms of the companies, only to go up in smoke in the craze of speculation on Wall Street.
These companies continuously pressured workers to work harder, to produce more wealth, only so they could pay enormous executive compensation, big dividends and interest on bonds, then take the rest out of the companies. It's disgusting.
Today, using the threat of the economic crisis and more job losses, the companies will carry out an even wider restructuring aimed at taking a still larger part of the wealth the workers produce. This restructuring will run through the former Big 3, the transplants and the parts plants.
David Cole, chairman of the Center for Automotive Research, and long-known as a confidant of GM, said it clearly. Referring to the current economic crisis, he let it be known that GM "feels this is an opportunity across the industry to do some things that normally would be very difficult to do" " just as Katrina gave the bourgeoisie a way to "restructure" New Orleans into a city occupied by the wealthy.
We can be sure, in the current situation which gets progressively worse, the UAW leadership will find the way, as Gettelfinger says, to do many more things to help these companies. Once again it will argue that the survival of the companies is at stake. No, the survival of the future of the working class is at stake.
The workers have never had a real way to defend their future unless they engage themselves in struggle, a struggle which encompasses broad parts of the working class and which is not afraid to shake capitalist society. Of course, workers in all these little parts plants are at a disadvantage going up against their employer, who is backed by Delphi, for example, which is backed by GM, which is backed by its banks. And it's also clear that the existence of these little companies can weigh on the possibilities of workers at the big ones. It's exactly why workers cannot be content to make their fight alone.
In the situation as it is unfolding today, from one crisis to the next, with the real possibility of a collapse that could make the Great Depression seem puny, the workers' only hope will come through struggles whose aim is to defend themselves, and let the companies be damned. In a period equally as dismal as this one is, workers throughout Michigan, Ohio and Indiana found the way when they massed in Flint in 1936-1937 to back off not only GM, not only the city government and police of Flint, but the governor of the state of Michigan and the president of the United States. They didn't concern themselves with the legality of GM's property when they sat down and occupied it for 44 days. They didn't concern themselves with GM's survival, but with their own.
Workers today can do no less.