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
Nov 7, 2005
On October 10, Steve Miller, chief executive of Delphi, explained why he was putting the automotive parts supplier into Chapter 11 bankruptcy. “We are broke,” he said, holding his hands in the air. “I am sorry to be the one delivering that message.”
Broke? Does Delphi have such a crushing debt, it can no longer pay its bills? No! Are the assets – all of its business, factories, offices, cash and other resources – about to be sold off in order to pay off the people who it owes money to?
No, Delphi is far from broke. It may have lost 600 million dollars in the first half of the year, but it has plenty of cash to tide it over. As Miller observed, Delphi's bankruptcy is “well-financed, well-organized and well-planned.” And the big companies that it owes money to aren’t worried they won’t be paid back. In fact, JP Morgan Chase and Citigroup agreed to give Delphi 2 billion dollars in new loans at better rates than the company got when it refinanced in June. And GM, which would stand to lose the most if Delphi were to really collapse, did not bat an eye when the Delphi board of directors granted Miller and the 600 senior Delphi executives 87 million dollars in bonuses and 10% of whatever new company emerges.
The reason for this is obvious. GM, the banks, and all the rest are on the same side as Delphi. For them, bankruptcy is nothing but an excuse to hammer the 34,000 Delphi workers with unprecedented concessions, concessions that GM can use to strong arm its own much bigger workforce, concessions that would spread to workers throughout the economy, like a capitalist plague.
This confrontation with the workers is what the creation of Delphi in 1999 was really all about. It was a scheme hatched by GM officers and directors. The express purpose of this new company was to divide and conquer the auto workers, to put much greater pressure for big cuts in wages and benefits. Delphi even made this clear in its 1998 prospectus, the official SEC filing describing for investors what the new company will be: “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 that Delphi negotiated with the UAW wheedled much lower wages and benefits for new hires. But Delphi profited little from this, since it hired few new workers in that time period.
So now Delphi is going after the active workforce and retirees. It is threatening to default on its pensions unless the active workers agree to a 66% wage cut, taking wages all the way down from $27 per hour to $10 per hour. Delphi wants to pay wages below the federal poverty line for a family of 4. Since most Delphi workers have very high seniority, it means threatening to pull the retirement rug out from under them, right before they retire.
Days after Delphi declared bankruptcy, the other shoe dropped. General Motors and the UAW announced that they had reopened the GM contract two years before it was set to expire. Among other things, they agreed to let GM take back $2080 from a scheduled 2006 wage increase. They also agreed that retirees would pay – for the first time ever – part of their health care premium, along with bigger co-payments for prescription drugs and a bigger deductible. Worst of all, perhaps, they agreed to change how the company would finance retiree health benefits, taking it from a defined benefit plan, which is not supposed to run out, to a VEBA plan or a defined contribution plan, which could certainly run out in the future – as it already has at other UAW-represented companies like Caterpillar and Detroit Diesel.
The concessions are supposed to be necessary to help rescue GM practically from death’s door. GM already lost 5 billion dollars so far in 2005. Of course, no one should fall for these numbers, since GM and its bankers control GM’s books and pay their accountants to produce the profit and loss figures that they want. But even if we took this at face value, the 5 billion dollar loss is still small compared to the 50 billion dollar cash hoard that GM has built up. On top of that, they paid out over 13 billion dollars in dividends and paid 19 billion dollars to buy up other companies in the last 10 years.
The reality is that GM is incredibly rich. This is confirmed by the fact that the financier, speculator, multi-billionaire, vulture capitalist, Kirk Kerkorian, who specializes in making tons of money, has bought up 10% of all the shares of GM stock over the last few months. Kerkorian knows that GM’s claims of being on the verge of bankruptcy are a complete sham.
GM dares to say that it is losing money because its labor costs keep it from being able to beat its global competition. In one interview, Delphi Chairman Steve Miller put it this way: “The Big Three have a serious competitive disadvantage. When you buy a Hyundai you get a satellite radio as your option, but if you buy a Chevrolet you get social welfare as an option. Long term, the customer is going to desert you if you try to price for your social-welfare costs.”
Of course, this is one big lie. First of all, auto workers in this country do not have more social welfare benefits than workers in other countries, especially not the big industrial countries. The opposite is true. The workers in those other countries have better social welfare benefits: better medical and pension benefits, more holidays and sick days and longer vacations. Their bosses pay bigger taxes for government programs, while in this country the bosses pay premiums to private insurance companies. That’s all.
Second, this corporate snow job buries the fact that workers in this country are much more productive than workers anywhere else in the world, both in the industrialized and less developed economies. Not only that, but the productivity of labor in this country is growing much faster than it did in the past, and faster than anywhere else.
This increase is truly astounding. By 2002 and 2003, U.S. industrial workers’ output per hour was increasing at a rate of over 10%, according to the U.S. Labor Department. This means in less than nine years time, workers will be producing twice as much every hour. And auto workers can feel the increase in the greater intensity of work.
On top of that, what corporations pay industrial workers in this country has steadily dropped, compared to industrial workers in 12 other countries, according to an annual U.S. Labor Department study.
It’s total bunk that these corporations can’t compete. Their level of profit is higher than anywhere else.
The auto executives try to bury these facts under talk about the Big Three losing market share.
If the traditional Big Three have lost market share, it happened because they concentrate on producing and selling for the most profitable sectors of the market. In the past it was luxury cars. Now it is SUV’s and luxury trucks, on which they make over $15,000 profit per vehicle. As for the less profitable sectors, such as economy cars, they leave it to foreign competitors to fight it out. So U.S. automakers have not lost market share. They have given it away!
But smaller market share doesn’t necessarily mean there’s no profit. In fact, they increased their profits by giving away market share.
Nonetheless, the auto companies howl not only about a pension crisis, which they themselves created by not funding pensions, they also moan about a health care crisis. Their usual refrain is that they pay more for health care per vehicle than they do for steel, that providing health care for workers and retirees and their dependents is driving up the cost of the car, making their products less competitive. We have heard this a thousand times.
It is true that the health care industry makes incredible profits. And those profits weigh on the whole economy. So why don’t the auto companies do something about it? Because the people who own and profit from the car companies, those with the big holdings of auto stocks and bonds, also own and profit from the health care companies, the big insurance companies, pharmaceuticals and medical equipment companies. The richest 10% of the population in this country own 85% of all the stock, and they own stock in both auto and pharmaceuticals.
Instead of taking these problems head on, UAW leaders agree that health care costs have gone out of bounds. And they make it sound like auto workers’ health benefits are practically free, no premium share, tiny co-pays, a gold-plated medical plan that is practically the envy of the entire civilized world. What lies!
Even before these latest concessions at GM, auto workers were already facing bigger and bigger restrictions on what doctors they could see, what procedures insurance pays for, what medicines are covered. At the same time, auto workers were already paying higher out of pocket costs for health care, in the form of higher co-payments. Those auto workers, active and retired, in most need of medical care were already being penalized.
But the biggest concession of all is the premium auto workers pay. It has been carefully hidden from sight, buried in the way the contract is written. The company and the top UAW leaders don’t call it a premium. They call it COLA diversion. Instead of getting full cost-of-living wage increases, workers have lost parts of those wage increases, which were “diverted” to pay for medical coverage. This started way back in 1964. Currently, auto workers pay about $2000 per year out of COLA for medical coverage. That is money going from the auto workers’ pocket to the bosses. That’s a premium no matter what they call it. And now with the reopening of the GM contract, these costs are about to skyrocket to $4000 per year. In other words, auto workers will pay at least $325 a month for medical coverage – and more with overtime, stolen from their cost-of-living adjustments. So don’t tell us this is the gold standard of medical coverage.
The corporations use any pretext – the supposed high cost of pensions, health care, a general lack of competitiveness – in order to impose ever greater concessions and sacrifices on the working class. It makes no difference how big and rich these companies are. They always strive to gain more at the expense of their own workforce.
This is class war – a one-sided class war, since with only a few, isolated exceptions, the working class has not fought back for a long time. This has encouraged the bosses to carry out ever more bold offensives against the entire working class. Like in every war, there are key battles. And guess who seems to pop up at several of these battles: none other than Steve Miller, the same Steve Miller, who as Delphi chairman is now leading the assault.
So lets see who this guy is.
Miller is an old hand at attacking workers. He was Lee Iacocca’s head of finance at Chrysler in 1979-80, when Chrysler used the threat of bankruptcy to extort several big rounds of concessions from auto workers that then spread throughout the auto industry and then very quickly throughout the economy. Miller then made his way to United Airlines in the 1990s before it declared bankruptcy, and helped to impose several big concessions on airline workers, while it threatened bankruptcy all the time.
In September 2001, Miller moved on to become the head of Bethlehem Steel, where his actions provide many parallels to what he is doing today. Upon assuming his post, Miller assured the steel workers: “I came here to find a way not to file for Chapter 11 bankruptcy.” Within six weeks, Bethlehem had filed for bankruptcy. Like other big integrated steel makers in the United States, Bethlehem claimed to be fighting a losing 20-year battle with foreign competition. It claimed that it was being killed by legacy costs – the accumulated promises to retirees it had been making for decades. But the dirty little secret was that at Bethlehem, productivity increases had grown by leaps and bounds. Where it used to take 9 man hours to produce a ton of steel 20 years ago, it now took only 2 hours. Bethlehem had used these productivity increases to slash its workforce – under the guise that it had to cut costs to stay competitive with foreign steelmakers and mini-mills.
In the 1990's, as the stock market ballooned, Bethlehem Steel stopped putting money into its pension fund. When the stock market crashed, the pension fund shriveled like a popped balloon. Bethlehem never had any intention of making up the difference. And they used the debt owed to their retirees to declare bankruptcy.
This is Miller’s legacy, the real legacy.
Months later, Miller sold Bethlehem to Wilbur L. Ross, a vulture capitalist, who combined it with four other steel makers he bought at about the same time. This year, Ross sold the resulting company for 4.5 billion dollars – a return of more than 1,000% in just three years on the 400 million dollars he paid for all five companies. And the company that paid the 4.5 billion dollars for those steel companies, Mittal Steel, is now making such big profits, it recently followed up by buying two more steel companies, for 4.7 billion, a record price.
For the 95,000 retired workers at Bethlehem Steel, it is a very different story. Their pensions were unloaded onto the Pension Benefit Guaranty Corporation (PBGC), a government agency that insures private pension plans. But the PBGC does not cover health benefits. So all those pensioners lost their health care benefits. Also, because the PBGC does not cover the full pensions of people who retired before age 65, many of the pensioners also lost a big chunk of their pension check, especially those who had taken early retirement. In steel, just like in auto, most workers retire before age 65. So, for every year before 65 they lose a substantial amount of their pension. And many have been forced to go back to work. As for those who continue to work in the mills, their pension benefits have been frozen at the level it was when the company went bankrupt. So if they put in 10 years before the bankruptcy, that will be their level of benefits, even if they retire after 30 years.
Other companies – like Polaroid and US Airways, textile companies like Cone Mills and WestPoint Stevens, and a host of smaller companies – also declared bankruptcy at about the same time in order to unload their pensions. But it was Bethlehem Steel, which was the second largest steel company in the country, that changed the ball game. As the New York Times recently pointed out, Miller showed how to “unlock hidden value in floundering Rust Belt companies by jettisoning their pension plans.” Bethlehem Steel really opened the door especially for the airlines to really grind down their workforces and dump their pension plans.
Taken together, steel and the airlines then served as the prelude for the present offensive of the bosses against the workforce of the much bigger auto industry. Right now, the fight is in the heart of the auto industry, but it is aimed at the whole working class. The capitalists’ intention is to take back a century of gains that the working class painfully built up.