UAW Contract:
Workers Were Sold a Lemon. Stop Payment!

Nov 19, 2007

An electrician at Chrysler told a reporter, “The contract got ratified and we got burned.” He was so right. The burning started before the ink was dry and will continue for years to come–if this contract is respected.

But workers would not continue to pay for a new car if its engine seized up and the four wheels fell off as they were driving it out of the dealership. This contract is like that car.

Risks to retirees were hidden!

UAW leaders promoted a new type of VEBA fund to pay for retiree health care at each company. They told workers that since the funds were now set up independently, they would continue to provide retiree health care benefits even if a company went bankrupt. They told workers that the funds would be “good for 80 years.”

Only in a world where sub-prime mortgages never collapse!

First, the new VEBAs are severely underfunded, even according to the auto companies’ own calculations. GM is only putting in 57% of its future health care obligations. Chrysler is putting in 55%, and Ford is putting in only 46%–that is, less than half.

And who will cover the other half of the health care costs? There is no doubt about it: the retirees themselves. According to the contract language, the VEBA fund can begin to increase retiree health care costs after January 1, 2012!

Even worse–the VEBA funds are not paid in cash but rather in stocks, bonds and other forms of company IOUs. So, if the company goes bankrupt, like at Enron, Bethlehem Steel, K-Mart or Delphi, all those company IOU’s and stocks will quickly become worthless. Will the retirees’ doctors accept worthless stock? Not likely!

“Job Security” was a fraud!

UAW leaders promised that this contract guaranteed “Job Security.” But GM immediately announced thousands of job cuts due to the closing of shifts at three plants and cuts in the line speed at another. Job Security promises be damned! Within five days of the Chrysler ratification, Chrysler announced shift closings at five plants and plans to eliminate 12,000 more employees. Before the ink was dry! Ford is expected to soon follow suit.

The companies and the UAW leadership promised job security. But buried in the small print, unavailable to most workers, was the loophole: depending on “market-driven” or “volume related” conditions!

The contract was also supposed to offer permanent jobs to temporary workers. But at GM, only half of the 6,000 long-term temps will be offered permanent positions. And a force of 600 temps at one plant was specifically “excluded.”

The “job security” contracts are phony, mirages, frauds.

Two-Tiers of Workers: Cutting the Union in Two

The 2007 contracts were peddled to those currently working in the plants–the only ones with the right to vote on it–as protecting their own wages and jobs.

That’s not true, since wages are to be frozen for four years, and most cost-of-living protection is “diverted” to the companies–supposedly to help pay for the VEBAs! Plus there are many changes in the medical plans that will require higher payments. Nonetheless, clearly these contracts were organized so as to take the worst concessions from those who didn’t have a right to vote: from retirees and from those yet to be hired, in the hope that the workers voting wouldn’t see beyond their own paycheck and a small signing bonus.

The new hires will never be eligible for regular pensions or benefits.

Current workers are not protected either. Who is going to protect the wages and pensions of the current workers, when the low-wage workers become the majority in the plants? It took the auto parts maker Delphi only three years, after pushing through a contract in 2003 that lowered wages to new hires, to impose low wages on everyone.

The Fight Has Just Begun

Auto workers did not enter these contracts willingly. At Chrysler, the contract was almost voted down; and at GM, the 35% vote of workers who rejected the contract was bigger than any no vote on a contract in 35 years. At Ford, which was last to vote and therefore under the most pressure to accept it, the contract was passed by a big margin–79%, according to the UAW International. But in some key plants, voter turnout was very low. If the workers at Ford were not ready to stand against the company and the UAW apparatus, neither were they eager to cut their own throats.

The 2007 contracts were voted on under conditions of fraud, intimidation, and coercion. In no court are terms and conditions of such contracts considered valid.

Workers would be perfectly justified to spit this lemon back in the companies’ faces–and in the faces of the companies’ partners.