Bankruptcy used to attack jobs, wages & pensions
By Martha Grevatt, Workers World, May 6, 2009
In an atmosphere of fear and intimidation, Chrysler workers represented by the United Auto Workers voted four-to-one on April 29 to take major contract concessions. The consequence of a no vote, workers were told, would be that the company would declare bankruptcy. A yes vote would secure jobs and protect pensions through a new alliance with the Italian auto company Fiat.
Yet not even 24 hours after the ballots had been counted, Chrysler double-crossed the workers and filed for Chapter 11 bankruptcy. On May 4 nearly every U.S. Chrysler employee was put on layoff while the “surgical” bankruptcy reshapes Chrysler LLC into a leaner, meaner—and they are plenty mean now—“New Chrysler.”
After the workers were told their sacrifice would ensure job security, Chrysler told New York bankruptcy Judge Arthur J. Gonzalez of its plans to close eight plants by the end of 2010. Four closings were already known, but workers at plants in Wisconsin, Michigan, Missouri and Ohio were stunned to hear their plants were now “bad assets” and up for sale. Workers at the Twinsburg, Ohio, plant voted 88 percent in favor of the concessions. They had no idea.
The workers were swindled!
The contract amendments included a letter stating, “The parties discussed the status and long term manufacturing plans for Twinsburg Stamping Plant. ... The company is committed to studying these plans with the desire that TSP remains viable. ... We appreciate the UAW’s continued support in developing a long-term viability plan for TSP.”
Sterling Heights Assembly, Kenosha Engine and St. Louis North Assembly, as well as Twinsburg, were covered by a moratorium on plant closings. This moratorium was not rescinded in the recent contract modifications. While Chrysler thanked the employees on April 30 for passing the new contract, they promptly proceeded to trash it, their appetites whetted by the contract-busting potential of the bankruptcy courts. As of this writing the rank and file are hoping the UAW International will challenge the announced closings.
Up until the eleventh hour UAW members and the general public were led to believe that bankruptcy would be avoided. Chrysler, Fiat, the UAW, the Auto Task Force, the U.S. Treasury, the Canadian government and nearly every lender holding Chrysler’s secured debt had purportedly agreed to the plans for New Chrysler.
The lenders were the last holdout, but at the last minute JPMorgan Chase, Morgan Stanley, Citigroup, Goldman Sachs and several dozen hedge funds agreed to accept $2.2 billion in cash payments to wipe out $6.9 billion in loans. This is actually twice the market value of the loans, which currently fetch prices of 15 cents on the dollar.
Yet this deal, which would double the value of their investment, was rejected by just three hedge funds—Oppenheimer, Stairway Capital and Perella Weinberg. The Chrysler debt they hold represents a mere sliver of their diverse portfolio and is likely not more than a few hundred million dollars.
How could their recalcitrant stance, as loathsome as it was, make bankruptcy unavoidable? Why couldn’t the Auto Task Force, led by former investment bankers Steve Rattner and Ron Bloom, have extended the 30-day period they initially set for Chrysler to develop a more aggressive restructuring? It could have insisted Chrysler adopt the same firm “take it or leave it” stand with the three holdout vultures that it took with the UAW and the Canadian Auto Workers.
The CAW gave up $19 per hour worth of concessions after Chrysler threatened to pull out of Canada completely.
Yet the Treasury, rather than use its financial and political leverage to soften the company’s attitude, took the same hard line towards the union. It was the Treasury that dictated an expansion of the two-tier wage structure agreed to in 2007, freezing “entry level” wages at $14 an hour until 2015.
The capitalist class as a whole clearly holds a consensus on this latest theft of union wages and benefits and is determined to see a much smaller U.S. auto industry. For months in Washington and on Wall Street, voices clamored for bankruptcy—both Democrats and Republicans.
The stated purpose of the sale of eight plants is to raise capital to pay back the big banks and the equity firms. The banks, which opted to unload a portion of their Chrysler loans to sharks such as Oppenheimer, have received nearly $100 billion through the government bailout. Yet thousands of workers will be either unemployed or forced to relocate so JPMorgan Chase and company can get paid another couple billion.
The whole purpose of the loans was to finance the previous round of restructuring that has shrunk the Chrysler workforce by almost 50 percent in less than two years—leaving just 27,000 UAW workers at the company.
Yet the corporate media have run feature stories on what a good deal the UAW has supposedly gotten. This myth is being constructed around the 55-percent share of the new company to be held by the Voluntary Employee Beneficiary Association. The UAW-administered VEBA was agreed to in 2007 to fund retiree health care. Does this mean the UAW now owns a majority stake in the company with which it bargains? Does it now have the ability, as a voting shareholder, to control the corporation?
Not exactly. The VEBA will be directed by a “trustee” who will appoint just one member to the New Chrysler board of directors. Three members will be appointed by the Treasury, three by Fiat, one by the Canadian government and one by the lender—all of whom will have a smaller stake in the company than the VEBA. All the VEBA’s equity will be in nonvoting stock, and as Fiat’s stake in New Chrysler grows, the VEBA’s will diminish.
Left out of press reports is that the VEBA itself was a big concession on the part of the workers. What drove Chrysler (and also Ford and General Motors) to set up the fund was the desire to eliminate “legacy costs”—compensation to retirees who are no longer exploitable. With the VEBA the companies were to pay a set amount but would be free of future legacy costs. It was a big break for the companies and a gamble for the union. Plus, workers in the plants gave up much of their cost-of-living allowance and other compensation to cover the cost of the VEBA.
Then, as a condition of last year’s bailout, the Treasury forced a second concession on the union. Half of the VEBA was now to be paid in company stock. Stock prices could fall, jeopardizing the health benefits the retirees earned working years on the assembly lines. The VEBA is not yet in operation and already retirees have had vision and dental coverage taken away.
Union members are getting nothing from this rotten arrangement. They have given up holidays, break time, time-and-a-half after eight hours, COLA, bonuses that were themselves a concession in lieu of annual raises, benefits for laid-off workers and more. These were precedent-setting achievements won through decades of struggle, and came on top of major givebacks in the original 2007-2011 contract.
The hundreds of millions of dollars’ worth of concessions represent a transfer of wealth from the working class to the capitalists. Autoworkers are blocked from striking from now until the end of the next contract in September 2015.
For all this workers were given assurance that the alliance with Fiat “could result in incremental product loading in the Company’s assembly and powertrain operations” and that there would be “no termination of pension plans covering UAW-represented employees and retirees.” The first promise crumbled with the latest plant closing announcements. The second, addressing a legitimate concern, could prove false too if the bankrupt company is exempted from making payments to the pension fund.
Rather than mobilize the rank and file to protest this outrage perpetrated against the workers, UAW International president Ron Gettelfinger has partnered with the company, the Obama administration and the lenders. The appearance is that of a united front committed to Chrysler surviving and becoming “competitive,” only to be stymied by a few inconsequential hedge funds.
Yet Gettelfinger has no real voice. Since Ronald Reagan broke the air traffic controllers’ union, a relentless drive to push down the cost of labor power has caused nothing but suffering for workers and their communities. The only way to prevent more mass suffering is with mass struggle.
The autoworkers should be staging mass protests against the layoffs, the plant closings and any further concessions. Their natural allies—the real stakeholders—number in the millions.
They work in auto parts companies where every week a new bankruptcy is announced. They work in rubber, steel, glass, plastics, utilities, construction, retail, food service and government—because what happens in auto affects the whole economy. They live in once-thriving communities now hit by double-digit unemployment.
Only a broad working-class movement can beat back the bosses’ attacks.
E-mail: firstname.lastname@example.org. Grevatt is a 21-year Chrysler worker and executive board member of UAW Local 122 in Twinsburg, Ohio.
Articles copyright 1995-2009 Workers World. Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.
Workers World, 55 W. 17 St., NY, NY 10011
Support independent news http://www.workers.org/orders/donate.php