DETROIT — As U.S. auto companies work to meet the government’s March 31 deadline for showing progress in their restructuring and turnaround plans, the pressure on workers and their union to accept concessions has been intense.
More grim news came last month when General Motors announced it was shedding another 47,000 workers worldwide, one-half expected to be in the U.S. An additional five U.S. plants (on top of the nine it announced last year) are set to close. Michigan’s 11.6 percent unemployment rate will undoubtedly go higher.
While President Obama’s auto task force continues to examine the companies’ restructuring plans and works to pressure those who hold GM debt to accept alternatives, the task force and the country as a whole must also be concerned with the shrinking income and growing debt of the autoworkers.
Under the terms of contract concessions the United Auto Workers earlier felt forced to agree to, many new workers will be hired at $14 an hour. With their drastically reduced purchasing power, how will they stimulate the economy, let alone buy new cars?
For example in 2006, the cost of paying for, maintaining and insuring a midsize car came to $12,600 a year here in Detroit — far beyond the budget of someone making $14 an hour.
When I asked one UAW “insider” what the employee car lots of the future would look like he replied, “There will be a lot of used cars.”
Missing from the White House auto task force, he said, is a look at the “bigger pie — what we want transportation to look like in 10 years.” That would involve a combination of mass transit, cars powered by solar, hybrid and electric power, and space for bicycle riders and pedestrians. He said that, while there are some good people on the task force, it should have had union representation and included mayors, people from the community, those who ride mass transit, even bicycle riders.
Meanwhile, future retiree health care benefits may be in jeopardy.
Though Ford has not received federal loans and is not under government mandate to lower its debt, it used the threat of more job losses to win union approval to reopen its 2007 labor contract. Almost 60 percent of the production and skilled trades workers voted to accept a deal which eliminates bonuses and cost-of-living adjustments, ends the jobs bank program, and changes work rules.
Most alarming, it allows Ford to pay up to half of what it owes to the union-run retiree health care trust, VEBA, in stock instead of cash. Beginning next year, that trust will assume responsibility for billions of dollars in annual medical bills for UAW retirees and their dependents.
At the time the VEBA was negotiated, many feared that the projected costs of health care would rise beyond the fund’s capacity to pay. Now that danger is more real as stock is substituted for cash.
At GM the UAW has agreed to similar concessions except for one very large item. GM owes more than $20 billion to the VEBA, and UAW President Ron Gettelfinger has vowed not to make a stock-for-cash deal like the one at Ford until GM’s bondholders also accept a stock-for-cash agreement.
But bondholders, who include such large institutional investors as Franklin Resources and Fidelity Investments, hold $27 billion of GM’s debt and have been resisting the auto task force’s mandate to accept $9 billion in cash and the rest in stock equity.
As reported in the Detroit Free Press last week, Steven Rattner, who heads the auto task force, and three other advisers traveled to Detroit to meet with UAW officials, drive an electric Chevrolet Volt prototype and tour Chrysler’s Warren, Mich., truck plant. Rattner said the plant tour drove home what was at stake. ‘As we went through that assembly plant, you saw real people doing real jobs that are now at significant risk,’ he said. ‘It reinforced for all of us the importance of doing everything we can to save those jobs.”
Many are asking how we are going to have a sustained recovery when those doing “real jobs” are counted on to purchase new goods but are finding their wallets thinner and thinner.
John Rummel (jrummel @ pww.org) writes for the People’s Weekly World from Michigan.
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