COMMENTARY: Whats so sacred about a contract?

Two of the nation’s “big three” auto companies, General Motors and Chrysler, both on the verge of bankruptcy, are asking the government for loans to keep them afloat.

Unlike the insurance giant AIG and the big banks, they are asking for loans, not direct taxpayer handouts that have amounted, thus far, to hundreds of billions of dollars.

In exchange for the loans, the GM and Chrysler execs have, unlike most of their counterparts in the world of finance capital, agreed to reduce their own salaries to one dollar a year.

It’s there, however, that their self-sacrifice stops. After all, they have contracts to uphold.

The CEO’s at the auto companies have not agreed to give up “bonuses.” Even though bonuses far outpace what normal people would consider a hefty salary, bonuses must be preserved, the CEOs say, because they are part of their contracts.

“Contracts are only sacred, these days, if you’re talking about the contracts that CEOs and corporate executives have,” William Alford, president of UAW Local 235 in Hamtramck, Mich., told the World March 23.

“The government has made one of the conditions of those loans that the companies renegotiate the UAW contracts. This says that contracts with workers are not at all sacred. This says to the companies that they will get their loans as a reward for cutting the pay of the workers and forcing the union to pay the costs of health care coverage.”

“Don’t forget,” Alford said, “that when former President Bush offered the first $17 billion in loans to the auto companies, he demanded that the workers’ pay be cut in half. My workers had already been cut from $28 to $14. If you cut their pay in half again, they’d be making less than the minimum wage.”

UAW members, March 9, ratified a new cost cutting agreement with Ford Motor Company, the only one of the big three that has not yet asked for a government loan.

The big fight in the Ford talks was over how the company would pay the union what it owes so that the union can administer health care. The 2007 contract said the company would pay in cash. Ford wanted to change that to paying with stock. The end result was a 50-50 split.

Ford assembly line workers ratified the new pact by 59-41 percent margin and skilled trades workers voted for it by a 58-42 percent margin.

UAW Ford Vice President Bob King said, “the voting shows our members are prepared to make painful sacrifices in order to be part of the solution to the problems facing Ford and the U.S. auto industry.”

GM CEO Rick Wagoner has rejected that line of reasoning, however, and is saying in interviews with a variety of newspapers and magazines that the Ford deal won’t cut it with his company. He wants deeper cuts, he says, and he insists that the union health care fund be funded entirely with company stock, rather than with cash. GM’s stock, like most other stock, is on a downward spiral.

The auto workers have done more than their part in rescuing the nation’s domestic auto industry.

They signed new contracts in 2007 for lower starting pay and smaller health benefits for new hires.

They agreed that the union would take over responsibility for paying out health care benefits.

“It is a damned disgrace,” Alford said, “that when my members at American Axle gave up half their salaries, Dick Dauch, our CEO, paid himself an $8.5 million bonus. And now they want my members to sacrifice even more.”

The conventional wisdom was that union contracts were unbreakable deals. A union contract was supposed to be as good as gold — something that would withstand anything except, perhaps, bankruptcy.

What we have seen since the 2007 give-back contracts in auto is that, as far as corporate executives are concerned, contracts with workers are made to be broken, disregarded, renegotiated or scrapped altogether. Auto companies, airlines, steel companies and many others want to use the current economic crisis to scrap as many contracts as they can.

“In case after case,” Alford said, “We see corporate executives defending their own contracts and their own bonuses. In case after case we see workers, in order to save their companies and their jobs, stepping forward to renegotiate and to make more sacrifices.” Executive contracts, golden parachutes, and bonuses are rarely re-negotiated or given up.

There is a limit to working-class patience, however. Millions are realizing that many corporate executives are doing a bad job. Many believe that without those executives workers might do as well, or better. In short, many are realizing that capitalism sucks.