DEC-Holiday-2008:Holiday Issue
12/16/08
10:05 AM
Page 3
GOP slams labor, derails auto rescue package
Some senators
demand more
wage and benefit
cuts from workers
By DON McINTOSH
Associate Editor
When U.S. auto industry CEOs
asked Congress for aid this month,
critics of organized labor seized the
crisis as a chance to slam unions. Out-
rageously high union wages and bene-
fits, it was argued, had brought the do-
mestic auto industry to death’s door.
So, when Senate Republican leaders
killed a proposed rescue package Dec.
12, they said it was because backers
had refused their proposal for immedi-
ate reductions in union worker pay to
the level of nonunion workers.
But leaders of the United Auto
Workers (UAW) counter that blaming
the union for the troubles of the Big
Three is unfair and inaccurate. It’s true
that General Motors, Ford, and Chrys-
ler are running out of gas, spending
down reserves at a time when car sales
have plummeted. And the Big Three
American automakers have lost mar-
ket share to foreign-headquartered
competitors — from 90 percent in De-
troit’s heyday to 48 percent today. But
that has little to do with the union,
which has shrunk dramatically in re-
cent years and had already agreed to
steep concessions.
The UAW has been unable to or-
ganize new foreign-owned plants, or
to stop the Big Three from outsourc-
ing. The layoffs Michael Moore docu-
mented in his 1989 film “Roger and
Me” have continued. U.S.-based auto
companies have outsourced produc-
tion of parts like seats, dashboards,
and frames that used to be made in-
house, often to lower-wage and non-
union employers. Five years ago, there
were approximately 300,000 UAW
members at GM, Chrysler, and Ford;
today, there are fewer than 150,000.
And the entire global auto industry
is hurting right now, as car and truck
sales have sunk to the lowest level in
25 years. Other governments are look-
ing to aid their automakers, too. The
U.S. auto industry’s relatively deeper
woes have some long-term structural
causes.
For starters, Japan, Germany and
South Korea have free government-
provided health care, and generous
public pension systems. The United
States lacks those things, so union
workers try to make up for them in
union contracts. That can be costly for
employers, especially older, long-es-
tablished companies like the Big
Three. The Big Three have automated,
downsized and outsourced in recent
decades, so they have a very senior
workforce and more retirees than ac-
tive workers. And older workers and
retirees are much more expensive to
insure. The Big Three, combined, are
responsible for pensions and health
care for more than a million retirees,
spouses and dependents. Two out of
five of their retirees are under 65 and
thus aren’t yet eligible for Medicare.
When foreign-headquartered auto
companies make cars in the United
States, they also need to pay for health
care. But they started making cars in
the United States only about 25 years
ago, so they have very few U.S. re-
tirees. As of a year ago, Toyota’s en-
tire U.S. operation reportedly had
fewer than 1,000 retirees.
As for the sky-high wages union
auto-workers are said to earn, the evi-
dence suggests union and nonunion
wages are converging. Just three for-
eign-owned U.S. plants are unionized
— a Toyota plant in California, a Mit-
subishi plant in Illinois, and a Mazda
plant in Michigan. Foreign automak-
ers mostly built in states where unions
don’t have as much of a presence —
like Toyota in Kentucky, Volkswagen
in Tennessee, and Mercedes in Missis-
sippi. And they pay higher-than-aver-
age manufacturing wages, likely in
part to make unionizing less attractive.
Counting bonuses, the Toyota workers
can make $30 an hour.
What about the oft-repeated statis-
tic that UAW members make $73 an
hour? It’s not true, UAW President
Ron Gettelfinger told the Senate
Banking Committee Dec. 4. “The $73
an hour figure … includes not only the
costs of health care, pensions and
other compensation for current work-
ers, but also includes the costs of pen-
sions and health care for all of the re-
tired workers, spread out over the
active workforce. Obviously, active
workers do not receive any of this
compensation, so it is simply not ac-
curate to describe it as part of their
‘earnings.’”
In fact, the UAW assembler wage
is $28.12 an hour — about $57,000 a
year for full-time work. And by 2010,
the union says, total compensation for
the average UAW worker will be less
than for the average nonunionized
worker at a foreign-owned factory.
That’s because in 2007, after a two-
day strike at GM, the union that once
set the standard for American workers
agreed to a two-tier compensation sys-
tem. Under that system, new hires
make $14.50 an hour and are excluded
from the retiree health care and de-
fined benefit pension plans. Those
provisions were copied in contracts
with the other automakers.
Plus, under that contract, the com-
panies get to unload their past com-
mitment to retiree health care onto a
Voluntary Employee Benefit Associa-
tion (VEBA) as of 2010. The compa-
nies are to contribute a lump sum to
the fund, and then have no further re-
sponsibility. Benefits will likely be re-
duced. Gettelfinger told Congress the
union is prepared to make a further
concession, delaying automakers’
payments to the VEBA.
But the myth that high union wages
were the root of the problem persisted.
And in the Senate, myth won out over
fact.
The House had done its part, pass-
ing a compromise bill that had support
from the Bush White House. The bill,
the Auto Industry Financing and Re-
structuring Act, allowed $14 billion —
from a fund to promote development
of fuel-efficient vehicles — to be used
for short term loans aimed at keeping
the companies in business for several
months as they attempt to restructure.
Lots of conditions were placed on
those loans, including limits on execu-
tive compensation, restrictions on
owning or leasing corporate jets, pro-
hibitions on dividend payments to
stockholders, and a commitment to
look at retooling factories to make ve-
hicles for sale to public transit agen-
cies. Each automaker that accepted the
loans would have to give the govern-
ment an equity stake, and submit a re-
structuring plan for approval by a gov-
ernment “car czar” no later than
March 31, 2009.
The restructuring plans would be
designed to return the companies to
long-term viability and would include
sacrifices from all stakeholders, in-
cluding management, directors, bond-
holders, shareholders, suppliers, deal-
ers, UAW members and other
company employees. If the plans meet
the czar’s approval, further govern-
ment financing could be made avail-
able. If not, the government could call
in the loans and force the company
into bankruptcy.
The House passed the bill Dec. 10,
237 to 170, with 205 Democrats and
32 Republicans in favor and 150 Re-
publicans and 20 Democrats voting
against it. [Southwest Washington De-
mocrat Brian Baird voted for it, as did
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