Jobs and Health Care Benefits to Be Slashed in the Auto Industry

by Andrew Pollack / July 2005 issue of Socialist Action newspaper

General Motors bosses hit the United Auto Workers with a double-whammy in early June. First they announced they were cutting 25,000 jobs, then they demanded billions in health-care cost savings from both active and retired workers by the end of June—savings which they threatened to implement unilaterally if an agreement wasn’t reached.

They claim they could slash retirees’ benefits without reopening the contract, which the UAW denies. But UAW leaders are promising to give concessions on health care that they believe are permitted by the contract.

In an industry where plant closings, layoffs, outsourcing, and job combinations have flourished for decades, the companies have been saving billions on
health care all along by relying on overtime rather than hiring new employees for whom they would have to provide benefits. But now that corporate America has latched on to health-care costs as its new all-purpose excuse for squeezing more out of workers to rescue its failing profits, even that isn’t enough for the Big Three (GM, Ford, and Daimler-Chrysler).

Early indications are that UAW President Ron Gettelfinger is ready to throw in the towel on health care. But he’s no dummy: he—and the local officials
he’s primed for this maneuver—are combining “reasonable” rhetoric about understanding the need to help GM, with “tough talk” warning GM against
unilateral moves, including implied threats to strike. All of this is designed to come up at the last minute with health-care concessions that will be just enough to stop GM from demanding that the contract be reopened before 2007.

The UAW VP in charge of GM, Richard Shoemaker, is also talking out of both sides of his mouth. He has already come forward with his own helpful suggestions for retiree health-care cuts totaling about $12.7 billion. Yet he told local officers at a June 9 meeting laying out the line to take back to members: “If GM does anything unilaterally, they’ll have a very hard time
making automobiles in this country. You can go back and tell your membership that.”

Autoworkers are resentful at being asked to give back benefits that they rightly feel they’ve earned by decades of foregoing wage increases in return,
supposedly, for more secure retirement and better health-care benefits. Even the much-bandied-about claim that it costs GM $1500 per car to provide health care is based on questionable calculations. UAW dissident Greg Shotwell points out that the supposed health care cost of $1500, based on dividing the number people covered into the value of vehicles sold, does not take into account the fact that “retirement benefits are covered by a trust fund, not vehicle sales. What’s more, the size of that trust fund decreased dramatically not because of increased health care cost, but because it was used [by GM, unilaterally] for capital investments.”

GM is not just stealing already-earned money; it’s playing with people’s lives. One retiree told the media that if benefits are cut, he and his wife might have to skip medications for high-blood pressure, arthritis, and allergies.

But instead of mobilizing the members’ anger, UAW leaders are calling for management and investors to “share the pain” by taking reduced salaries and dividends. Plus they’re questioning whether GM needs as many givebacks as it’s demanding.

Gettelfinger said GM had not presented him with enough information to convince him of the severity of the financial situation. While its debt is in the hundreds of billions, and is rated at junk levels, that debt comes due over several decades.

Gettelfinger and others also point to management’s responsibility for poor product choice and design and costs from recalls. “To us, product is No. 1, first and foremost,” he said.

What’s more, he said of GM, “they are paying out dividends; their equity in their stock is up a lot; they have a lot of cash on hand; they’ve stated that
they have no intentions of going into bankruptcy … that means they will expose us to a lot of internal information that we normally would not have access to. … If somebody makes a claim about how bad things are, then I’m assuming they want to support that and back it up, and we’ve got experts in place that are taking a look at those kinds of issues.”

Open the books!

Of course what’s really needed is the ranks’ expertise; the bureaucracy’s “experts” are used to coming up with the numbers Gettelfinger wants to
justify concessions. The union should be demanding that all company ledgers be opened—and that the members have a chance to do their own analysis of
where GM’s hiding the money.

But despite their discounting GM’s claims of need, Gettelfinger and Shoemaker still said they were prepared to work with the company to find “mutually agreeable ways to reduce costs in health care and other areas.” In fact, talks on health-care cuts began weeks before the company board meeting at which the media claims that GM’s top manager, Wagoner, was told to attack the union.

Another plea of the bureaucracy is for more time to put the concessions over on the members. Oscar Bunch, president of a Toledo local, told the press that “the [GM] board was mandating things that he couldn’t do” within the time frame specified by the company. Eldon J. Renaud, the president of a union local in Kentucky said, “It’s hard enough for us to agree to concessions without forcing something down our throat. It takes time to do this.” Time to force it down the members’ throats, that is.

And finally, union officials are pleading with management to be reasonable, saying a strike would only hurt both the union and the company.

GM’s claimed weakness in the face of competition could be turned into a leverage point for the union. Wall Street analysts say unilateral cuts by GM are unlikely since it could result in a strike at a time when GM is preparing to launch important new additions to its vehicle lineup. This may or may not be an accurate prediction of GM’s willingness to attack; but certainly the possibility of losing billions won’t help their “competitive” standing much.

(Of course, the talk about the Big Three’s “competitive” woes in the U.S. ignores their global reach. GM, for instance, has 388,000 employees in 50
countries, and its parts spin-off Delphi has 211,000 employees in 42 countries. In 2003, GM reported profits of $437 million from China, the world’s fastest-growing market.)

The official UAW goal is to help “our” companies, proven most recently in the health-care sphere with concessions in March to Chrysler, which won tens of
millions in savings when the union allowed it to exercise a little-known and never-used contract provision negotiated in 1982 that lets the company raise deductibles and co-payments if it can prove health-care costs have risen substantially. When this happened it was predicted that GM and Ford would make similar demands, but after the union officials had rolled over at Chrysler, it was never in the cards that they would prepare union members at GM and Ford to defend their health-care rights.

One Wall Street analyst says investors are wondering how to profit from GM’s troubles. Possible scenarios include someone like super-rich investor Kirk
Kerkorian buying GM, terminating UAW retiree benefits—and selling GMAC Mortgage, or even all of GMAC, and thus acquiring GM and the core of GMAC for a bargain-basement price of a few hundred million. In this scenario the stockholders would get huge dividends from the cash garnered in the sale—and a stripped-down GM could demand more concessions because
its most profitable arm was gone.

But this corporate swashbuckling is countered by union pleas for reason and understanding. “Right now, we’re doing everything possible to help GM, because it helps us too. We don’t want GM to go under,” said Don Swegman, president of an Indiana local. “As long as what they want to do is laid out within our agreement, it’s quite all right to do.”

Troubles at Delphi, Visteon

After GM made its demands, GM spin-off Delphi demanded its own concessions. In late June UAW leaders from 22 plants met with top Delphi officials to discuss measures such as closing or selling plants, offering
buyout packages, and shifting more health costs. Cited as proof of need were not only GM’s demands but the recent acceptance by the UAW of the Ford-Visteon restructuring. A local union president said, “I’m sure whatever they do for General Motors, they’ll turn around and do for Delphi.”

In fact, union officials at Delphi plants had been invited to the earlier meeting of UAW GM reps precisely because Gettelfinger knew similar demands
would be made. But rather than use that meeting to plan company-wide (much less industry-wide) resistance, it was designed to strategize about how to prepare members for givebacks.

Shoemaker said: “Delphi’s problems were just as significant (as GM’s) and at some point would have to be addressed as well.” Delphi has already said it plans to cut 8500 jobs this year and idle some U.S. plants.

In May the UAW agreed to let Visteon, a Ford parts spin-off, restructure by sending workers and plants back to Ford. Most of those plants will then be closed and buyouts offered to 5000 autoworkers, with the result that Visteon’s North American manufacturing operations will be even more concentrated abroad. As at GM, union officials accept it stoically:

“Obviously, we’re all very apprehensive about what’s going to take place,” said Eugene Morey, the president of an Ypsilanti local. “I think we did pretty well when you consider that Visteon was on the brink of going bankrupt.”

But workers transferring back to Ford are going to a company that an industry analyst says “is in no position to absorb additional labor costs. There’s no real place for them to transfer in Ford.” Ford will sell most of the repossessed plants—which surely means that most of those workers will either be laid off or have their wages and benefits slashed drastically. And the entire remaining workforce at Visteon will be in the lower tier negotiated in 2003.

When Delphi and Visteon were spun off (in 1999 and 2000 respectively), the union maintained the wage parity that had existed among all Big Three plants, whether assembly, components, or parts. The auto industry has always had a multi-tier structure, with non-Big Three supplier companies at lower wage rates. But in the 1980s and 1990s the Big Three closed some
of their own parts plants and increased outsourcing from nonunion suppliers here and abroad, and the union did virtually nothing to organize those nonunion plants. Instead they gave back more of their own members’ money in the hope that this would protect existing members’ jobs and wages.

Meanwhile, the union was allowing management to play off assembly plants against each other in a “whipsawing” process whereby locals fought each other over who would get to produce a given line by proving they could give more concessions to the company. The net result of this failed strategy was to let Delphi and Visteon management claim that their wage rates were “uncompetitive” with other suppliers.

Finally, in the 2003 contract UAW officials obliged them with a drastically lower wage tier for new hires of $14 to $16 an hour—compared to the $24 to $26 range for current workers (and new hires will never reach the top tier). Although assembly and parts workers voted on the same contract, lower-tier wage rates weren’t agreed on till after ratification and those affected had no vote on them.

Ironically the shuttling of workers from Ford to Visteon and back is actually proof that the bosses’ claims about individual corporations’ needs are never
as set in stone as they claim. In some industries spin-offs mean total separation between the parent and offspring. In others—such as the “double-breasted,” nonunion subsidiaries in trucking—ownership remains the same even if corporate boundaries are erected.

At Ford/Visteon, the ties remained even closer: the UAW insisted that workers have the right to go back to Ford if necessary (and Ford all along subsidized Visteon financially). So there’s nothing inherent in auto industry structure preventing the union from making even broader, cross-company demands for job protection, portability of benefits, etc.

Also included in the 2003 pact were givebacks from members in core assembly plants, such as more “team concept,” more combined job classifications, “flexible work schedules,” etc. Most of these givebacks were
left out of the scanty contract summaries provided to members. The contract also furthered the whipsawing trend by encouraging locals to make work-rule changes if new production is moved into the plant.

This defeat at Delphi and Visteon was prepared by decades of failure to organize nonunion parts plants. Instead of aggressive organizing, the union has sought management “neutrality,” and has done so by proving it willingness to be a “reasonable” partner.

UAW Organizing Director Bob King said that when Gettelfinger gave him the post he was instructed to make sure suppliers “were a value-add”—that is, that unionization would make the plants more profitable.

“If we want to keep manufacturing jobs in the United States, which is a major objective of the UAW, then we can’t be fighting management. If we have an
adversarial relationship, then we’ll see more work go overseas.”

Needless to say, this logic lets management play the union for a sap and provides potential members with little incentive to sign up: why join a union that wants to give away wages, benefits, and jobs? And in the end jobs go overseas anyway.

The union’s dismal organizing record was combined with betrayal of struggles at existing plants. At Accuride the union abandoned workers after a four-year lockout, voluntarily giving up its right to represent members after earlier trying (and failing) to force them to return to work. Throughout, scab parts made at Accuride fed union-organized assembly plants.

And at American Axle and Manufacturing, another company spun off from GM, the UAW “International” leadership helped management impose a three-tier system (using one of their favorite tactics: “vote till you get it right”). Nor, despite the growing internationalization of production and sales, did the
bureaucracy establish effective ties with autoworkers in other countries.

So UAW members at GM face this June’s job and health-care cutbacks with a divided workforce and a union bureaucracy that has fostered that division by its collaborate-with-management strategy. A worker in one UAW parts plant in Alabama summed it up best, telling reporters that he has “had enough of the union agreeing to cuts under the banner of protecting jobs.
‘The only thing (the UAW has) done for us members is give concessions to the automakers under the auspices that it’s going to make them competitive. And it hasn’t worked.’”

Fightback at Visteon, Flint

In the last few years members have several times shown their willingness to fight—and have taken advantage of the new “just-in-time” production process to launch crippling strikes where one plant shuts down most or all of an entire company. At one Visteon plant (Bedford) just last year there were pitched battles with local and state cops and private security guards, cars overturned and set on fire, and blocking of scab buses.

The strikers were members of International Union of Electronic Workers (IUE-CWA) Local 907. But UAW members in the region, including GM workers, came to the picket lines to show their support. UAW officials, however, refused to organize solidarity. This was due in no small part to the fact that Bedford jobs were slated to be moved to a UAW-organized plant in Michigan (in fact removal of equipment from Bedford was the spark that touched off the strike).

Workers, having seen GE, RCA, and other companies shut down plants even after wage cuts were granted, decided to resist. (In the end the IUE “International” officialdom stepped in and imposed a settlement.) At GM itself workers vividly remember the eight-week long strike at Flint in 1998.

Launched over subcontracting and other issues affecting job levels, it idled as many as 193,000 GM workers, shut down 25 of 29 North American assembly plants, and cost the company an estimated $2 billion.

The members stood up to GM efforts to get the strike declared illegal, and attempts to block unemployment benefits and to force the union into arbitration.

Workers today say “Remember Flint,” by which they mean remember the union’s ability to inflict pain on the company. But the lesson of Flint for the bureaucracy was the exact opposite: the need for more communication and collaboration with the bosses. Shoemaker believed that the strike created a “new process, with more frequent discussions with people at the highest level … to be sure we can resolve things before we reach a crisis.”

This refrain was repeated in June by Gettelfinger and Shoemaker: “It is in the best interests of all GM stakeholders for the UAW and GM to work together, to maintain the solid working relationship that we have worked so hard to build since 1998.”

Wider fightback potential

Since GM has chosen health care as a key battleground, the ranks have another potential ally on their side: the entire working class. Virtually all organized workers have seen cutbacks in their own health care, with higher premiums, deductibles and co-pays, and this has been the central issue in almost every strike of the last decade. The unorganized sector of the
working class has keenly felt the cutbacks in Medicaid and Medicare—or the lack of any health insurance at all (for over 45 million people).

What’s more, since GM is particularly targeting retirees’ health-care benefits, the union could appeal to millions of retirees already enraged by, and many
of them mobilized against, recent attacks on Social Security and Medicaid. The recent termination of pensions in the airlines makes clear the need for a
class-wide defense of retirees’ rights.

When talking out of the noncollaborative side of his mouth, Gettelfinger says GM’s health-care cuts won’t solve the broader problem and that a society-wide health-care fix is needed. But of course, neither he nor any past UAW president has ever mobilized the membership behind a demand for a single-payer, universal health-care system (such as the Labor Party’s “Just Health Care” campaign).

It’s interesting to note that GM bosses in Canada actually support the single-payer health care system that exists there! On the surface this is because of
the “competitive advantage” it gives them: “The Canadian (health-care) plan has been a significant advantage for investing in Canada,” says GM Canada
spokesman David Patterson—and in fact production has been shifted from Detroit to Windsor for just that reason.

But the deeper reason is that Canada’s labor movement pushed for and fought to maintain such a system, which has yet to happen in the U.S.

In the words of Greg Shotwell, “The only legitimate solution is universal health care. The UAW should take the lead and refuse all concessions until all
Americans have full and equal access to health care.” Instead of using the lack of single-payer as an excuse for concessions, as Gettelfinger does, the fight for it must begin with defense of existing, contractual benefits.

Such a fight could put wind in the sails of the reorganizing UAW dissident movement. Shotwell says union reformers will soon “introduce a plan calling
for a national pattern contract [at parts companies], portability of pensions, a national benefits pool and preferential hiring and transfer rights for UAW

There’s still time to prepare for a fight, even if GM were to take unilateral action on June 30, the scheduled date for the two-week summer shutdown, which normally would mean that plants reopen July 19. Late June announcements by Ford of possible job cuts make even clearer the need for industry-wide solidarity and mobilizations.

Related Articles

Behind Sam Bankman-Fried’s Cryptocurrency Crash

FTX’s plunge from $32 billion to bankruptcy and the collaping value of cryptocurrencies shows the speculative casino nature of the capitalist economy, where unimaginable wealth is driven by fictitious capital.

The International Food Crisis and Proposals To Overcome It

[Editor’s note: We reprint this article by the Committee for the Abolition of Illegitimate Debt (CADTM). In 1989, the Bastille Appeal was launched, inviting popular movements throughout the world to unite in demanding the immediate and unconditional cancellation of the debt of the so-called developing countries. This crushing debt, along with neo-liberal macro-economic reforms imposed on the global South, has led to an explosion of worldwide inequality, mass poverty, flagrant injustice and the destruction of the environment.