Jobs, Wages, Health Care
Pensions: All in Jeopardy
Fallout from
the Sale of Chrysler
By CHRIS KUTALIK
and TIFFANY TEN EYCK
|
Auto
workers are bracing for a bumpy road ahead at Chrysler, following the
May 14 announcement that Daimler-Chrysler (DCX) would sell off 80
percent ownership of the company to Cerberus Capital Management, a
private equity firm. The surprise sale may tip the balance of power
further against the United Auto Workers (UAW) as the union faces the
expiration of its agreements with the Big Three auto manufacturers in
September.
|
|
|
Leveraged Buyouts By The Monied
Crowd
More ominously it may also herald the
deepening of disturbing trends faced by U.S. workers as speculative
financial interests play more and more of a role in the restructuring of
their workplaces. Buyouts of ailing mostly-unionized companies by
private equity firms, hedge funds, and private multi-billion dollar
investors in the U.S. steel, coal, airlines, and carhaul industries in
recent years have on occasion led to "strip-and-flip" style
restructuring that downsizes and merges fragments of older companies
before selling them off.
|
|
|
|
|
Ask The Airline Employees
Worse for the workers involved in this
turnaround restructuring, it has also frequently led to large-scale
layoffs, wage/benefit givebacks, the dumping of pension and retiree
health care benefits, and the weakening of union strength in affected
industries. Though often aided by federal bankruptcy courts, this
process is not dependent on bankruptcy alone--a decided advantage to
bankruptcy-adverse companies like the Big Three.
|
|
|
Canadian Auto Workers
In the lead-up to the Cerberus sale,
union leaders in the United Auto Workers, the Canadian Auto Workers, and
I.G. Metall (Germany's largest metalworking union) all voiced fears that
a sale of the Chrysler unit by Daimler would lead to just such a trend.
In the lead-up to the Cerberus sale,
union leaders in the United Auto Workers, the Canadian Auto Workers, and
I.G. Metall (Germany's largest metalworking union) voiced fears that
such a sale might lead to layoffs, wage and benefit concessions, or the
dumping of pension and retiree health care benefits.
"They're going to give us a couple
years [to see if they can make profit] and if they can't they're going
to break us apart, and break off Jeep. I'm scared to retire," said Paul
Wohlfarth, a member of UAW Local 12 with 30 years in at the Chrysler
Jeep plant in Toledo, Ohio.
|
|
|
Hargrove C.A.W |
|
|
Fineberg At Cerrebus |
SEEKING
CONCESSIONS
"It's bull that private equity firms
are looking for long term-investment," said Mike Parker, an electrician
at Chrysler's Warren, Michigan plant and a member of UAW Local 1700.
"One, that's certainly not been Cerberus's rep and two, look up what's
happened at [bankrupt auto parts manufacturer] Delphi."
In its 15 years of operation, Cerberus
has bought up companies in a range of industries, from real estate to
governmental outsourcing services to firearms to transportation
(totaling over $24 billion in assets). Cerberus then institutes
cost-cutting measures and sells the restructured companies back to
investors at big profits.
Last year it began making bids for a
number of pieces of the U.S. auto industry, including controlling
interests in GM's lucrative financing arm, GMAC, and Delphi. Besides
Chrysler, it currently controls 51 percent of GMAC and five auto parts
suppliers: GDX Automotive, CTA Acoustics, Tower Automotive, Guildford
Mills, and Peguform.
|
Cerberus's bid for Delphi was opposed
by the UAW after the firm announced it was seeking steep cuts in the
modest wage and benefit increases promised to Delphi workers by 2011.
While it's not immediately clear what Cerberus will be asking of its
newly acquired DCX workers, the biggest ball in play is health care
benefits, one of the first labor costs companies like Cerberus look to
shed.
|
HEALTH CARE
SHIFTING
Cerberus's expected drive for
concessions may also force the UAW to shoulder the Big Three's health
care obligations. The Wall Street Journal and others in the business
press have speculated that auto makers may push for a deal that will
have the union assume a huge chunk of Chrysler's health care costs in a
voluntary employees beneficiary association (VEBA, a union-administered
health care fund).
GM and Ford have sought similar
agreements in the last two years. If the companies prevail the VEBA
would assume an estimated $95 billion in current and future health care
costs.
UAW Local 1700 member Brett
Talbot-Ward said that health care is of "vital importance" to workers
because of the dangerous work they do. Auto companies, said Talbot-Ward,
"create the situation were they injure us and they should be the ones to
deal with that. The unions need to be constantly vigilant and trying to
get more for their workers, not having to deal with concessionary
behavior with their workforce."
|
|
Talbot-Ward said that a potential VEBA
situation would weaken their union, as the UAW could be forced to
administer health care concessions to its own members.
|
Gettlefinger |
THE DEALT HAND
Despite its previous vocal opposition
to a Chrysler sell-off, the UAW International was quick to accept the
sale as an accomplished fact. At a May 15 press conference UAW President
Ron Gettelfinger said, "Based on everything that we heard, we, without
reservation, have made the decision that we would support the decision."
Leaders of the Canadian Auto Workers
were initially not as accepting. CAW President Buzz
Hargrove said that he was "pissed off"
that the CAW was not included in discussions about the purchase and
added that the CAW would not approve until Cerberus promised to stave
off job loss for 15 months.
|
Hargrove said that the CAW had
problems with the idea of a private equity firm buying the company:
"They're not interested in buying cars. This could be a bicycle shop as
far as they're concerned. As long as they see an opportunity to make a
lot of money in a short period of time they'd be buying in."
Within a few days Hargrove changed his
tune and supported the purchase after getting a guarantee that Cerberus
would not institute layoffs beyond Chrysler's restructuring plan laid
out earlier this spring.
|
WHAT NEXT?
With workers making huge concessions
to both GM and Ford in recent years, Chrysler was the UAW's foot in the
door around wages and benefits. With DCX sold off, the union could be
walking into negotiations this fall with less leverage than ever.
"What will happen at the next contract
depends on what happens now," said Parker. "If we are not in position
and ready to go, the company is going to walk away with our contracts.
The union needs to build a credible strike threat, work-to-rule threat,
or inside strategy, so they can have some inside bargaining power."
Unions in other industries facing
similar crisis have found new ways to play a role, like the Steelworkers
who've targeted and locked out buyout deals such as the attempted
November 2006 merger between Brazilian steel manufacturer and U.S.-based
Wheeling-Pittsburgh. Though the Steelworkers have not successfully waged
full-scale fightbacks in steel, they have had some limited success in
using strong successorship language in contracts (fought for in better
times) and financial tactics to halt takeover bids.
Wohlfarth said he hopes the UAW will
use this opportunity to start organizing in other parts of manufacturing
to stave off or slow down concessions. "Once the Big Three cuts our
wages and benefits, I think there's going to be a downward spiral of
wages and benefits [across the auto industry]. Toyota workers have been
living off the back of the UAW and say they don't need a union, but
they're in for a rude awakening."
Chris Kutalik
and Tiffany Ten Eyck work for
Labor Notes in Detroit.
They can be reached at:
chris@labornotes.org
|