The Coming Attack Against Auto Workers--And You

    The real story bubbling within the auto industry is not the news that Toyota vaulted over General Motors in worldwide auto sales. Rather, it's the growing ideological--not economic--drumbeat that is gathering targeting the livelihoods of tens of thousands of auto workers. And this is a direct attack against a decent standard of living for every worker. That means you!

  The ideological assault goes something like this: American auto companies are in trouble. The trouble is caused by "generous" benefits paid to auto workers. Solution: cut those benefits to save the auto companies.

  Yesterday's Wall Street Journal typified the rhetoric that I've been seeing for some time now, rhetoric that has picked up in the past few months and is certain to get even louder. In a piece on DaimlerChrysler, columnist Dennis Berman wrote:

     Forget about making better cars. Or even about the rise of private equity. The best way to understand the sale of Chrysler Group is as blood sport between parent DaimlerChrylser and its North American unions.

       Is DaimlerChrysler willing to get fully ruthless with its employees, in spite of its well-hewn image as loveable corporate citizen? The answer will make for some gripping theater in the months ahead. That is because this deal really is about persuading the company's unions to roll back their own health and pension benefits.

   

I want to explain why these attacks, by in large, are ideological, not economic, in nature. If they were economic, then, a whole other set of issues would be on the table beyond cutting rank-and-file workers pay, health care and pensions. Let's see how.

  First, the real burden to auto companies is health care costs. If the auto executives and their counterparts actually dealt with the economics of health care--as opposed to ideology--they would wake up and be avid supporters for a single-payer health care plan. Enacted this year, such a plan would immediately lift off auto companies tens of billions of dollars--that's BILLIONS--in health care costs for current and, most notable, retired workers.

  This is nothing new. Almost two years ago, I cited General Motors as the prime example of a company that should be arguing that single-payer health care is an economic necessity. Many others have made that point before and since. And, yet...these guys are unwilling to break from their ideological framework, even though the economics are unassailable.

  Second, it is not rank-and-file workers pensions that are causing a financial problem for auto companies, or, for that matter, many other big companies. CEO pensions are the problem. I pointed this out last summer by highlighting a terrific article in the Wall Street Journal. Here are two snippets from that article:

    Even as many reduce, freeze or eliminate pensions for workers -- complaining of the costs -- their executives are building up ever-bigger pensions, causing the companies' financial obligations for them to balloon.

    Companies disclose little about any of this. But a Wall Street Journal analysis of corporate filings reveals that executive benefits are playing a large and hidden role in the declining health of America's pensions. Among the findings:

        * Boosted by surging pay and rich formulas, executive pension obligations exceed $1 billion at some companies. Besides GM, they include General Electric Co. (a $3.5 billion liability); AT&T Inc. ($1.8 billion); Exxon Mobil Corp. and International Business Machines Corp. (about $1.3 billion each); and Bank of America Corp. and Pfizer Inc. (about $1.1 billion apiece).
        * Benefits for executives now account for a significant share of pension obligations in the U.S., an average of 8% at the companies above. Sometimes a company's obligation for a single executive's pension approaches $100 million.
        * These liabilities are largely hidden, because corporations don't distinguish them from overall pension obligations in their federal financial filings.
        * As a result, the savings that companies make by curtailing pensions for regular retirees -- which have totaled billions of dollars in recent years -- can mask a rising cost of benefits for executives.
        * Executive pensions, even when they won't be paid till years from now, drag down earnings today. And they do so in a way that's disproportionate to their size, because they aren't funded with dedicated assets.

And...

    When General Motors cites retiree costs, the giant auto maker has a point: It owed nearly 700,000 U.S. workers and retirees pensions that totaled $87.8 billion at the end of last year.

    But $95.3 billion had already been set aside to pay those benefits when due.

    All of these assets are earning investment returns, which offset the pensions' expense. GM lost $10.6 billion in 2005. But deep as its losses have been, they would have been far worse without the more than $10 billion per year in investment income that the GM pension plan for the rank and file generates.

    The pension plan for GM executives is another matter. Unfunded to the tune of $1.4 billion, it detracts from GM's bottom line each year.

   

To underscore: workers pensions are funded, CEO pensions are not.

  More recently, I also pointed out the vast CEO pension riches now coming to light because of new disclosure rules. So, the obvious solution is to first cut CEO pay and pensions deeply. If you want economic solutions, to paraphrase Willie Sutton, go where the money is.

  Third, as a matter of economics--and, to be fair, a tad of ideology--it's worth noting what auto workers "generous" pensions amount to: an average of $32,000 if you worked 30 years and retired. And that monthly payment by the company GOES DOWN once a worker begins to collect Social Security.

  It's ironic that the ideologues are calling for cuts in auto worker pensions, of all places. After all, it was Henry Ford himself who used to say that he wanted to pay his workers enough money so they could buy Ford cars. Exactly how do the ideologues think retired auto workers, not to mention other workers, will be able to participate as consumers in the fall and winter of their lives if they are asked to live on less even as expenses like health care, rent and gas go up?

  And that's where this all comes back to you. We all need to see the coming attack against auto workers as a direct attack on the ability of average people to make a fair wage and retire with dignity and respect. The attack against auto workers will be lead by the same voices who have fashioned a global economy with rules that enrich a few and impoverish the many; the same people who have created, in our country, the chasm between rich and poor and the obscene spectacle of CEO legalized robbery with very little resistance from our elected leaders.

  Our response has to be very clear: The auto worker pension is not the "gold" standard. It is the decent and fair standard.

Comments

[JustJim]

I see the causes so often cited for the failing US auto industry as the salaries, benifits, high paid CEO's etc etc. What I see as the real problem with the auto industry, besides the fact that that the unions who own the employees have nearly bankrupted the companies by demanding higher shares of the profits, although I haven't seen them offer to reduce wages when profits are down, or even in the red, is the fact that American cars and trucks are junk. I've always bought American vehicles untill three years ago when I bought my first foreign SUV. I have 70K miles on it now and have only replaced the tires and engine fluids. In ALL my American vehicles with that milage, I was on a second transmission, replaced the power steering unit, had to have an engine rebuilt, clutches, AC, fuel injection system, doors are hard to close and the list goes on.
People simply are tired of buying junk for 30 - 40K, and then tacking on another 10K for repair costs immediately after it gets past the 40K millage warranty. Build a better product if they want us to buy their vehicles. Look at any Dodge mini van from the early 90's and show me one where the paint isn't peeling off. They don't even exist.

[Jill Sweet]

All workers should read this!

UAW OFFICIALS BETRAY MEMBERS "2007"

http://www.speroforum.com/site/article.asp?id=10043

[Walt Reuther]

AUTO COMPANIES...."PLEASE RELEASE OUR TOP UAW OFFICIALS!"

While the rich get richer, American unions are betraying and sacrificing middle-class workers. A double standard for UAW officials, such as Ron Gettlefinger, and the rank and file will destroy the union from within.
.... http://unionreview.com/insights-analysis-uaw-betrays-autoworkers

…REUTHER QUOTES

“ NEVER A STEP BACKWARDS”

“ YOU CAN TELL THE VALUE OF A UNION LEADERSHIP BY HOW WELL THEY TAKE CARE OF THEIR DEFENSLESS RETIREES.”

[Pam Brown]

I am never surprised by the rhetoric spewing from anti-union zealots. The people who spew anti-union garbage more than likely have never been a union member. Also, I have found that many of these anti-union guru's are people who make less than a fair living wage. Are they perhaps just a little jealous of their fellow human beings. God forgive them of what they say as they know not what they need and who is taking from them.

[tom w]

Hello

I wonder 'should unions influence car design'?

I have surely not read the new contract between Chrysler and the UAW. However I have read the news reports summarizing UAW’s position and gains/losses.

What surprises me about the union’s stance toward the auto industry is they have not driven the industry into further development, I hope I am wrong.
Wouldn't it be wise to push the CEO's and executive body to improve the vehicles. Improving vehicular standards would there by guarantee long term job security in the future.
If the unions took an active role in demanding better fuel efficiency and better emissions from the vehicles they build it seems the company in a whole would be better off. Short term arguments stating job closure could be overcome by long term growth.
Am I wrong in this assumption?

Sincerely
Tom W
PCB Florida

[kpli]

Thanks for the lovely post, i've read it with interest and had bookmarked this blog for future reference..keep em coming bro, and i wish you A Happy New Year !!

[Steve]

American cars lose their value rapidly while foreign cars do not. Also, I've owned American cars and I've owned Japanese and German cars. This example will explain why the U.S. auto companies are struggling:

We currently own a 1998 Honda Civic: 98K miles, I've only had to change the motor for one windshield wiper and change the tires and engine fluids. That is it.

I bought a 1995 VW Jetta in 1994, owned it 10 years, 180K miles on it with a few issues as it got to 160K. So I traded it in on a 2004 Jetta, still own it, 40K miles not one issue.

We owned a brand new Ford Probe, transmission issues occurred, they replaced it with a used one after I asked for a new one. Once we got to 36K miles, Ford said tough luck on your repair bills. After another issue with the transmission, I drove it straight to a Honda dealer and traded it in on the Civic above. We lost $2K but peace of mind knowing my wife drives a reliable car is worth it.

I owned a Chevy and an Oldsmobile before the first Jetta in 1994. The Olds actually didn't do bad until it was almost 10 years old, but the 4-speed auto transmission was crap. The Chevy Cavalier was cheaply made and it didn't last long.

As the years go by, unless drastic changes occur at U.S. auto manufactures, I'll be buying German or Japanese. I'd buy Italian if I could afford it. The sad part is that the U.S. used to be on top of all this but they became fat, dumb and happy and lost the quality edge. Sorry Detroit.

[axy]

right on the mark, and year before the poop hit the fan. BRaVO!

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[extended auto warranties]

It's quite simplistic to think that the plight of the US auto industry is a mere clash of ideology, if not a clash of selfish intentions. For one thing, Detroit 3's decline can bee attributed to several years of being out-of-touch with the American consumer's wants and the trends leading up to the push for environmentally conscious cars and the surge of oil prices in the world market.

[Bed Wetting Solutions]

Is it really an attack on autoworkers, or is it just the economy resetting 'car purchases' back to where they should have been, had we not had the huge boom of the last ten years?

[Wayne A]

The economic downturn has been devastating for the auto industry. Hopefully things will improve if we can just hold on a little longer.

[Canon Digital Cameras]

Can't understand what is really going on here but thanks anyway for sharing.

[Gift Registry]

Sad to hear but for me auto workers must be given incentives for the work they've done.

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[Credit Repair Services]

poor thing auto workers must be given what's for them..

[Credit Repair Services]

Hopefully things will improve if we can just hold on a little longer...things will be fine.

[Credit Repair Services]

It's ironic that the ideologues are calling for cuts in auto worker pensions, of all places...

[fixyourcredit]

You were absolutely right in your prediction.Well done.The recession will go on for a long time I think so the car industry sales will not increase....

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[kennedy tool boxes]

The state of this country is really sad, and the workers such as these are the ones feeling it most. Unfortunately there is zero job security nowadays and it is something that everyone has to learn how to deal with it.

[Jhon Neil]

this year is still not over and many things can happen to end on a positive note.

[mesa windshield repair]

True. Let's wait until the year ends.

[american gold eagle bullion]

Auto executives and their colleagues really dealt with the economy, health care - as opposed to ideology - will be standing and be an enthusiastic supporter of single payer health care plan.

[Got-A-LUPA]

At the top of this page is an item referencing Daimler-Chrysler, and its tug of war with the UAW referring to it as ("blood sport"). What is missing is the simple fact that European labor unions are far stronger, and well accepted by the public in those countries, including Germany.

It is all history now however, and still I wonder if European unions promote quality as much as the UAW does? The major differences in American cars and German cars have more to do with economic and cultural differences of the consumers who choose the products. That said, very few car ads, by either domestic or foreign companies, broadcast in the united states focus on quality as much as they do on performance and luxury. So who is kidding who about why they chose the car they drive? Do the car companies spend all that advertising money without doing market research to determine what motivates sales? By the way that advertising cost is right there on the "Window Sticker" that "shocks" so many of us.