[Translated from GegenStandpunkt 2–08]
GM, Ford and Chrysler, “The Big 3” of the American automobile industry, are no longer successful enough in the competition on the world's largest domestic automobile market. The competing American multinationals agree that this is an unbearable situation, so costs must be reduced. And the costs that are first and most crucially in sight are the wages of the employees who once had been regarded as living proof that in the heartland of modern capitalism the American worker – successfully represented in a union – earns a good income for good work. For the users, this has looked quite differently for a long time: they are burdened with costs in the payment of their workforce that are not justified by the profits yielded, but hinder profitable production. Consequently, the three competing American multinationals have been out for a long time to systematically end this abuse. In the autumn of last year, they collectively conducted radical cuts that unburdens them of billions in costs, conversely with one blow robbing the automobile workers of their current standard of living in matters of pay: This relates to the company funds for pensions, and secondly to the occupational wage structure.
Because the income that GM & co. pay their workforce is set in collective bargaining contracts handled by their union, the automobile workers union (UAW) is asked to tear up rules that are declared to be “outdated” and sign over to the needs of capital in new agreements. It participates because – not unlike its fraternal organizations in Europe – it is clear in principle that American automobile capital can only restore its competitive position against Toyota & Co. by radical cost reductions in wages. The question for the union as to how it actually stands in the eyes of the workers gives it more problems if it abandons positions on which it has until now based its importance as a competent authority for workers' interests in the automobile companies. However, the good reputation of the UAW as a powerful workers organization is not least based on the fact that their clientele is still regarded as a relatively privileged “middle class” of the workforce, given the massive reduction in the national wage level. This reputation now derives its persuasive power more in retrospect, given that in recent years the automobile workers in Detroit, with the active cooperation of the UAW, have been giving up all kinds of things that non-union workers never had. All the more reason that the agreed-to impoverishment of its members should be made out to be a result of a nevertheless ultimately successful use of union representation. The UAW to some extent succeeds in this to its own satisfaction; a new social role in the representation of workers even emerges with the radical reduction in wages, in which it can prove – wage losses or not – indispensable for the workforce.
It agrees with the big three companies, namely:
The employee health fund for retirees is scratched from the benefits catalog of the companies. With it an elementary union acquirement is attacked, which until now established the responsibility of capital for social benefits that to some extent gave security to the employees when they became sick and elderly. This proletarian life condition, in which the person concerned is no longer at disposal with his labor power for shorter or longer or in the end at all, actually does not concern the users of the labor power at all; this is the well-known point of view of the entrepreneurs. They consider such benefits, as far as they are forced upon them by the state, as “non-labor costs,” costs that are not part of the original wage payments that a worker receives for his work effort. The American state, out of consideration for its capitalist class, has to a great extent skimped on a general welfare state fund like in Europe and has limited itself in the question of a general health and old age pension plan for the proletariat to a rudimentary, state-regulated fund system and thus extremely low social costs for its capitalists. Consequently, American labor unions, with the automobile union at the forefront, have for decades made it their task to wring from capital the establishment of internal social insurance plans, which complement the lean, state-regulated social benefits and generally offer something like a protection for illness and old age. The unions do not consider it to be an objection against the wage that it is chronically not enough for security against the life risks of a worker; instead, they take from this circumstance the task, where it applies, of obtaining from the companies such benefits as supplements to the individual wage. So it has come about that in the USA the mere existence of a company health insurance plan represents a privilege, a not at all self-evident additional benefit, which is good above all for employees in union organized large-scale companies, which have in this way secured frictionless order over their union organized staffs and their profit-benefiting employment of labor.
The big companies of the automobile industry now take this expense in sight, as a no longer sustainable additional cost that undermines their competitive power. Therefore, they decide on a change in the system. They unite to sort out “affordable” and “unaffordable” benefits and to once and for all get off their backs the health costs of their retirees, who have to be taken into account as increasing costs – not least because of their own progress in rationalization: the number of company retirees increases while capital at the same time cuts the number of employed workers and at the same time brings down the number of contributing payers in the company funds. This item has to go – and directly in the name of the whole nation, which with its wealth simply can no longer afford so much health care for the elderly:
“We value our retirees and appreciate their significant contributions in making GM the great company it has been for 98 years. However, the U.S. health care crisis is eroding our nation’s manufacturing base and undermining our country’s ability to compete in a low-cost global economy. These benefits were conceived decades ago, and no one could have foreseen the explosive cost inflation that we have experienced in recent years. These costs are simply not sustainable and result in difficult but necessary decisions. Many other U.S. companies have already taken similar action in the face of these rising costs and increasing global competition. Many companies have eliminated health care for their retirees altogether …” (Letter to employees by Kathleen P. Barclay, Vice President of Human Resources, GM Benefits & Services Center).
In contrast, GM, Ford & Chrysler do not simply abolish health insurance entirely; they present the union with an interesting alternative: either in the future you take the responsibility for this foreseeable to increase, unproductive cost, or soon we can no longer pay anything at all! After some back and forth and some strike actions, the UAW is willing. Health insurance for the retirees is separated from the health insurance for the active employees, who are comparatively less ill and are definitely contributing, so they may continue to deposit into a company health insurance fund. A new fund is created for the health costs of the retirees, with the union officiating as its owner; with GM:
“The UAW agreed to the establishment of a new health insurance fund to be managed by the union. It will take over future health insurance liabilities from GM for about 340,000 retirees and their relatives from 2010 onwards. GM will pay $29.9 billion into the fund, and take over the health insurance costs accrued from 2008 to 2010 of $5.4 billion. GM also promised other benefits and payments over 20 years totaling up to $1.6 billion if the fund’s endowment should be insufficient.” (Financial Times Germany, 9.29.07)
Similar rules apply at Ford and Chrysler, so that the UAW controls a health fund amounting to over $54 billion, a so-called Voluntary Employees Beneficiary Association (VEBA), which is responsible for the health costs of the company retirees, until the entitlements to health insurance in old age expires, with the last recipients passing away. The company will still pay contributions and the employees may still claim benefits up to a 2010 deadline, when health insurance for old age will no longer be offered to GM employees.
For this purpose of getting rid of these payment obligations once and for all, GM & Co. declare themselves ready to hand over billions to the union and make share capital available for the new funds. They do not see the matter in such a way that they thereby erase debts that they have to the retirees or their health insurance plan; in their view, they make a generous advance from their capital assets. It must then however not be too high. Up to the end they argue with the UAW to pay as little as possible in the form of hard cash. Instead they pay the bulk with their own shares or share assignments, which are in addition subject to constraints regarding their marketability. Thus the funds, with some billions in share properties, may make a reliable contribution to the protection of the credit-worthiness of the companies, and the working class agency becomes the beneficiary of their share holder value, thus also the advocate of its ruthless increase; all in the service of the retirees whose health fund now depends on the stock market fate of the three companies – and not only on them. Then its managers see themselves referred to the stock market with the remaining fund assets. Because from the deadline no more payments of contributions from the actively employed come in, which were formerly deducted contributions into the company’s money fund but once and for all compensation for all that, the new welfare fund is able to survive only through successful speculation, on the one hand, and receiving as poor benefits as possible, on the other. The union takes over the new assignment of ensuring for both.
Once again nobody deceives about the “risks” for those who still need pills in old age – least of all the union itself, which already informs the employees what they have to adapt to:
“Given the current state of our industry and the current state of the American political debate about health care there is no risk-free way to guarantee lifetime health care coverage. Not for active auto workers. Not for retired auto workers. Not for anyone“ (UAW President Gettelfinger, 01.17.08, www.uaw.org).
He issues the first hints as to what will probably no longer be “affordable“; and the entrepreneurs obviously count on this, so they deal all kinds of accounting tricks despite their financing problems, and promise limited second helpings, if necessary. In view of the fact that the companies could let their retirees go completely without health insurance, the employees anyway are still lucky if they are at least covered by a union fund administration, no matter what they are then able to afford at the end of life in terms of health insurance. If state and capital see themselves simply unable to carry the “risks” of a health insurance plan for poor people, it is probably clear where this risk is left hanging!
So the UAW’s responsibility grows too: it no longer wants to represent social interests that extort capital, but are now accredited fund managers in the worsened conditions, which the companies pay for with their “pre-financing”; and at the same time it becomes a financial capitalist player on the highest level – a due reward for union concessions in reducing the costs of wages and benefits, as the automobile workers’ representatives considers obvious. In any case, it discusses in return not only the freeing of the companies from these burdens, but also the management of the approval of this fundamental upheaval in collective bargaining wage rules.
The companies consider one such upheaval overdue. They are not satisfied with the usual concessions by the union regarding wage levels and the duration of collective bargaining contracts. They prescribe reductions in costs of a magnitude – 4 billion, for example, at GM – that cannot be attained by everyday wage lowering methods. And they are by no means content with the cost savings from outsourcing, temporary and part-time work and extensive rounds of lay offs, but also adjust the earning capacity of their permanent staff from scratch. For this purpose, they introduce a new distinction into the workplace: from now on they differentiate between “core operations,“ which are still paid according to collective agreement at the hitherto applicable rate, and “non-core operations” which are newly classified – the name says it all – at about half the level of the existing hourly wage. The employees perform everything in the factory the same as yesterday or more, but a good part of them are now “assistants” who get only low wages.
The wages of the workers at the assembly lines will increase from $28.12 to $28.85 per hour with the end of the new collective agreement (with GM). In addition, the union agreed for the first time to a two-tier wage system: “Newly hired assistants, such as drivers, who do not work on the assembly line, will in the future only receive $14.00 to $16.23 per hour. At the moment, replacement offers are to be made to 16,000 employees at full wages in these functions, and with elimination they are to be replaced by cheaper new workers… GM has made production promises for 16 of 18 American auto factories and wants to make 3,000 part time workers full time employees. The labor union has reached its principal purpose of securing wages and other earnings, as well as the jobs of the current members.” (Financial Times Germany, 9.29.07)
Again the UAW rises to a new task. It may and should be present if it concerns the classification of the jobs. The definition as to what is placed in the low wage category and what is not is a collaborative effort between the union and production management, which on “site tours” supplies them with material for its classification business. For example, the UAW and GM in collective bargaining agreed on the number of about 16,000. However, it is clear that capital does not feel bound to such numbers; it urges reclassification be allowed to turn out as many as possible. Also the larger number of “core” jobs are by no means left unaffected. The union finds itself ready to cut the remaining employees also. All previously scheduled accessory production is cancelled; in addition, the wage components that the old workers acquired for themselves by their loyalty to the company are cancelled. New hires open for the company not only the freedom to sort as many as possible into the new cheap wage level. They also offer the opportunity to bridle other “vested rights” of the old staff that it no longer considers bearable. Furthermore, the companies also envisage – they make no secret of this – decisively squeezing down the “core wages” by new hires. For them it is certain that – regardless of the strong decline in supplemental benefits – in the future employees will no longer receive the “$28.85.” basic wage rate still valid according to the collective agreement.
Barely are the new collective agreements a done deal, and Ford and GM let it be known that they want to disassociate in a big way from the employees. Ultimately, they notice that the prepared wage cuts are achieved only to the degree that the workers who are still paid the old wages are ready to be retired and allow a successor to step in their place. GM & Co. therefore make their best efforts to help along the “natural attrition.” They would prefer to replace the whole crew with one stroke. GM thus offers severance payments to its entire staff of 74,000 employees if they are willing to take early retirements or simply turn their backs on their factory and leave the place for the new cheap workers:
“There are some jobs we want to economize on where we are overstaffed; but the bigger part concerns a replacement of staff.” (Henderson, Chief Financial Officer of GM, Wall Street Journal, 02.12.08).
Agreements with the union again serve as a lever for the comprehensive replacement program. It has also made provisions for this case and has arranged with the companies in detail what it has to cost per prole, after completed service life, to be free from workers they judge too expensive or completely redundant. Under no circumstances does the union want to seriously stand in the way of the need of capital for layoffs and replacements – certainly not in times in which capital makes the alternative clear: instead of large-scale investments in the parent plants, thus under the care of the UAW, the company could outsource more jobs. Thus instead they provide for appropriate cheap wage conditions within the company itself.
The company pension fund is tapped to finance this program:
“The money for the compensation of the younger employees is situated by the company; the money for the special payments to the employees with long seniority comes from the company pension fund for workers. As the CFO of GM announced, the pension fund of GM currently has plenty of surplus funds with which bonus payments for early retirement can easily be paid.” (Wall Street Journal, 2.12.08)
Thus the pension contributions of the employees are put to a good purpose. They may use them to finance the settlement costs of their own price reduction.
Beside the “Big 3” with their collective-bargaining organized cost reduction program, there operates at the same time supplier operations, which they have created themselves through outsourcing from the operating division, as forerunners for imposing a general wage level that once and for all says goodbye to the previous level of American auto workers wages with its few social benefits. American Axle (AAM), a GM-outsourced manufacturer of axles and transmission components, initially ensures – for a considerable transition period still bound to the old GM wage level – for more profitability of labor in a different way: “The company is characterized by top quality in this industry and strong growth in productivity,” as the union proudly comments on the reduction of employees from 6,500 to nearly half (uaw.com, 3.1.08). At the end of the transition period at the beginning of 2008, the company cuts the average hourly wage in half, cancels all benefits and eliminates special payments to the program and makes it clear at the same time that it is not interested in union proposals for how “labor costs can be significantly lowered and flexibility of work input secured.” It wants to square off not only with the past wage level, but with the influence of the union. Incidentally, it invokes the fact that the UAW has already conceded such cheap wages to another supplier outsourced by GM. In the case of American Axle, however, the workers refuse to go along and so force the hand of their union leadership, and this results in “the longest strike in the automobile industry in 40 years … AAM recruits strike breakers among the massive number of automobile workers who have been made unemployed, threatens lockouts and outsourcing large parts of production to low-wage countries such as Mexico” (Financial Times Germany, 4.4.08.). The parent company gives its full support for its combat program; affected by the strike in production, it cuts work in 32 factories – sales on the US market come to a standstill anyway – and pleads for toughness: the auto giant fully supports the decision of AAM to deal its workers a decisive defeat. Thus GM supports the outsourced company as a comrade in arms that spearheads its own wage reduction program.
The “decisive defeat“ looms in the meantime: the UAW leadership agrees with American Axle on a collective bargaining contract that lowers wages from a previous $28 for the “core employees” – the division into two parts is there also – to $18.50 and $14.55 for all the rest, as well as the closure of two factories. This offer is submitted to the strikers for a vote – accompanied by the recommendation of their union leadership, which hopes that the workers will show understanding and “make a decision not on anger, but on fact … It is not a good agreement, but at this juncture, it’s the best we can do.” (Gettelfinger in Morningstar.com, 5.19.08.)
So progresses the smashing of wage conditions by the united power of capital. The newly created subcontracting firms invoke the low wage level prevailing “in their industry,” which they decisively advance; and the low wages in the outsourced supplier firms are invoked as the standard for wage reductions in the parent companies.
Worker representation remains
The union tells them how they should see the attacks of capital that the union leadership sanctions. It may seem extremely risky if the union claims one of the largest wage reduction programs of all time and the accompanying mass layoffs as a method for saving jobs, thus as a sacrifice that is worth it – it also does this, for example:
“‘For too many years, America has stood idly by while industries moved overseas,’ said UAW President Ron Gettelfinger. ‘U.S. autoworkers made a decision: We were fighting for U.S. auto jobs. We made progress at GM, and we’re going to continue to advocate for a strong U.S. manufacturing sector.’ The tentative agreement …delivers solid economic gains for active and retired members, despite repeated attempts by GM to impose harsh takeaways.” (UAW Report on the GM contract, www.uaw.org).
In their dedication to national jobs, the UAW takes measures consistent with what the domestic capitalists announce, in references to foreign cheap wage locations, to be their need in cost reductions. All the terms that regulate the demanded radical cuts in wages are then said to be inevitable in principle and a successful protection from even harsher cuts, the measures may yet be so brutal. The union just consistently takes the argument “jobs“ to its conclusion: if the right to be allowed to work at GM, Ford, Chrysler or the their dependent subcontractors stands and falls with one’s “own” company winning in the competition against its hostile brothers – then each contribution that the workforce makes to the competitiveness of “their” national company is considered a sure means to protect their source of survival and in this respect always averts greater damage. So the union makes itself strong for the insight that submission under capital is the only perspective that is open to its members.