What can autoworkers do to protect jobs & pensions?
By
Jerry Goldberg
Detroit
Published Jul 10, 2008 9:41 PM
With U.S. automobile sales plummeting nationwide, Wall Street is raising the
possibility that both General Motors and Chrysler may enter bankruptcy in the
near future. The questions for autoworkers, and especially the tens of
thousands who were essentially forced to take early retirement in recent years,
are how bankruptcy will affect them and what they can do to protect their
rights.
The bankruptcy specter was raised after June sales dropped 35.9 percent at
Chrysler, 27.8 percent at Ford and 18.2 percent (despite a deep-discount sales
program) at General Motors.
Significantly, Toyota and Nissan, whose U.S. sales had actually risen in recent
months due to their dominance in the small-car market, also reported steep
sales drops—21.4 percent at Toyota and 17.7 percent at Nissan.
These statistics reflect the impact of the recession on all auto sales, on top
of the collapse of the truck and SUV market due to overproduction and rising
gas prices.
In the wake of these sales figures, the price of GM stock fell to its lowest
level in 54 years. A Merrill Lynch analyst downgraded the stock to
“underperform” from “buy,” stating that
“bankruptcy is not impossible” if the auto industry continues to
deteriorate. By contrast, an analyst from J.P. Morgan said GM was unlikely to
go bankrupt, while Chrysler was more likely to face imminent bankruptcy.
While auto sales are plummeting in the U.S., sales in developing nations seem
to be on the rise. GM set record second-quarter sales in Russia, Brazil, China
and India. Chrysler announced record international sales as well.
Of course, not one article in the capitalist press has focused on the
potentially catastrophic consequences for autoworkers if GM and/or Chrysler
file for bankruptcy.
What happens to pensions?
In the past few years, tens of thousands of autoworkers took early retirement
as the auto companies used buyouts to drastically trim their workforces. Under
the UAW contracts a worker can retire with a full pension after 30 years of
service—though this is no longer the case for new hires. Hence, workers
as young as 48 years of age, faced with the deterioration of their job
situations and encouraged by the UAW leadership, took advantage of the buyouts
and opted for early retirement.
What will happen to these workers’ pensions if either GM or Chrysler goes
bankrupt? During a bankruptcy, the corporation typically stops putting money
into its pension fund. The Pension Benefit Guarantee Corporation, a
quasi-governmental agency, takes over the pensions, which are vested under the
Employee Retirement Income Security Act (ERISA). The PBGC generally pays only
about 80 percent of the pension liability.
For retirees under 65 years of age, the PBGC pays even less. For example, in
2008, the maximum guaranteed amount for a pension assumed by the PBGC was
$4,312.50 per month for a 65-year-old worker, but only $1,366.88 for a
48-year-old retiree.
Thus, in the event of bankruptcy, the pensions of younger UAW retirees could be
reduced as much as 70 percent. And that is assuming that the PBGC is solvent
enough to cover these pensions!
Benefits are not vested—that is, not fully guaranteed as a legal
right—under ERISA. That means no quasi-governmental agency makes up the
loss of benefits for retirees whose company goes bankrupt. Generally these
retirees lose their health and benefit plans.
GM had promised to cover retiree benefits for workers at Delphi, a manufacturer
of GM parts, as well as its own employees.
It was to avoid the potentially catastrophic consequences of bankruptcy,
causing retiree benefits to disappear, that the UAW opted in the last contract
to take over payment of retiree benefits through a Voluntary Employee Benefit
Association. The VEBA is to be initially funded by contributions from the auto
companies in the amount of $35 billion from GM and $8.8 billion from Chrysler
and then operated by the UAW.
However, the VEBAs are not scheduled to go into effect until January 2010. If
GM or Chrysler goes bankrupt before 2010, will the payments to fund the VEBAs
and make them operational be made? Or will they be liquidated in the bankruptcy
proceedings?
In the case of GM, $4.4 billion of its VEBA payment is to be in the form of
company stock. With that stock falling to record lows, the VEBA, which under
optimum conditions was underfunded by $20 billion relative to current
health-care costs, will have even less funds available to maintain health-care
benefits for retirees and their families.
Of course, bankruptcy would impact not only retired autoworkers. The UAW made
unprecedented concessions in the last contract, agreeing to a two-tiered wage
scale with new hires making one-half the wages of current workers in exchange
for job guarantees. Under bankruptcy, those job guarantees would be eliminated,
and union membership would shrink even more.
In fact, the recession has already made mincemeat of those job guarantees. GM
announced 17,000 layoffs last month, a violation of at least the spirit of the
contract.
The UAW leadership has been silent in the face of this bankruptcy threat and
the dire consequences it could mean for the workers and retirees. It is
critical that the rank and file be on the alert and begin organizing now to
meet this attack.
Bankruptcy calls into question the ownership of the means of production. The
courts must appoint a “trustee” to assume control while the
proceedings go on. It was the auto bosses who in part brought on the current
crisis by refusing to invest their record profits from the sale of trucks and
SUVs into developing fuel-efficient, low-cost cars and other means of
transportation. It’s time for the workers to assert control of the
industry to protect their jobs and benefits and retool the plants based on
production for need, not just short-run profits.
The UAW and its allies should be prepared to demand that they become the
trustee that assumes control of the auto companies if bankruptcy ensues. Most
important, the autoworkers should prepare now to implement this demand with
plant takeovers and occupations to defend their jobs and benefits.
Jerry Goldberg was a Ford assembly-line worker and member of UAW 900 for 12
years. He also was an organizer of the Job Is a Right Campaign.
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