Labor Advocate Online

In Give-Back Leap Frog, UAW Surges Forward
by Bill Onasch

Sam VarnHagen/Ford, via Reuters

Since the end of World War II, reflecting the importance of the industry, the United Auto Workers served as the pace setter for the American labor movement. Others used the impressive victories won by the UAW at the Big Three automakers as tools to forge their own improvements in wages, benefits, job security and working conditions. For decades, millions of workers came to live well, sent their kids to college, and retired with pensions and health care that assured them dignity and security in their old age. The UAW was the vanguard of the semi-mythical Middle Class in the USA that was once the envy of most of the world.

The arrival of first imported vehicles, then later opening of “transplant” factories in North America by Asian and European carmakers, increasingly intruded this idyllic scene from the mid-Seventies on. Except for a short-lived Pennsylvania plant producing the Volkswagen Rabbit, and some joint ventures such as the late lamented NUMMI, the UAW failed to organize these interlopers. In addition to a patriotic appeal to “Buy American”--that at times took on overtones of bigotry--the UAW leadership began decades of incremental concessions to their Big Three “partners” to keep them “competitive.”

I reviewed some of the history of the rise and fall of these “golden years” of American collective bargaining in a two-part article about a sea change UAW-Big Three agreement in 2007. I opened with this,

“Whether or not you’re a UAW member, if you work for a living in the USA you are going to feel the impact of the recently ratified contracts with the Big Three automakers. Many pundits have labeled these agreements ‘historic.’ Indeed they are. They signify a historic defeat of immense proportions for the entire American working class.”

Some of the game-changer give-backs then reflected growing trends in other industries. By 2007, two-tier wage structures had already been widely implemented in airlines, meat packing, grocery, and hundreds of other contracts great and small. Though not the pace setter in this area the UAW made up for lost time by accepting a Tier-2 at about half the regular wage. It was in fact lower than the starting rate at most of the nonunion transplants and was even far below the average wage in manufacturing.

The few restrictions on the pace of expanding Tier-2 were soon wiped out through a combination of negotiated supplementary concessions given to all three companies early on in the Great Recession and expanded further at GM and Chrysler in the bailout/bankruptcy deal imposed by President Obama. In the name of “pattern bargaining,” then UAW president Ron Gettelfinger tried to get Ford workers to voluntarily accept many of the extra concessions the White House had extracted from the other two--but the ranks rejected this by a large margin.

Legacy Burden
The 2007 surrender on two-tier made resistance to this erosion of solidarity in the workplace much more difficult for other unions still trying to fight it. But even much worse was the acceptance of “legacy burden” as a legitimate concern of the bosses.

The Big Three have roots going back a century or more. Since 1949, UAW workers could count on a decent pension in return for their years of hard work building profitable companies. Since 1953, retirees have had health insurance covered. Other unions used this as a model to obtain similar benefits. As more workers retired over the years--while at the same time outsourcing and technology in auto reduced the number of UAW jobs--they came to outnumber active workers.

The expense of pensions and health insurance were “costed out” in contract negotiations over the years and the employers were expected to set aside sufficient funds to cover them. But the bosses started howling that this normal cost of doing business had become an unsupportable “legacy burden.”

The Big Three in 2007 used the argument that since their transplant competitors had no defined benefit pensions or retiree health plans–and only a small number of retirees–to stay competitive they had to rid themselves of those obligations. Otherwise, they more than hinted they would soon be faced with bankruptcy. That was the rationale used by both company and union for freezing pensions and establishing VEBAs.

The VEBA had earlier been plucked from obscurity by the Steelworkers in an effort to salvage some retiree benefits at bankrupt companies being gobbled up by corporate raiders. There’s also VEBAs in place in some of their rubber contracts, such as Goodyear. The VEBAs set up at the Big Three were much more massive, covering hundreds of thousands of retirees, dependents, and surviving spouses.

As predicted in the earlier article, all bosses now started to confront their own “legacy burden.” Beginning in the private sector with the theme of competitiveness that had worked so well for the Big Three, defined benefit pensions and retiree health insurance were challenged in almost every contract negotiation–usually at least with partial success. Even highly profitable General Electric, with an overfunded pension plan, succeeded in imposing a pension freeze excluding new workers in national negotiations with the IUE and UE earlier this year.

Nor, even though they have no natural competition, was the public sector long exempt from this process. Public sector workers generally have accepted more modest wage increases over the years in exchange for more job, health and retirement security. When tax revenues plunged during the Great Recession and Jobless Recovery public bosses pushed legacy burden to new extremes. Governors and Mayors across the land, whether they be Tea Party or Working Families Party, are reneging on promises past and present to public workers and retirees.

These breaches of once sacred promises to loyal employees for a lifetime of work, now running amok in collective bargaining, are also feeding escalated attacks on a wider front yet–the “burden” of tens of millions now on Social Security and Medicare, along with the expectations of all who once had good reason to look forward to these “entitlements.” The slippery slope descended by the UAW in 2007 has become a wild toboggan ride for the whole working class.

And what about those UAW retirees who were supposed to be protected by the VEBAs? In 2007, it was claimed the funds established by the employers would take care of their needs for eighty years–far more than their expected life spans. This prediction was made on the expectation that fund investments would grow at a nine percent annual rate while health care costs would go up an average of five percent a year.

Even at the time most thought those projections were overly optimistic. Then came the real estate collapse and the frantic gyrations of the stock market--greatly reducing the hoped for returns on investments. Health care expenses have nearly doubled. As a result, after less than four years the VEBA retirees have already had to spend more out of pocket and have lost some services. Here is a chart recently published in the Wall Street Journal graphically showing the hit they have taken so far.


A Stern Approach
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The bureaucracy at Solidarity House still commemorate such class struggle heritage of the UAW as the Flint Sit-Downs and the Battle of the Overpass. But current president Bob King doesn’t speak of class war. He espouses many of the ideas and even the same syntax as Andy Stern. Like the former SEIU president who led the Change to Win split from the AFL, King cultivates relationships with top management at the Big Three and is trying to do the same with the nonunion “foreign” transplants. He reassures them the UAW is not out to cause them grief but can actually bring them “value added.”

Selling this approach to both boss and UAW members was made easier by the fact the White House bailout deal had included a pledge by the union not to strike at General Motors or Chrysler over economic issues. Failure to agree at either of those employers in this year’s bargaining would lead to a settlement dictated by arbitration.

When talks with the Big Three began this year it soon became clear that traditional pattern bargaining–securing essentially the same wages, benefits, and conditions for workers at all three–was being jettisoned for good. Instead, the King’s Men sought to equalize the impact on profitability of each “partner” employer. The biggest disparity between the three settlements was in the lump sum signing bonuses–6,000 at Ford, 5,000 at GM, while Chrysler agreed to only installment payments of 3,500.

Sergio Marchionne–the CEO of Fiat, the now controlling owner of “Detroit” Chrysler– may not yet be familiar with baseball but he pitched a wicked curve ball during the talks. Sergio proposed to do away with the two-tier wage, cynically using the truthful arguement it is divisive in the workforce. But his counter-proposal was to pay everybody 22 dollars an hour–nearly a 25 percent cut for the present big majority of workers. As some of my former coworkers would say, that dog didn’t hunt.

It was agreed at all three to give incremental raises to the Tier-2 workers that by the end of the four-year contract would bring them up to about 19 dollars an hour--still about nine dollars an hour less than what those jobs paid eight years earlier.

The Senior-Tier workers haven’t had a raise in seven years. By the end of the new contracts, they still won’t have had an hourly raise. In another sea change departure from traditional bargaining increased money for workers will come only through lump sum bonuses and profit sharing tailored to each company’s perceived ability to pay. It has now been revealed that the practice since a special deal in 2005 of diverting COLA and various bonuses from worker paychecks to shore up health insurance and the VEBAs is still in place.

The new contracts concluded this year were a sweet deal for King’s partners. Bill Vlasic, writing in the New York Times, opened a perceptive look at the UAW-Big Three contracts with these words,

“After bankruptcies, bailouts and a decade of downsizing, America’s three large automakers wanted to ensure that expensive new labor contracts would not undermine their fragile turnarounds. With the ratification of the last of their new four-year agreements with the United Automobile Workers union on Wednesday, the Detroit car companies have successfully held the line on costs and further closed the competitive gap with their foreign rivals. It was one of the cheapest set of contracts ever negotiated by the companies, analysts said. Historically, new union contracts have meant annual increases in labor costs in this country of 5 percent or more. But the 2011 talks resulted in a much more manageable increase of about 1 percent a year.”

As bad as the general economy is, the BLS reported third quarter wage and benefit costs nationally edged up .4 percent–projected annually that would be 1.6 percent, far below the inflation rate. So the one percent at the again profitable Big Three is quite “manageable” indeed.

Beyond this particular windfall is the new pattern being blessed by the pace-setting union–replacing hourly wage raises with the contingency of mostly unguaranteed lump sum bonuses tied to profitability as shown by the bosses’ bookkeepers.

Not only the growing Tier-2 at the Big Three will be condemned to static low pay, absorbing increased costs of health care, on their way to paltry, uncertain retirement benefits. These will be the new goals of most employers in future collective bargaining in the United States.

Is there anything that can be done to stop and reverse these new pace-setting trends? I believe there is. But, just as in 2007, exploring alternatives will require a part two to this article. Stay tuned for the next installment coming soon.

November 10, 2011

About the Author
The webmaster of the website is a paid-up member of UAW Local 1981—the National Writers Union. During the 70-80s, while employed at Litton Microwave’s Minneapolis operations, he was elected to various positions in UE Local 1139, including Shop Chairman and Local President. In 1980 he took a union leave from the plant to work on a successful UE organizing drive at a Litton runaway plant in Sioux Falls, South Dakota. When Litton began shutting down its four Minneapolis plants Onasch was selected to be a worker representative in a Dislocated Worker Project administered by Minneapolis Community College—where he became a member of the Minnesota Education Association. Returning to his home town of Kansas City in 1989, he soon began a 14-year stint as a Metro bus driver. During that time he published a rank and file newsletter, Transit Truth, chaired a union Community Outreach Committee that organized public protests against cuts in transit service, helped organize a privatized spin-off at Johnson County Transit, and served a term as Vice-President of ATU Local 1287. He has also been involved in US Labor Against the War and the Labor Party since those organizations were launched.

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