The UAW-GM 2007 Negotiations

This is a long analysis of the results of the negotiations and the recent history of the union. As globalisation has accelerated so the strength of US auto (and other) unions declined. However, the US has always been among the least unionised of advanced capitalist countries. Even so the UAW made impressive advances in wages and working conditions for its workers during earlier periods when the big three were the big movers on the world auto maker stage. Now there are more and more defeats and give backs for the unions.
Even so as Gindin points out the union has not fought back in ways it obviously could. They could have become leaders in a movement for universal medicare but instead they have accepted the costs of their medical plan be made the responsibility of the union. They could have campaigned for GM to make more fuel efficient cars and less gas guzzlers vans and SUV's but they didn't.


One Sided Class War: The UAW-GM 2007 Negotiations
Sam Gindin

In 1978, then United Auto Worker (UAW) President Douglas Fraser,
frustrated with corporate America’s new aggressiveness, accused US
business of waging a ‘one-sided class war against working people, the

unemployed, the poor, the minorities, the very young and the very
old, and even many in the middle class of our society.’ In response,

he warned, ‘we in the UAW intend to reforge the links with those who

believe in struggle: the kind of people who sat-down in the factories
in the 1930's and who marched in Selma in the 1960's’. The threat
was, sadly, not serious and the promised identification with the
movement gave way to a deeper identification with the companies.
Auto workers, and American workers more generally, have been paying
the price since.

The UAW negotiations over the last few months might have been a
chance to make up for that generation-long period of working-class
defeat. But once again, only one class was fighting. As a result,
the union which once pioneered new benefits for working people now
contributed to dismembering them. The union whose great sit-down
strikes demonstrated the power of solidarity is now shabbily
negotiating lower wages for workers not-yet hired and not-yet voting.
With this agreement, it is – as the Wall Street Journal noted
(September 27, 2007) – no longer the UAW that sets the bar in the
industry, but Toyota.

The core elements in the agreement are discussed below: health care,
the treatment of new hires and the wage settlement. These
negotiations will have major implications for Canadian workers as
well, especially the Canadian autoworkers who go into Big three
negotiations in September, 2008 that will have to be discussed and
debated.

Health Care: If it’s Broken, Give it to the Union

The most-publicized part of the new agreement has been the change in
the way that health care for retirees will be administered. In the
US, unlike any other developed country, there is no national health
care plan and so health care is a matter of private purchase or
negotiated benefits. In the post-war period the UAW developed a
‘privatized welfare system’ whereby the companies pay health care
for
both actives and retirees (including surviving spouses). It’s that
privatized system – once a symbol of autoworker strength – that is

now in crisis.

Competition in the auto industry has increased and rising health care
costs have become a major factor in that competition. Non-US
companies have the advantage of socialized health care costs, or if
they have come to the US relatively recently, of having small numbers
of retirees drawing health care. GM on the other hand, not only
carries these costs itself but for every active worker drawing health
care, it now also pays for almost five retirees and surviving spouses
– 340,000 pensionsers versus 73,000 active workers.

Some of these pensioners – those over 65 – do get health care under

the medicare program and so GM’s costs are just the supplemental care

the UAW negotiates; but a good number of UAW retirees are well under
65 (partly because early retirement was encouraged as an alternative
to layoffs) and their health care is fully paid for out of the UAW-GM
negotiated plan.

The obvious solution to this dilemma is to follow the rest of the
developed world into some version of a single-payer national health
care plan, and the UAW is in a position to lead the way in such a
campaign. With health care the number one issue in American polls, an
election in the air, and Wall Street and the media pressuring the UAW
to get GM off the hook, the UAW could have declared that this problem
can’t be solved in bargaining. It could have fought against workers
being stampeded into a false solution. It would of course have been
attacked as destroying the American auto industry. But that attention
would also have given it a platform to make its case and speak on
behalf of the 47 million American without health care, the tens of
millions with inadequate care and the millions about to lose the
plans they formerly assumed they had for life.

The union could, in other words, have placed the issue squarely on
the national agenda and looked to convert a looming disaster into an
opportunity. This would undoubtedly have meant real risks, but in
addition to defending its members, leading such an initiative might
also contributed to the long-awaited revival of the moribund American
trade union movement.

That did, of course not happen. The top leadership, its clear, is too
integrated into ‘jointness’, too cautious, too much a part of the
history of defeats to contemplate such a response. What happened
instead was that GM shifted the responsibilities for administering
the health care needs of retirees to the union.

The vehicle for doing this is the Voluntary Employees Beneficiary
Association (VEBA), a new plan to be implemented in January, 2010.
Earlier GM had argued that what they owed the retirees for health
care required an amount equivalent to $50 billion in the bank. That
sum was used to show how high GM’s overall labour costs were. Once
GM was putting up some cash to cover the future costs, its estimates
suddenly fell dramatically: it now argued that at most only about 60%
of this (under $30 billion) would be necessary. The details are
complex, but it seems that:

* GM will transfer $24.1 billion cash to the union and put up a
‘debenture’ of $4.5 b (which may be in the form of GM stock).

* The above sums include not just GM money but an advance by GM on
the monies diverted from the COLA and wages for VEBA.

* If necessary, GM will transfer a maximum of up to $165M per year
over 20 years. The union has agreed to not ask GM for any amounts
beyond the above (‘The UAW and the Covered Group may not negotiate to

increase any of the funding obligations set out herein’, Memorandum
of Understanding, Post-Retirement Medical Care September 26, 2007, p.
9, #13).

* Any further shortfalls – as might happen if returns on the fund are

lower than expected or health and drug costs rise faster – will have

to be met by either cuts in coverage or increased co-pays. According
to the language, this does not have to be taken back to the workers
but can be decided by the plan’s administrators.

* Some funds will be transferred from the pension fund into VEBA.
This will be done by ‘giving’ retirees a special lifetime monthly
benefit of $66.70 but then charging them $51.67 per month for VEBA
(the amounts are apparently equivalent after tax treatment).

* Note that one rationale used by the union to justify this betrayal
of both rights and principles is that now, if GM goes bankrupt after
2010, there will at least be a fund to keep paying benefits. This
will not be a problem in the short run. But since the monies are
phased in and also include GM stock (the ‘debenture’), some of the

promised monies might not in fact be available if GM goes bankrupt.
Here again, the common-sense argument to defend retirees (and actives
who will move into retirement) would have been to reject the new fund
and demand that GM should keep the money and use it to set up its
own fund to guarantee the benefits until such time as a national
health care plan is established.


New Hires: Inequality as Job One

A fundamental principle of the CIO – the industrial unionism that
gave birth to the UAW – was the equality of workers across skills,
gender, and race. Equal pay for the same work and narrow
differentials between workers in the workplace were a matter of
principle as well as of building solidarity for coming struggles.

In the new agreement, however, workers hired into ‘non-core’ jobs
(e.g. sub-assembly, machining, material handling, and janitors where
they are still in the union) will get wages approximately half that
of workers already in the workplace ($14/hr in the case of material
handlers). It’s estimated that as many _ to 1/3 of assembly-plant
jobs are ‘non-core’ (Detroit Free Press, October 4, 2007). New
hires
will have a distinct pension plan and will not be eligible for post-
retirement health care – this applies to all new hires, not just
those in the ‘non-core’ jobs. In lieu of the existing plan they
will
receive a $1/hr contribution to a 401(k) savings plan (which is tax-
deductible for GM).

It’s not hard to see where this is going:

* A weaker union. The first thing new workers see and experience is
the union-company collaboration in making them second-class workers.

* A major threat to the auto parts industry. Earlier, GM outsourced
work to lower-wage components plants and used that threat to weaken
assembly workers. Now they can get revved up again to threaten the
parts industry with sourcing the work back to GM plants if they don’t

lower their wages further.

* A precedent for spreading the new-hire principle to ‘core jobs’.
If
the union acquiesced to the first steps, wouldn’t the companies be
rather stupid not to keep pushing for more?

* Forget organizing. Why would anyone want to join a union proud of
the fact that it may now have lower standards than non-union plants?

Note that the new-hire rate has special significance at GM because
its workforce is so much older and closer to retirement than that at
Chrysler and Ford, meaning that GM may have significant numbers of
new hires. As Bloomberg reports (October 5, 2007), the numbers
eligible to retire over the next five years are 63.5% at GM, but only
30% and 31% at Chrysler and Ford.

Wage Gains: When More is Less

The UAW brochure tries to sell this agreement to the actives based on
the increased income they’ll get over the four-year life of the
agreement (retirees don’t vote on the contract and future hires are
only potential workers/voters). These gains will, it’s asserted, be
as much as $13,056 for a typical assembler. The first $3,000 is a
signing bonus; there are three annual lump sums of 3%, 4%, and 3% of
income which amount to about $2100, $2800, and $2100 respectively
(based on steady work with 10% overtime); the rest comes from an
estimated $.68 in cost-of living (also assumed to accumulate through
overtime).

Leaving aside what has been given up in health care, the new-hire
rate, and other benefits and workplace rights to ‘win’ these income

gains, note that:

- The agreement diverts $.10 quarterly from the cost-of-living plan
to cover ‘health care costs’. Over the life of the agreement and
based on the same assumptions as above, this represents a take-away
of $6,240 or close to half the above gain. (If inflation is lower
than the UAW assumption of 2.44%, the $.10 quarterly diversion may
leave no COLA at all).

- In September, 2006, the UAW agreed to ‘temporarily’ postpone the
3%
annual improvement factor (AIF) (it too went into health care costs).
In the present agreement that has been made permanent. This wage
loss ($.75 for an assembler) would have generated, with the overtime
assumed above, about $7,200 over the life of the agreement.

- Together, the lost COLA and lost AIF more than cancel out any of
the ‘gains’ cited in the brochure. Moreover, since lump sum
payments
– the bulk of the income increase under the new agreement – do not

increase the wage rate. They also do not increase wage-related
benefits like holiday and vacation pay, sickness and accident, life
insurance. But the losses cited above do affect wages and so also
impact on benefits.

- A GM assembler, currently earning $28.17/hr, would need to be
earning $31.02 four years from now just to remain in the same place
in terms of purchasing power (based on the UAW’s inflation assumption

2.44%/yr). Since they will only be at an estimated $28.85 at year’s
end, they will have lost $2.17/hr in terms of what money will buy
over the life of the agreement.
Concessions and Job Security

The main promise of the GM-UAW agreement, as in all concessionary
agreements, is job security. It’s worth recalling the history of such

promises. At the end of the 1970s, the UAW membership stood at
450,000. After a series of agreements, each solemnly promising job
security, the GM membership is now at 73,000 – a stunning decline of

84%! It is difficult to see why new job security promises would put
any worker at ease.

One of the problems with making concessions is that it reinforces the
view that workers were the problem to the performance problems and so
if they take less, the companies’ problems can be fixed. As such,
concessions also divert attention from the real problems. Another is
that it never stops; having discovered that workers will accept less,
its too tempting for companies, especially in the face of
competition, to keep demanding more.

In the auto industry, health care has indeed been a problem for the
US-based companies. But as we noted above, the answer doesn’t lie in

making health care protection even worse, but in fixing this
particular American disaster.

Wage costs are not the problem. Wages and benefits of assembly
workers account for less than 10% of the cost of a car and
differentials between companies are not, in this context,
significant. In any case, the union answer here is clear – especially

now that GM’s competitors are primarily inside the US – and it’s
not
concessions: extend unionization across the sector and take wages and
benefits out of competition. This is easier said than done, but it is
impossible to do while negotiating inferior agreements.

Moreover, productivity in the auto industry has been rising very
fast: real output per worker has more than doubled since 1987. If
anything, workers have a strong claim to sharing in those gains –
especially in terms of work-time, another benefit in which the US
lags the rest of the world (historically, hours of work fell by about
1/3 in the first half of the century but have actually increased
since then). Note that even in comparisons across the industry, the
Big Three compare favourably. The Harbour-Felax Report – which
analysts consider the industry bible on productivity – has stated
that: ‘The Big Three largely have eliminated the productivity gap
with the Japanese’ (Ward’s Automotive Report, December 12, 2005).

A central problem for GM, one at least as important as the health
costs, has been GM’s determination to stick with larger vehicles and

their larger short-term profits. This is not something the union is
responsible for, but had the union itself criticized GM for sticking
with gas guzzlers in the face of rising gas prices and environmental
concerns – rather than being silent or supporting the companies –
its
members would be more secure today.

Conclusion: Towards Outrage and Struggle

There is nothing inevitable about what has happened to autoworkers
and what has happened to their union, but if there is anything that
the history over the past quarter century teaches, it is that without
working class resistance things will most likely continue to get
worse. The question that begs answering is whether this agreement can
become a catalyst for expressing the collective outrage of
autoworkers across the US and North America and in so doing, spark
the long-awaited response to the one-sided class war raging against
them.

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For further information see the following sites:

http://www.soldiersofsolidarity.com.
http://www.centerforlaborrenewal.org.
http://www.gmworkersblog.com
http://www.uaw.org