Vol. 73/No. 15      April 20, 2009

“What we are asking is difficult,” stated Obama in a March 30 White House talk. “It will require hard choices by companies. It will require unions and workers who have already made painful concessions to make even more.”

The president’s comments come in response to the auto bosses’ demand for additional federal bailout funds. General Motors has already received $13.4 billion and has asked for an additional $16.6 billion. Chrysler has received $4 billion and is seeking another $5 billion.

To obtain these funds, the government told each company to submit a “restructuring” plan by the end of March, shrinking their size and reducing their expenses. This included cutting jobs, reducing wages and benefits, and altering work rules so the companies could become more “competitive” with nonunion plants in the United States owned by companies from other countries. GM promptly announced plans to eliminate 47,000 jobs worldwide, shutting 14 factories.

In February United Auto Workers (UAW) officials agreed to grant concessions that lowered labor costs by up to $1.1 billion, GM officials told the New York Times. These included changes in overtime pay, eliminating the jobs bank, which pays the wages of workers waiting to be recalled to work, and cutting back supplemental unemployment benefits that provide laid-off workers with close to full-time pay.

However, auto bosses are now demanding much bigger concessions. GM and Chrysler insist that tens of billions of dollars they owe to a union-run trust fund for retirees’ health-care coverage be paid not in cash but with their stocks, the value of which has declined precipitously. The UAW approved such an arrangement with Ford Motor Company in March. GM estimates it owes $20 billion to the health-care fund.

Chrysler, Ford, and GM have also offered buyouts to more than 100,000 auto workers, hoping to replace them with new hires making about $14 an hour, half the wages of many UAW members. The union agreed to this two-tier wage structure in its 2007 contract.

But by the end of March this year, GM said only 7,500 hourly employees had accepted the buyout, far below the number of better-paid workers it had hoped to cut. There are some 132,600 workers currently employed at GM, Ford, and Chrysler, and 550,000 retirees and surviving spouses.

The White House auto plan stipulates that Chrysler will receive bailout funds and avert bankruptcy if it forms a joint partnership with the Italian-based car company Fiat by May 1. In a protectionist move, the plan demands Fiat agree to build new cars and engines in the United States, noted the Financial Times.

GM has until June 1 to present its new plan for “restructuring.” The company is already preparing to file for Chapter 11 bankruptcy. This filing is now “certainly more probable,” Fritz Henderson, newly appointed GM chief executive, told the media March 31. He also said the company may not wait the full 60 days to make this decision. Such a move “could tear up labor contracts with benefits the UAW has won over 73 years,” noted Bloomberg News.

The government is also working with GM on dividing up the company’s “good” and “bad” assets through a more “controlled” bankruptcy. “The administration would like to see the ‘good’ GM, comprising brands such as Chevrolet and Cadillac, remain an independent company,” the Wall Street Journal reported.

Under this plan, GM’s tens of billions of dollars in retiree and health-care obligations would be transferred to the bad “old GM,” which would include less profitable brands such as Hummer and Saturn and would remain in bankruptcy court much longer. The sell-off of parts of this company would be prioritized towards paying bondholders and other creditors. The government would spend tens of billions of dollars to finance this bankruptcy proceeding.
 
 
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