Reidblog [The Reid Report blog]

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Friday, December 19, 2008
How to (almost) bust a union
The White House plan to use $17 billion in TARP funds to provide short-term loans to automakers was greeting with cheers on Capitol Hill, and in the boardrooms of General Motors and Chrysler, the two companies who will split the cash. But the UAW isn't cheering, and neither should American workers, including in the South, because at the end of the Republican rainbow is plan to not just bust the United Auto Worker union, and paralyze it politically, but also, and more important to conservatives, a plan to break the middle class wage itself, for workers north ... and south. You see, the Bush plan calls on the union to accept wages comparable to those paid by foreign automakers, located down South. But what is it that those automakers really want? They want to pay workers what's called a "prevailing wage," and they want the UAW to be forced to do the same. Why? I'll explain in a moment. First, let's look at the specific terms of the White House rescue plan, which I'll add, needed to be passed, only I wish it hadn't been passed in this form. The details, courtesy of the White House website:
Terms And Conditions

The binding terms and conditions established by the Treasury will mirror those that were supported by a majority of both houses of Congress, including:

    • Firms must provide warrants for non-voting stock.
    • Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
    • Debt owed to the government would be senior to other debts, to the extent permitted by law.
    • Firms must allow the government to examine their books and records.
    • Firms must report and the government has the power to block any large transactions (more than $100 million).
    • Firms must comply with applicable Federal fuel efficiency and emissions requirements.
    • Firms must not issue new dividends while they owe government debt.

The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:

    • Reduce unsecured debt by two-thirds via a debt for equity exchange.
    • Make one-half of Voluntary Employee Beneficiary Association (VEBA) payments in the form of stock.
    • Eliminate the jobs bank.
    • Work rules that are competitive with transplant auto manufacturers by December 31, 2009.
    • Wages that are competitive with those of transplant auto manufacturers by December 31, 2009.
Sounds good, right? Limits on executive pay, scaling back on the corporate jets, and the federal government gets stock. Great. But look at the last two provisions again:
  • Work rules that are competitive with transplant auto manufacturers by December 31, 2009.
  • Wages that are competitive with those of transplant auto manufacturers by December 31, 2009. [Emphasis added]
What does that mean? Let's go to the Los Angeles Times, and an op-ed by Unite Here food service union president Bruce Raynor, which takes us back to last week's failed Senate vote on an auto bailout that looks suspiciously similar to what Bush announced today:
The foreign nonunion auto companies located in the South have a plan to reduce wages and benefits at their factories in the United States. And to do it, they need to destroy the United Auto Workers.

Last week, Senate Republicans from some Southern states went to work trying to do just that, on the foreign car companies' behalf. Senate Minority Leader Mitch McConnell (R-Ky.), Sen. Bob Corker ( R-Tenn.) and Sen. Richard C. Shelby (R-Ala.) -- representatives from states that subsidize companies such as Honda, Volkswagen, Toyota and Nissan -- first tried to force the UAW to take reductions in wages and benefits as a condition for supporting the auto industry bailout bill. When the UAW refused, those senators torpedoed the bill.
Again, these are American Senators, colluding with foreign auto companies, many of whom are so heavily subsidized by their home governments, they practically are part of those governments, to LOWER THE WAGES OF WORKERS IN THEIR OWN STATES, not just the workers in Detroit. The L.A. Times piece continues:
When one compares how the auto industry and the financial sector are being treated by Congress, the double standard is staggering. In the financial sector, employee compensation makes up a huge percentage of costs. According to the New York state comptroller, it accounted for more than 60% of 2007 revenues for the seven largest financial firms in New York.

At Goldman Sachs, for example, employee compensation made up 71% of total operating expenses in 2007. In the auto industry, by contrast, autoworker compensation makes up less than 10% of the cost of manufacturing a car. Hundreds of billions were given to the financial-services industry with barely a question about compensation; the auto bailout, however, was sunk on this issue alone.

UAW President Ron Gettelfinger realized that the existence of the union was under attack, which is why he refused to give in to the Senate Republicans' demands that the UAW make further concessions. I say "further" because the union has already conceded a lot. Its 2007 contract introduced a two-tier contract to pay new hires $15 an hour (instead of $28) with no defined pension plan and dramatic cuts to their health insurance. In addition, the UAW agreed that healthcare benefits for existing retirees would be transferred from the auto companies to an independent trust. With the transferring of the healthcare costs, the labor cost gap between the Big Three and the foreign transplants will be almost eliminated by the end of the current contracts.

These concessions go some distance toward leveling the playing field (retiree costs are still a factor for the Big Three). But what the foreign car companies want is to level -- which is to say, wipe out -- the union. They currently discourage their workforce from organizing by paying wages comparable to the Big Three's UAW contracts. In fact, Toyota's per-hour wages are actually above UAW wages.

However, an internal Toyota report, leaked to the Detroit Free Press last year, reveals that the company wants to slash $300 million out of its rising labor costs by 2011. The report indicated that Toyota no longer wants to "tie [itself] so closely to the U.S. auto industry." Instead, the company intends to benchmark the prevailing manufacturing wage in the state in which a plant is located. The Free Press reported that in Kentucky, where the company is headquartered, this wage is $12.64 an hour, according to federal labor statistics, less than half Toyota's $30-an-hour wage.

If the companies, with the support of their senators, can wipe out or greatly weaken the UAW, they will be free to implement their plan.
So you see, southerners, you've been had ... again. Your Senators want to crack your wages IN HALF, and make you take the pay cuts with a smile (you beat those dirty old unions, hooray! The South shall rise again...!)

But of course, a provision in the Bush plan makes that plan unlikely to succeed, at least not unless Hank Paulsen has a Jeb Bush style "devious plan" to crush the UAW by January 20th. The provision is married, paragraphically speaking, to an afterthought of the deal: making the other major stakeholders, besides labor, share the load:
These terms and conditions would be non-binding in the sense that negotiations can deviate from the quantitative targets above, providing that the firm reports the reasons for these deviations and makes the business case that it will achieve long-term viability in spite of the deviations. In addition, the firm will be required to conclude new agreements with its other major stakeholders, including dealers and suppliers, by March 31, 2009. [Emphasis added by the White House, not me]
The union can, and will, appeal the work rules and pay "targets" in an appeal to the Obama administration. And Barack Obama has done us the considerable favor of nominating a true friend of the labor movement, California Rep. Hilda Solis, to be his next labor secretary (witness the frothy-mouthed reaction of anti-unionites here), not to mention Bill Richardson, who will be heading the Commerce Department, and his in-coming financial team. Un-American mission (by the Dixie Axis of Corker, McConnell and Shelby, et.al.) not accomplished.

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