"Is The UAW Too Big To Renegotiate?"

AP – In this Nov. 19, 2008 file photo, auto industry executives, from left, General Motors Chief Executive …

Humbled and fighting for survival, Detroit's once-mighty automakers appealed to Congress with a retooled case for a huge bailout Tuesday, pledging to slash workers, car lines and executive pay in return for a federal lifeline. GM said it wouldn't last till New Year's without an immediate $4 billion and could drag the entire industry down if it fails.

General Motors Corp., asking for as much as $18 billion to keep afloat and survive even worse economic storms, painted the direst portrait to date of what could happen if Congress doesn't quickly step in.

"There isn't a Plan B," said Chief Operating Officer Fritz Henderson. "Absent support, frankly, the company just can't fund its operations." Without help, the company warned, "the company will default in the near term, very likely precipitating a total collapse of the domestic industry and its extensive supply chain, with a ripple effect that will have severe, long-term consequences to the U.S. economy."

New sales figures underscored the seriousness of the situation. Ford said its November U.S. light vehicle sales tumbled 31 percent, while sales at Toyota, Japan's No. 1 automaker, fell 34 percent despite its extension of zero-percent financing on many vehicles.

All three plans envision the government getting a stake in the auto companies that would allow taxpayers to share in future gains if they recover.

Along with detailed stabilization plans, the auto executives were offering up a hefty dose of humility and a host of symbolic concessions designed to repair their images, badly tattered after they arrived in Washington last month on three separate private jets to plead for federal help.

Ford CEO Alan Mulally, GM CEO Rick Wagoner and Chrysler chief Bob Nardelli all planned to road-trip to Washington in fuel-efficient hybrid cars for hearings on Thursday and Friday.

Mulally and Wagoner both said they'd work for $1 per year if their firms took any government loan money, while Ford offered to cancel management bonuses and salaried employees' merit raises next year, and GM said it would slash top executives' pay. Both said they would sell their corporate aircraft.

This executives are going out of their way to show deference to lawmakers and a willingness to flog themselves for past mistakes. "I think we learned a lot from that experience," Mulally told The Associated Press in an interview.

Ford Motor Co., in far better shape than GM and Chrysler LLC, asked for a $9 billion "standby line of credit" to stabilize its business but said it didn't expect to tap the funds unless one of Detroit's other Big Three went bust. Its plan projected Ford would break even or turn a pretax profit in 2011.

The company plans to cut its number of dealers by more than 600, to 3,790 by the end of the year.

The unions were preparing to make sacrifices as well. United Auto Workers leaders summoned local union leaders from across the country to an emergency meeting Wednesday in Detroit to discuss possible concessions. Up for discussion were the possibility of scrapping a much-maligned jobs bank in which laid-off workers keep receiving most of their pay and postponing the automakers' payments into a multibillion-dollar union-administered health care fund.

Ford's recovery blueprint said it would invest $14 billion over the next seven years to boost its vehicles' fuel efficiency, and it said it would improve the overall efficiency of its fleet by an average of 14 percent next year. The company plans to speed its rollout of electric and hybrid gas-electric vehicles.

And Ford is calling for a partnership among automakers, parts suppliers and the government to develop new battery technologies domestically, so the U.S. doesn't have to rely on foreign batteries — as it now does on foreign oil — to power its cars.

Besides cutting its number of dealers, it will trim its major sourcing suppliers by more than half, to 750 from 1,600.

GM said it would make huge cuts in its numbers of workers as well as reductions in its vehicle brands and plants by 2012. The auto giant is seeking a $12 billion loan to keep it running, plus a $6 billion line of credit in case market conditions worsen.

GM, according to its quarterly report filed with the Securities and Exchange Commission, owes creditors $45 billion and it must pay more than $7.5 billion early in 2010 to a UAW-administered trust fund that will take over retiree health care payments.

Ford owes more than $26 billion, with $6.3 billion due to its UAW trust fund at the end of 2009. Chrysler, a private company, does not have to open its books, but its CEO, Nardelli, has said it would be difficult for the company to make it without federal aid. All three likely are negotiating with the UAW for delays in payments to the trusts.

The companies are resisting calls that they file for bankruptcy, arguing that no one would buy a car from an automaker that might not survive the life of the vehicle.

AP – In this Oct. 7, 2008. file photo, United Auto Workers president Ron Gettelfinger talks to reporters …

The United Auto Workers union, according to CRP, ranks 16th all-time as a contributor to federal campaigns, but gives almost exclusively to Democrats. For this year's elections, the UAW gave $1.4 million to federal candidates but also spent another $4.8 million to support Democrats and oppose Republicans in ways other than direct donations.

Even as Detroit's Big Three teeter on collapse, United Auto Workers President Ron Gettelfinger said Saturday that the problem is not the union's contract with the automakers and that getting the automakers back on their feet means figuring out a way to turn around the slumping economy.

"The focus has to be on the economy as a whole as opposed to a UAW contract," Gettelfinger told reporters on a conference call, noting the labor costs now make up 8 percent to 10 percent of the cost of a vehicle.

"We have made dramatic, dramatic changes and the UAW was applauded for that," he said.

Instead, Gettelfinger blamed the problems the auto industry is suffering from on things beyond its control — the housing slump, the credit crunch that has made financing a vehicle tough and the 1.2 million jobs that have been lost in the past year.

"We're here not because of what the auto industry has done," he said. "We're here because of what has happened to the economy."

Gettelfinger also called on Congress to act quickly on a bailout plan for the auto industry, saying action is necessary before President-elect Barack Obama takes office in January.

Before voting on aid to ailing automakers, Republicans in the Senate will take aim at the UAW and some benefits that many Americans find excessive.

Sen. Kit Bond, R-Mo., a moderate hoping to help Detroit, told Automotive News the UAW will have to join auto executives in making sacrifices. Likely to be targeted by Bond and other Republicans: the Jobs Bank — the UAW equivalent, in the public's mind, of corporate jets.

"Management, workers and investors are going to have to make sacrifices if they truly want to turn around their companies enough to earn taxpayer help," Bond told Automotive News last week in an e-mail message.

The Jobs Bank requires the Detroit 3 to pay nearly full wages to hourly workers who have been laid off. Although the number of workers in the Jobs Bank has dwindled, the concept has become a powerful symbol of auto industry excess.

General Motors is likely to propose its elimination, says a source familiar with the company's thinking.

Last week Bond did not spell out precisely which concessions he expects from the UAW. But during the congressional debates, many GOP lawmakers singled out the Jobs Bank as a wasteful Detroit 3 practice.

"The enormous costs in union-required benefits are unsustainable," said Sen. Elizabeth Dole, R-N.C. "Renegotiating these contracts would be essential if there were to be hope of keeping these companies afloat."

Added Sen. Robert Bennett, R-Utah: "Hourly workers are going to have to have their contracts renegotiated, and some of them are going to lose their jobs."

The Jobs Bank costs the Detroit 3 automakers $478 million a year, estimates Mark Perry, an economics professor at the University of Michigan-Flint. Even if that program is eliminated, the union may be asked to accept additional concessions to fulfill Congress' notion of shared sacrifice.

Himanshu Patel, an auto industry analyst with JPMorgan, calculated the concessions necessary for GM to break even at an annual industry sales rate of 13 million vehicles.

Patel assumed that financial concessions would be split evenly between GM's unions and creditors. With that in mind, he concluded that average wage-and-benefit costs would have to drop from $60 an hour to $44.

Bond told Automotive News his aid proposal is "the only plan that has a chance to be signed into law." It would convert a pool of $25 billion already approved for factories to retool for fuel-efficient vehicles into emergency loans for the Detroit 3. The compromise would replenish the retooling program later.

In addition to Bond and Levin, the bill is co-sponsored by Democrats Debbie Stabenow of Michigan, Sherrod Brown of Ohio and Robert Casey Jr. of Pennsyslvania, as well as Republicans George Voinovich of Ohio and Arlen Specter of Pennsylvania. Voinovich calls the measure "the only game in town," an aide told Automotive News last week.

Democratic congressional leaders object to a diversion of the retooling money. Instead, they want to carve out $25 billion in loans to the Detroit 3 out of the $700 billion bailout fund for financial institutions. The Bush administration rejects that approach.

     The question that seems to be most important in the Detroit auto makers bailout is not whether the Big Three auto makers are too big to fail but rather is the United Auto Workers Union (UAW) too big to renegotiate their bloated "fat cat" union contracts with GM, Ford and Chrysler. Making about $70.00 an hour in wages and benefits, getting laid off with full wages and retiring with company paid full health benefits are not enjoyed by the vast majority of American wage earners and retirees. As I see it, the UAW needs to give up it's "Jobs Bank" and retirees health benefits. Get the lay off benefits and Medicaid that all other US working class and retired workers have available and enjoy having a job and a retirement pension. Works for every other American working class family. But we mustn't forget that the UAW has put a lot of money into the Barack Obama campaign and the Democratic party as a whole, for many years. As far as Nancy Pelosi, Harry Reid and other organized union shills are concerned, the UAW is too big to renegotiate! Oh, the power of campaign contributions!

tags: uaw  ford  general motors  chryslers  congress  takebackamerica  politics  business  capitalism  

links: digg this    del.icio.us    technorati    reddit