Wall Street plans to devour health benefits

For three months after the Feb. 14 announcement that Chrysler was for sale, Chrysler workers were kept in suspense about their future. They hungered for information while overpaid executives and Wall Street vulture capitalists flew back and forth across the Atlantic for meetings behind closed doors. Now the world knows who the buyer is—Cerberus Capital Partners—and there are others besides Chrysler workers who are worried about their future.

From the chief organ of finance capital one can get a pretty good idea of what the Big Three automakers have in mind for this year’s negotiations with the UAW. “By effectively agreeing to give away 80.1 percent of Chrysler Group to private-equity firm Cerberus Capital Management LP, German auto maker DaimlerChrysler AG has set the table for a potentially far-reaching restructuring of Detroit’s faltering auto giants,” writes the May 15 Wall Street Journal, a day after the sale was announced.

“The New York investment firm and the German auto company have set an ambitious goal: to work with the powerful United Auto Workers union to restructure the $18 billion that Detroit’s No. 3 auto maker estimates it will eventually owe for UAW retiree health-care benefits.”

“Many big airlines and steelmakers have chosen to file for Chapter 11 bankruptcy protection to reduce such liabilities. If Cerberus can devise a formula for doing so outside of bankruptcy court, Ford Motor Co. and General Motors Corp. would almost certainly try to follow suit, potentially affecting some $95 billion in total retiree health-care obligations. Discussions among Big Three executives are under way at ‘the highest levels,’ one person familiar with the situation says.”

The Associated Press added: “Cerberus is seen wielding a big bat when it comes to the bargaining.”

Even back in March, GM’s annual report cited the intention of “vigorously” going after health-care costs. The sale of Chrysler to this group of bat-wielders on Wall Street has accelerated global restructuring. Rather than seeking a competitive advantage over one another, the domestic automakers are collaborating to sharpen their competitive edge against the ever-shrinking but well-paid workforce.

Following the Goodyear model agreed to after last year’s strike, GM, Ford and Chrysler want to jointly establish a Voluntary Employee Benefits Association (VEBA) to be administered by the UAW. This scheme would shift the burden of increased health-care-costs from the corporations to the union-run fund.

VEBAs are non-profit trusts through which corporations invest money for the purpose of financing employee benefits. The money is raised by the tax-exempt interest earned from investments. When GM workers and retirees agreed to make concessions to cover retiree health care costs, GM already had a VEBA to pay for all union and non-union employees’ benefits.

UAW activist William Hanline explains that “there is nothing in the law that prevents a company from using the money in the VEBA for capital expenditures. GM reported doing exactly that in the company’s Proxy statement of 2001. During the year 2000, General Motors raided the VEBA for over 1 billion dollars (1) for a 500 million dollar equity purchase in Suzuki (to build a plant) and (2) for a 500 million dollar equity injection into GMAC to show a profit that year. In other words, they looted the health-care trust to build a plant overseas and transfer money from our healthcare VEBA to the stockholders. ...”

“In the beginning of year 2005, General Motors was telling Wall Street and the world they had 21 billion dollars in cash. Where was that money? You guessed it, ‘in the VEBA.’ In the beginning of the year General Motors decided to take 6 billion dollars out of the VEBA to cover three consecutive quarters of one billion dollar losses. Losses that grew from poor sales, rebates, the employee discounts made available to the public and massive recalls. However, during that time nobody, neither in General Motors or their ‘Cooperation Partner’ (the UAW) spoke of the VEBA.

“Consequentially, General Motors and their ‘Cooperation Partner’ had to come up with some kind of scheme to free up that VEBA money. Naturally, the plot was propagated in the media, newspapers across the country and in GM and Delphi plants as ‘Excessive Healthcare & Legacy Cost.’

“The cleverly designed scheme provides General Motors with the right to absolve its existing VEBA and replace it with a new VEBA.” (www.futureoftheunion.org/?page_id=1036)

Does GM propose to now dissolve this VEBA, absorbing the cash, and start another VEBA with Ford and Chrysler? How will a “Big Three VEBA,” funded to the tune of $55 to $65 billion, be regulated? Will there be safeguards against corporate raiding? If the fund loses money, will benefits be cut?

In any case, the corporations would be forever off the hook for absorbing future cost increases, a savings they would pocket. The ongoing restructuring is really a huge transfer of wealth.

Health care is not the only casualty—traditional defined pensions are also at risk of being incorporated into a VEBA-like setup. While GM and Ford stunned workers last year with announced cuts of 35,000 and 30,000 jobs respectively, now they are already exceeding those projections with Ford “getting out of the foundry business” and GM dumping its light truck division. Who but a fool would trust Chrysler CEO Tom LaSorda and Cerberus Chair John W. Snow not to go beyond the planned cutting of 13,000 workers?

Has UAW President Ron Gettelfinger forgotten that former Treasury Secretary Snow was the architect of another transfer of wealth—Bush’s tax cuts?

As Workers World has often pointed out, when a corporation declares bankruptcy, it becomes a “debtor in possession,” with the workforce being its largest creditor. This is because of the billions of dollars owed workers in deferred wages, or pensions. Therefore the workers have a legal right to seize their assets if necessary.

Even when bankruptcy is not declared, workers have equity in the credit they advance every day in the form delayed payment for their labor power. If an autoworker works 40 or more hours in a given week, he or she does not get paid until the following week. Thus by the first hour of the first shift hundreds of thousands of dollars are owed to autoworkers in unpaid wages.

The picture gets even clearer when benefits—deferred wages—are figured into hourly labor costs. For example, when autoworkers are hired, they work six months or more without health insurance. So for those months they are really loaning out a portion of their wages until the company pays the insurance premium. Then the cycle of partially unpaid labor begins anew until the premium is paid again, perhaps on an annual or quarterly basis. There is a similar cycle with vacations; a worker must work a year or more to get even a week of paid leave.

Then consider pensions. A typical autoworker will put in thirty or more years—giving the boss that many years of partially unpaid labor—before collecting a pension.

Workers need to arm themselves with new understanding. Workers need to dispense with the notion that a corporation has some inherent right to bail out their top management with huge salaries, bonuses and golden parachutes. Workers need to know that they have power as legal stakeholders—that they have a right to protect their equity. Workers have a legal property right to their jobs and all the benefits that traditionally go with them.

In just four months the contracts expire between the UAW and the auto corporations. The moment of class truth is coming. Knowledge empowers the workers to propel the class struggle forward.

Martha Grevatt has worked at the Chrysler plant in Twinsburg, Ohio, for twenty years and serves on the executive board of her local union.

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