Labor unions face new wave of cuts

What caused the United Auto Workers (UAW) leadership to go along with a contract that severely lowers the wages and benefits of its Delphi auto parts workers? Was it the best the UAW could do under the threat of a bankruptcy court imposing even more onerous conditions?

The new contract between Delphi Corporation and the United Auto Workers (UAW) reduces wages for workers from $27 per hour to a maximum of $18 per hour—$14 per hour for new hires.

It eliminates fixed pensions and health care benefits for future Delphi retirees, replacing the pension plan with 401(k) plans and IRAs. It drastically reduces health benefits by imposing deductibles of $300 per individual and $600 per family with co-pays of $1,000 per individual and $2,000 per family. Previously these auto workers’ health costs were virtually 100 percent covered. The contract also eliminates the jobs bank which guaranteed workers’ wages during lay-offs.

It provides that only four of Delphi’s 21 plants will be kept open as Delphi operations, with four plants scheduled to be transferred to a “third party” or General Motors, and three more plants designated as “footprint sites” for future parts production in their vicinity.

Significantly, 32 percent of the workers rejected the contract despite the UAW leadership’s line that the alternative to the settlement was a more vicious contract to be imposed by the bankruptcy court, and the fact that 13,000 of the 17,000 current Delphi workers who voted were temporary workers recently hired at a much lower pay than the traditional UAW wages.

At the Lockport, N.Y., UAW local—where a higher percentage of seniority workers remain on the job, and where the rank and file had actively carried out the “work to rule” strategy to slow down production advocated by the Delphi rank-and-file activist organization “Soldiers for Solidarity”— the workers voted down the contract by a 4-1 margin.

In a recent commentary, Gregg Shotwell—a Delphi and GM worker with over 25 years seniority and an organizer of Soldiers for Solidarity—stated: “Delphi, just like [former CEO Robert S. “Steve”] Miller said in the beginning, is shutting down, chopping up, and selling off all U.S. operations. And yes, like [UAW International President Ron] Gettelfinger confessed, GM made it all possible. The deal was conceived in a back room in Flint in 1998.”

What Shotwell refers to is the fact that General Motors created Delphi in 1999 by spinning off its parts plants into this new corporation in an attempt to reduce its costs for parts by lowering the wages of the auto parts workers.

Even after the spinoff, GM called the shots for Delphi and continued to be involved in Delphi labor negotiations. In 2004, GM, Delphi and the UAW negotiated a supplemental agreement to the 2004 UAW contract with Delphi, an agreement never voted on by the rank and file. This supplemental agreement created a permanent second and lesser tier of wages and benefits for newly-hired Delphi workers.

The new Delphi UAW contract takes the second tier wages and benefits from the 2004 Supplemental Agreement and extends them to the entire Delphi workforce.

In July 2005, as Wall Street clamored for a more aggressive posture to take down UAW wages and benefits, Steve Miller was named Delphi CEO. Miller is a “vulture capitalist” who made his name at Bethlehem Steel, where he used bankruptcy to destroy the wages and pensions of the steelworkers. He quickly took Delphi into bankruptcy in October 2005 and announced plans to lower the Delphi workers’ wages to $9 per hour.

However, the Delphi workers, even under bankruptcy, were in a unique position relative to most workers in similar circumstances. Usually workers at a bankrupt company have limited power—their bosses are on the verge of shutting down production anyway and use this threat to bludgeon the workers into take-backs and concessions.

In contrast, Delphi produces many of the parts that keep General Motors running at a time when GM desperately needs to maintain production as it develops new model lines to recover market share from Toyota and Honda. When Delphi shuts down, General Motors immediately shuts down.

The rank and file sensed this potential for a struggle. On their own, a group of Delphi workers organized Soldiers for Solidarity, and traveled the country organizing Delphi workers to challenge the bankruptcy and wage cuts, layoffs and destruction of pensions that were threatened.

They developed a strategy called “work to rule,” encouraging workers to strictly stick to all safety rules in the plants, as a means of slowing production and asserting workers’ control.

Faced with GM’s fears of a Delphi strike and this rank-and-file uprising preparing the workers for a massive fight to challenge the onerous contract Miller threatened, over time Miller was forced to tone down his arrogant bluster and was even removed as Delphi CEO.

It was the power that the Delphi workers had to shut down GM production that put them in a relatively strong position. The UAW leadership could have used this power to challenge the bankruptcy proceeding, telling Delphi and the courts that if they tried to impose Miller’s wage cuts, the union would strike Delphi, shut down GM and mobilize the UAW’s power to strike a blow at the use of bankruptcy as the new, favored method of union-busting and destruction of workers’ wages and benefits.

This could have galvanized the entire working class.

Instead, the UAW leadership used GM’s fear of a shutdown of production to essentially force GM to soften the blow to current Delphi workers, as the union cooperated with Delphi in transitioning in the second tier of lower wages and benefits for all Delphi workers.

First the UAW got GM to offer significant buy-outs to give Delphi workers an incentive to retire or otherwise leave the corporation. Through these buy-outs, approximately 13,000 of the 17,000 UAW Delphi workers left the company and were replaced by temporary workers who made $14 an hour with no benefits. Many of the workers who took the buy-outs have stated they only did so because they felt forced out by the company and the union leadership who essentially encouraged them to leave.

In the new settlement, GM again intervened to soften the blow. The 4,000 Delphi workers who continued to be covered under the traditional UAW contract are given an extra $35,000 payment a year for the first three years of the contract, funded by GM, to soften the blow of their wages being reduced from $27 an hour to $18 per hour effective immediately. And the other 13,000 newly hired temporary workers are made full-time union members with the wage and benefit package outlined above.

Why did the UAW choose this path of using its power to shut down GM production to transition to a lower wage and benefits package, rather than taking on the fight to maintain the traditional UAW wages and benefits which were won over 60 years of militant unionism?

Faced with globalization and the ability of corporations to transfer production overseas and utilize new technology to quickly integrate overseas low-wage production, the UAW leadership essentially accepted the ruling-class argument that auto workers, at least in parts production, had no alternative but to accept a fundamental lowering of wages and benefits as an alternative to production disappearing entirely from the U.S.

It was this ideological view of the need to accept lower wages and benefits that guided the UAW leadership throughout the Delphi struggle.

Of course, the idea that auto workers are overpaid and that U.S. companies cannot be profitable as a result is a complete fabrication.

UAW President Gettelfinger in a speech noted that each auto worker produces approximately $300,000 in value, quoting a study by the U.S. census on manufacturing. Even if an auto worker makes $80,000 with overtime, that still is $220,000 in surplus value for the bosses. And of course, in the 1990s, under the same UAW contracts that exist today, Ford, Chrysler and GM all made record profits when they were building products the consumers wanted.

The current crisis facing the U.S. auto makers is largely a product of their of own greed, in refusing to shift to gas efficient and smaller cars because the profit margin was less than that for SUVs and trucks, thus causing them to lose market share to Toyota, Honda and Hyundai.

For the capitalists the question is not whether they can make a profit. Rather, it is how to increase the rate of profit, which means lowering the value of the workers’ labor.

In its court papers asking to repudiate the UAW contract, Delphi never argued it could not make a profit paying traditional UAW wages, as it was required to do under the law. Rather, Delphi simply argued that because its competitors were paying less, they should be allowed to pay lower wages and benefits as well.

The UAW leadership’s Delphi strategy has opened a Pandora’s Box. Any parts producers paying decent wages and benefits will now want a “Delphi contract.” The Delphi settlement has helped whet the appetites of Ford, Chrysler and GM to impose a similar contract in the assembly plants as well, especially with Chrysler having been sold to Cerberus, a private equity corporation. (See article on preceding page.)

The next period will tell a lot about the future of the UAW, both at Delphi and throughout the auto industry. For one thing, thousands of Delphi workers took early retirement in the belief that GM will guarantee their pensions in the future. But the contract supplement dealing with this question was conveniently omitted in the contracts distributed to the workers. Delphi’s pension plan is already underfunded by billions of dollars.

The introduction of the 13,000 younger workers who were hired by Delphi in the last year potentially brings an element of fresh energy and militancy into the union. Can these workers be organized and mobilized to fight Delphi’s scheduled plant closings and layoffs and defend their jobs?

Even under the lower wage and benefits scale, in the current economic climate in the industrial Midwest, these are still desirable union jobs that these younger workers will surely feel are worth fighting for. In the already devastated industrial Midwest, Delphi plant closings will destroy more and more communities. Perhaps community organizers as well as union activists can raise the demand for a “Moratorium on Plant Closings,” and reach out and organize the new younger Delphi UAW members to fight to stop the proposed plant closings and defend their right to their jobs.

Most significantly, if the Big Three push to impose a “Delphi contract” on the assembly plants, will this wake up the rank and file and produce a fight back?

These questions will be answered in the coming months. All class-conscious workers must be prepared to come to the aid of the auto workers in the battles that are sure to come.