What can autoworkers do to protect jobs & pensions?

With U.S. automobile sales plummeting nationwide, Wall Street is raising the possibility that both General Motors and Chrysler may enter bankruptcy in the near future. The questions for autoworkers, and especially the tens of thousands who were essentially forced to take early retirement in recent years, are how bankruptcy will affect them and what they can do to protect their rights.

The bankruptcy specter was raised after June sales dropped 35.9 percent at Chrysler, 27.8 percent at Ford and 18.2 percent (despite a deep-discount sales program) at General Motors.

Significantly, Toyota and Nissan, whose U.S. sales had actually risen in recent months due to their dominance in the small-car market, also reported steep sales drops—21.4 percent at Toyota and 17.7 percent at Nissan.

These statistics reflect the impact of the recession on all auto sales, on top of the collapse of the truck and SUV market due to overproduction and rising gas prices.

In the wake of these sales figures, the price of GM stock fell to its lowest level in 54 years. A Merrill Lynch analyst downgraded the stock to “underperform” from “buy,” stating that “bankruptcy is not impossible” if the auto industry continues to deteriorate. By contrast, an analyst from J.P. Morgan said GM was unlikely to go bankrupt, while Chrysler was more likely to face imminent bankruptcy.

While auto sales are plummeting in the U.S., sales in developing nations seem to be on the rise. GM set record second-quarter sales in Russia, Brazil, China and India. Chrysler announced record international sales as well.

Of course, not one article in the capitalist press has focused on the potentially catastrophic consequences for autoworkers if GM and/or Chrysler file for bankruptcy.

In the past few years, tens of thousands of autoworkers took early retirement as the auto companies used buyouts to drastically trim their workforces. Under the UAW contracts a worker can retire with a full pension after 30 years of service—though this is no longer the case for new hires. Hence, workers as young as 48 years of age, faced with the deterioration of their job situations and encouraged by the UAW leadership, took advantage of the buyouts and opted for early retirement.

What will happen to these workers’ pensions if either GM or Chrysler goes bankrupt? During a bankruptcy, the corporation typically stops putting money into its pension fund. The Pension Benefit Guarantee Corporation, a quasi-governmental agency, takes over the pensions, which are vested under the Employee Retirement Income Security Act (ERISA). The PBGC generally pays only about 80 percent of the pension liability.

For retirees under 65 years of age, the PBGC pays even less. For example, in 2008, the maximum guaranteed amount for a pension assumed by the PBGC was $4,312.50 per month for a 65-year-old worker, but only $1,366.88 for a 48-year-old retiree.

Thus, in the event of bankruptcy, the pensions of younger UAW retirees could be reduced as much as 70 percent. And that is assuming that the PBGC is solvent enough to cover these pensions!

Benefits are not vested—that is, not fully guaranteed as a legal right—under ERISA. That means no quasi-governmental agency makes up the loss of benefits for retirees whose company goes bankrupt. Generally these retirees lose their health and benefit plans.

GM had promised to cover retiree benefits for workers at Delphi, a manufacturer of GM parts, as well as its own employees.

It was to avoid the potentially catastrophic consequences of bankruptcy, causing retiree benefits to disappear, that the UAW opted in the last contract to take over payment of retiree benefits through a Voluntary Employee Benefit Association. The VEBA is to be initially funded by contributions from the auto companies in the amount of $35 billion from GM and $8.8 billion from Chrysler and then operated by the UAW.

However, the VEBAs are not scheduled to go into effect until January 2010. If GM or Chrysler goes bankrupt before 2010, will the payments to fund the VEBAs and make them operational be made? Or will they be liquidated in the bankruptcy proceedings?

In the case of GM, $4.4 billion of its VEBA payment is to be in the form of company stock. With that stock falling to record lows, the VEBA, which under optimum conditions was underfunded by $20 billion relative to current health-care costs, will have even less funds available to maintain health-care benefits for retirees and their families.

Of course, bankruptcy would impact not only retired autoworkers. The UAW made unprecedented concessions in the last contract, agreeing to a two-tiered wage scale with new hires making one-half the wages of current workers in exchange for job guarantees. Under bankruptcy, those job guarantees would be eliminated, and union membership would shrink even more.

In fact, the recession has already made mincemeat of those job guarantees. GM announced 17,000 layoffs last month, a violation of at least the spirit of the contract.

The UAW leadership has been silent in the face of this bankruptcy threat and the dire consequences it could mean for the workers and retirees. It is critical that the rank and file be on the alert and begin organizing now to meet this attack.

Bankruptcy calls into question the ownership of the means of production. The courts must appoint a “trustee” to assume control while the proceedings go on. It was the auto bosses who in part brought on the current crisis by refusing to invest their record profits from the sale of trucks and SUVs into developing fuel-efficient, low-cost cars and other means of transportation. It’s time for the workers to assert control of the industry to protect their jobs and benefits and retool the plants based on production for need, not just short-run profits.

The UAW and its allies should be prepared to demand that they become the trustee that assumes control of the auto companies if bankruptcy ensues. Most important, the autoworkers should prepare now to implement this demand with plant takeovers and occupations to defend their jobs and benefits.

Jerry Goldberg was a Ford assembly-line worker and member of UAW 900 for 12 years. He also was an organizer of the Job Is a Right Campaign.