The banks & the attack on the UAW

Following are excerpts from a talk given at the conference on “How the Banks Destroyed Detroit and How to Fight Back” held June 11 at the United Auto Workers Local 22 hall in Detroit.

In 2009, fearing a total collapse of all three U.S. auto companies, the United Auto Workers swallowed big concessions that were part of the Loan Service Agreements between Chrysler and General Motors and the U.S. Treasury. The LSA included a number of plant closings and the freezing of new hire wages at $14 an hour until 2015. President Barack Obama hailed the creation of a “leaner, meaner and more competitive” auto industry.

Who were Obama’s advisers? They were all from finance capital. Secretary of the Treasury Timothy Geithner’s resume showed years of service to the Treasury and the Federal Reserve Bank under both Republican and Democratic administrations. The White House Auto Task Force was led by two Wall Street personalities, Stephen Rattner and Ron Bloom. Rattner was an executive with Lehman brothers, Morgan Stanley and Lazard Freres before starting his own firm. Bloom also spent time at Lazard. Task Force member Diana Farrell worked for Goldman Sachs before joining the McKinsey Institute think tank. She is the author of “Market Unbound: Unleashing Global Capitalism.”

Lawrence Summers was chair of Obama’s National Economic Council. Best known for his sexist comments made during his tenure at Harvard, where he also engaged in racist abuse of renowned scholar Cornel West, Summers at one time was chief economist of the World Bank, where he advocated austerity cuts and privatization. During his stints with the Treasury he consistently pushed banking deregulation, which allowed out-of-control speculation.

Besides union concessions, which represented a huge transfer of wealth from the workers who produce vehicles to the bosses and bankers, the other “achievement” of the task force was the Fiat-Chrysler alliance. Fiat is about to become the majority shareholder in Chrysler. The Treasury initially gave Fiat 20 percent ownership, which has now grown to 30 percent, and will be 35 percent by year’s end.

Fiat acquired another 16 percent for $1.27 billion, which all went toward paying back the government loan. The fund for UAW retiree health care benefits — the voluntary employee beneficiary association, VEBA — has seen its share shrink with no cash compensation. One of the contract changes demanded by Treasury was that half the VEBA be funded with Chrysler stock. The increase in Fiat’s share was to come primarily from the VEBA’s majority share — at no cost to the Italian company!

Fiat is buying the 6.6 percent share held by the U.S. government for about half a billion dollars. For $75 million Fiat bought from the Treasury the right to force the VEBA, when it sells its stake, to sell it to Fiat for $5 billion. It’s likely Fiat will also acquire the last 1.7 percent held by the Canadian and Ontario governments. Fiat borrowed enough money from private lenders, led by none other than Goldman Sachs, to buy up Chrysler and pay back high-interest government loans six years early.

Union must break the box

Last fall, Rattner quoted Fiat and Chrysler CEO Sergio Marchionne as stating that “the UAW has to get used to a culture of poverty.” (http://tinyurl.com/27kl8cj) Wall Street and the capitalist state have backed this stance by facilitating an easy, low-cost acquisition of Chrysler.

Meanwhile, GM paid back a portion of the Treasury loans through an Initial Public Offering, reducing the Treasury’s ownership to less than a third. The underwriters? Morgan Stanley and JPMorgan Chase. As underwriters they were granted the option, which they exercised, to buy billions of dollars’ worth of GM stock.

The Treasury does not plan to hold on to its remaining GM stock. The state took temporary control to streamline operations and extract more wealth from the hides of the workers. Billions in lower wages and benefits meant a $4.7 billion profit for GM last year — and billions in interest, “servicing” fees and stock dividends for Wall Street. Now that it’s done the bankers’ dirty work, the Treasury can make its exit.

Ford, with huge loans from Wall Street — especially Ford’s long-time friends at Goldman Sachs — imposed a slightly less austere round of concessions in 2009 without government help. Its 2010 profits were $6.6 billion.

The UAW leadership, which is going into negotiations in July, is in a state of ideological paralysis. Their orientation is to take what they can get, the priority being to make the companies profitable and competitive. It’s not that they aren’t thinking outside the box. Their thinking is the box.

The union must learn to operate from the premise that profit is theft — what the banks and the company owners (including banks) steal from us. From there we need a fightback strategy that engages the rank and file, their families and communities.

Grevatt is a long-time Chrysler UAW worker. Email: [email protected]