Chrysler became 100 percent owned by Fiat on Jan. 20, when the trust fund responsible for United Auto Workers retirees’ health care sold its 41.5 percent stake in Chrysler to the Italian auto company. In five short years — since the 2009 bankruptcy, when President Barack Obama’s Auto Task Force put Fiat in charge of Chrysler — a company that had been a nonentity on the U.S. auto scene has increased its stake in Chrysler fivefold. Now the newly christened “Fiat Chrysler Automobiles” is the seventh-biggest auto manufacturer in the world.
The backdrop to the acquisition was the glitz and glamor of the North American International Auto Show in Detroit, where Sergio Marchionne — who was CEO of both Fiat and Chrysler and is now the CEO of FCA — typically gets star treatment. With the conquest of Chrysler fully consummated, media from around the world tailed the man in the black sweater.
Marchionne has, in fact, made out like a bandit in the whole five-year process. First, under the U.S. Treasury loan terms, Fiat was given a 20 percent stake in a restructured Chrysler at no charge. After meeting certain benchmarks, by the end of 2011, the company’s no-cost share grew to 35 percent. The share held by the Voluntary Employee Beneficiary Association, which funds retiree health care, was correspondingly reduced by 15 percent, but with no compensation to the fund. The U.S., Canadian and province of Ontario governments, which had been given a share in the new Chrysler under the bankruptcy loan terms, all sold their shares — combined, almost a quarter of the company — to Fiat for just about $2 billion.
Fiat had no trouble coughing up the $2 billion to gain a majority share of Chrysler. Nevertheless, like any greedy boss, Marchionne cried poverty when Fiat wanted concessions from Italian workers. He threatened to move work to Eastern Europe. Now, Fiat workers are stuck on schedules similar to the “alternative work schedules” that are the bane of U.S. Chrysler workers.
In the latest sale, the agreed-upon price of $4.35 billion was reached after the VEBA refused a lower offer and a judge turned down Marchionne’s request that the court set the price for the stake held by the fund. Fiat is still the winner in this deal, with the company only putting up $1.75 billion of its own cash. Another $1.9 billion was generated by a “special disbursement” that Chrysler, not Fiat, provided funds for. The final $700 million of the $4.35 billion is to be paid to the trust in four annual installments of $175 million out of the Chrysler coffers. The first $175 million payment has been made.
Fiat now gains complete access to Chrysler’s $10 billion in cash reserves. The cash infusion comes as the Italian company continues to lose billions in Europe, where the continental auto industry is still in recession. Fiat has only been kept afloat by the billions in profits generated by the labor of Chrysler workers. On Jan. 29, Chrysler announced its profits for 2013: $2.8 billion after taxes, interest, depreciation and amortization are deducted.
Fiat’s bottom line is stronger because of contract concessions, foisted on the workers during the bankruptcy and reinforced in the current contract, which expires in 2015. These concessions, on top of major concessions given in 2007, represent a huge transfer of wealth from labor to capital.
What the media never point out is that the VEBA, a creature of the 2007-2011 contract, was a concession. Under previous contracts, retirees’ health care benefits were nearly identical to those of active workers, and General Motors, Ford and Chrysler were contractually responsible for providing them until death. Over the decades, retiree ranks swelled while active workers’ numbers were decimated by technology and outsourcing. The companies cried that the high cost of retiree health care — “legacy costs” — put them at a disadvantage compared to plants of their European and Asian competitors. The UAW agreed to set up the VEBA, to which the companies contributed a one-time lump sum and were henceforth relieved of future legacy costs. The problem is that if the VEBA’s investments perform poorly, retirees can lose their benefits. Already they have lost most of their dental and vision coverage.
In 2007, Chrysler agreed to pay $8.8 billion to the VEBA. In 2009, this figure was cut almost in half; in exchange the VEBA was given the Chrysler stock that Fiat just purchased.
What’s in store for the workers?
Chrysler workers and retirees are wondering what Fiat’s takeover means for them. Marchionne is a hardliner when it comes to union workers, having made a now famous statement during the bankruptcy proceedings that the UAW had to “get used to a culture of poverty.” Yet the UAW leadership has partnered with Fiat/Chrysler — as it has with General Motors and Ford — to keep labor costs “competitive.”
The VEBA is an independent fund with only a minority of its directors appointed by the UAW; its board cannot negotiate contract terms. What is therefore peculiar about the purchase from the VEBA is that a memorandum of understanding, an addendum to the UAW-Chrysler collective bargaining agreement, has been attached to these transactions.
The UAW leadership agreed to the memo of understanding in exchange for Fiat’s commitment to make the four $175 million contributions, pledging the workers to “continue to support the industrial operations at Chrysler Group and the further implementation of the Fiat-Chrysler alliance, including to use best efforts to cooperate in the continued roll-out of Fiat-Chrysler ‘World Class Manufacturing’ programs … and actively assist in the achievement of the Group’s long-term business plan.”
WCM, based on the Toyota production system, is Fiat’s version of “Lean Manufacturing.” “Lean” really means more vehicles built by fewer workers. One “pillar” of WCM is titled “Autonomous Maintenance.” Autonomous maintenance shifts more work onto line workers — routine maintenance tasks traditionally done by skilled trades workers — but with no increase in pay for them. Meanwhile, the highest-paying jobs are cut to the bone. This is just one example of how WCM slashes jobs.
Using technology to cut jobs is not new under capitalism. As Karl Marx observed, “The whole aim of capitalist production is appropriation of the greatest possible amount of surplus-labor, in other words, the realization of the greatest possible amount of immediate labor-time with the given capital.”
It is pure insanity for the UAW to agree to help the capitalists cut jobs. The leadership must wake up to the fact that the partnership is only hurting the workers on the shop floor. If they don’t wake up, the membership will have to find ways to circumvent this obstructive bureaucracy and build independent rank-and-file resistance to the “culture of poverty.”
Martha Grevatt is a 26-year UAW Chrysler worker.