The Big Three’s Big Three
Severance, pensions, and health benefits
STEPHEN SPRUIELL
Any successful business must be able to respond to fluctuations in demand for its products, but GM’s job-security agreements with its unions make that process burdensome and costly. The workers at the Moraine plant belonged to IUE-CWA, an electrical workers’ union. As a result of the plant closure, IUE-CWA was able to negotiate buyouts of $70,000 to $140,000 for any worker who voluntarily quits. Other workers were made eligible for early retirement.
A few days after the election, I run into Morrow in the parking lot of the Moraine plant. (When I tell him I am a reporter, he says, “Aw, Christ.”) I ask him what’s going to happen to the plant’s 1,400 remaining employees. “More than 50 percent are taking the buyout, maybe a third are doing some sort of retirement, and some are staying and hoping to transfer,” he says. He says he’s hoping to transfer.
GM employees who stay with the company and are laid off will qualify for GM’s supplemental unemployment benefits, meaning that GM will make up the difference between their former wages and their state unemployment checks. When those checks run out, GM will pay these workers 95 percent of their former wages for up to two years, depending on seniority. Workers with at least ten years of seniority are eligible for the Job Opportunity Bank Security program. This is the notorious jobs bank that allows laid-off workers receive their regular hourly pay to sit around and work crossword puzzles or read the paper. If GM offers them an opportunity to transfer to another plant, they have the right to turn down a limited number of such offers. And if no offer is made, they can stay in the jobs bank until they retire. GM currently has around 1,400 workers nationwide in the jobs bank.
Peter Morici is a professor of international business at the University of Maryland. In late November, he testified before the Senate Banking Committee, alongside the CEOs of the Big Three automakers and United Auto Workers president Ron Gettelfinger. “The real problem here is that [Banking Committee chairman Chris] Dodd doesn’t understand the scope of the severance payments that the UAW gets,” Morici tells me. “They go in the jobs bank and they stay there forever. My feeling is that [the Big Three] are at fault for letting the jobs bank continue after these last labor negotiations and agreeing to $105,000 buyouts. The whole situation is absurd.”
John Heitmann, an automotive historian at the University of Dayton, agrees. “We can’t really compete when we have those kinds of contracts,” he says. “It’s the health care, it’s the seniority, and it’s the work rules. In flush times, when life was good and you could sell many different vehicles and particularly trucks at very high profits, GM could survive like that. But it was just a matter of time before things caught up with them.”
The Big Three and their unions argue that in 2007 they signed new contracts bringing wages and benefits down to more realistic levels. Once the health-care provisions of these contracts take effect in 2010, they say, they will be out from underneath the crushing liabilities that have saddled them with so much debt. “They talk about all the things they gave up,” Morici says. “But their contracts are so complex, you could give up half the things in the contracts and they would still be burdensome.”
The new contracts took steps toward closing the compensation gap between the Big Three and their foreign competitors, but left in place the job-security guarantees and work rules that have rendered the Big Three sclerotic and unable to adjust to shifts in demand. Imagine the U.S. auto industry as an emergency-room patient with a severed artery and cholera. The 2007 contracts stopped the bleeding, but the Big Three are still very sick.
The cure, according to Morici, is bankruptcy. “My feeling is that these guys haven’t adequately explored Chapter 11, because they don’t want to,” he says. Bankruptcy would force concessions from the automakers’ unions, but the Big Three are pushing hard to avoid it. They claim that bankruptcy would necessarily mean liquidation and thus economic calamity. To back this up, they produce surveys purporting to show that 80 percent of Americans would not buy a car from a bankrupt auto company, for fear that the company would not be around to service the warranty or provide parts.
