On the Chrysler Contract

by Marty Goodman / May 2009

Washington deliberately targeted Chrysler first because it’s smaller than GM and easier to impose concessions. The strategy was to threaten Chrysler with bankruptcy in order to wring massive concessions from the UAW. It worked. Two days later, the administration ordered bankruptcy. Unfortunately, Gettlefinger had told workers the contract would avert bankruptcy.

UAW members had a contract vote quickly rammed down their throats. On April 30 the vote count was 87% in favor. Members feared for their jobs and saw no alternative. The April 26 contract allows Chrysler to pay only half its $10.6 billion debt to the UAW’s health-care fund, the Voluntary Employee Benefits Association (VEBA), in exchange for devalued Chrysler stock. Incredibly, the company has 23 years to pay on its remaining obligations, endangering retiree benefits. The health-care giveaway is in line with a similar agreement between Ford and the UAW in February.

The contract also includes the suspension of cost-of-living increases, limits on overtime pay, and reduced paid time off. Dental and vision benefits for retirees are eliminated. Destroying a UAW tradition of equality and solidarity, new hires will make about half the salary of present workers. As a result, 25% of the Chrysler workforce will make $14 to $16 an hour—up from 20% in the concessionary 2007 contract.

In exchange for Chrysler’s $10 billion pass on health care, the UAW health trust fund will be given 55% of Chrysler equity or shares of stock, binding the union hand and foot to the anti-worker agenda of Chrysler bosses and an unstable bond market. The UAW will have only one seat on a new nine-member Chrysler-Fiat board. In a grotesque example of a fish eating its own tail, union bureaucrats will oversee Chrysler stock, whose value would rise after workers’ benefits are slashed and jobs lost.

For years the UAW had a seat on the boards of Chrysler and DaimlerChrysler AG—Chrysler’s previous owner—but gained little. "Equity stake doesn't translate into voting control," said Harley Shaiken, a labor professor at the University of California, Berkeley. "What’s happening at Chrysler and GM is not employee ownership in any recognizable way," said Corey Rosen, founder and executive director of the nonprofit National Center for Employee Ownership.

It is expected that GM’s contract will parallel Chrysler’s. GM has asked for $11.6 billion in additional bailout funds, for a total of $27 billion. A GM reorganization plan submitted to the Obama administration, released April 27, would eliminate 21,000 factory jobs, axing its Pontiac car. In exchange for forgiving $10 billion in loans from the Fed, it would give the U.S. Treasury a 50% stake in the company and the UAW’s VEBA health-care fund, 39%.

Under bankruptcy, the quasi-government Pension Guarantee Corporation would cover at most 80% of benefits, and as little as 30% for workers under 65. A deal was reached that the federal government would assist retiree health care, at least somewhat, in case of bankruptcies.