Obama Weighs Buyout Rage Against Future Of Iconic Auto Union
The UAW, once a pre-eminent U.S. labor organization, is in retreat along with U.S. automakers. It is a quarter the size it was at its peak of 1.5 million members in 1979, when its political clout helped Chrysler Corp. get a then-unprecedented $1.2 billion federal bailout.
Now Obama is pushing the union, which already has given up job-security programs and some compensation, to take more concessions within 60 days or General Motors Corp. could face bankruptcy. His auto task force warned the cost of GMs pensions and retiree health care will “grow to unsustainable levels.”
“The president is showing labor a little tough love,” said David Cole chairman of the Center of Automotive Research in Ann Arbor, Michigan. “He took away the idea from labor that Barack will take care of us, no matter what.”
Instead, Obama, facing growing public resentment over bailouts following the $165 million in bonuses awarded employees of American International Group Inc., is putting the same pressure on the UAW as he is on GMs bondholders.
A March 23 survey by auto researcher R.L. Polk & Co. found 62 percent of Americans oppose additional government aid for GM and Chrysler LLC. In 1980, Chrysler Corp., as it was known then, was granted more than $1 billion in loan guarantees and paid the loans back in 1983.
Equally Tough
“He has no choice but to be equally tough on labor and the bondholders,” said Cole. “Hes put them both in a cage with the government and said if they dont come up with a deal in 60 days, hell let the lions in,” referring to bankruptcy.
In Chapter 11, a judge could tear up labor contracts with benefits the UAW has built over 73 years.
The pre-arranged bankruptcy the president is said to expect could be used to protect the union, said labor professor Gary Chaison of Clark University in Worcester, Massachusetts.
“Obama will use his influence to protect workers in the way the collective bargaining agreement is rewritten,” he said.
At Ford Motor Co., which is not seeking federal aid, the union on March 9 accepted concessions that put labor costs on a path toward parity with Japanese rival Toyota Motor Corp. UAW members once enjoyed wages and benefits that pushed labor costs to $74 an hour. Ford said its new deal brings its labor costs down to $50 an hour by 2011, slightly more than Toyotas $48.
Obama indicated he wants more labor cuts — without giving targets — from GM and Chrysler, which has 30 days to complete an alliance with Italys Fiat SpA or lose its U.S. government support. GM has received $13.4 billion in aid compared with $4 billion for Chrysler, and the two are seeking as much as $21.6 billion more.
The administration has raised the prospect of putting GM through a so-called quick rinse bankruptcy of as few as 30 days if there arent more givebacks from labor, lenders and dealers.
“This is not consistent with the rhetoric that Bankruptcy is the last resort and were out to protect the workers,” said auto analyst Brian Johnson of Barclays Capital in Chicago. “Improvements in liquidity for GM will come out of the UAW.”
Union Influence
The UAWs role in the auto bailout had been seen as pivotal. There are 132,600 active members at GM, Ford and Chrysler. With another 550,000 retirees and surviving spouses, the union has more influence with Obama than the automakers, said Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Michigan. Spokesmen for GM, Ford and Chrysler declined comment.
“We cannot have a strong middle class without a strong labor movement,” Obama told an AFL-CIO conference March 3. Unions spent $52 million to help elect Obama, including $5 million from the UAW, according to OpenSecrets.org, a Washington-based organization that tracks campaign spending.
On Monday, Obama took a tougher tone in putting the onus on the UAW and the companies to justify further taxpayer support.