Chrysler saves itself at workers' expense
Sunday, June 28, 2009
By: Jane Cutter

A broader fight-back initiative by labor needed

On June 15, the auto manufacturer Chrysler—in a merger with Fiat—began to "emerge" from Chapter 11 bankruptcy with the re-opening of the Viper plant. "Today is a day for optimism," said Fiat CEO Sergio Marchionne, who will be Chrysler's new chief executive, in an e-mail to Chrysler employees June 10. Meanwhile, thousands of Chrysler workers are losing their jobs. Workers who still have jobs will face cuts in benefits and pay under a new, concessionary contract approved at the end of April.

Almost 800 Chrysler dealerships to close

Chrysler, along with many other corporations, has been in deep trouble due to capitalist overproduction. Simply put, they had made more cars than they could sell at a profit. So, the federal government bailed them out to the tune of $15.9 billion on condition that the company "reorganize" itself. With the hope of saving jobs, the United Auto Workers approved a concessionary contract. As soon as the UAW ratified the contract, with the approval of the Treasury Department, Chrysler went into Chapter 11 bankruptcy. As a result of the Chapter 11 reorganization, there are eight fewer Chrysler factories, 789 fewer Chrysler dealerships, and 7,800 fewer employees than at year-end 2008.

Contract details

The contract, which covers 26,800 UAW-represented workers, is full of concessions. The contract allows Chrysler to hire as many new workers as it can at a wage and benefit rate roughly half that paid to current UAW workers. Cost-of-living increases are suspended. Workers will lose two paid holidays in both 2010 and 2011 and will also lose performance bonuses and Christmas bonuses in 2009 and 2010. Meanwhile, the prices of food and gas continue to increase.

The contract calls for binding arbitration on a new contract through 2015. If no agreement can be reached on a new contract, the arbitrator must base total hourly labor costs on a rate comparable to Chrysler's U.S. competitors, including foreign-owned manufacturers.

That's a lot of concessions—and that's not all. One of the most touted components of the contract is that the UAW will hold a 55 percent stake in Chrysler, which makes it seem as if the workers got a good deal. What is not always made clear is that the contract forces the UAW to accept Chrysler stock for half the $10.6 billion obligation that the automaker owes a retiree health care trust that the union will administer. So the union is taking over the pensioners' health plan—eliminating vision and dental benefits—in exchange for 55 percent of a currently failing business and one seat on the board of directors. Fiat now holds 20 percent of Chrysler with the option to go up to 35 percent, and the U.S. and Canadian governments hold 8 percent and 2 percent, respectively.

Chapter 11 bankruptcy declared

The Chapter 11 deal merges Chrysler with Italian automaker Fiat. All of Chrysler's 23 North American plants are closed down for the duration of the bankruptcy process.

The plan includes the shuttering of nearly 800 dealerships as well. The loss of jobs from these dealership closures will not be just white collar, car-sales positions. Mechanics, car parts delivery drivers, janitors and others will also lose their jobs.

What is Chapter 11? When you think about an individual person or even a small business going bankrupt, you understand that they owe more than they can afford to pay back, and any assets will be sold off to pay the creditors. Under Chapter 11, which is primarily used by businesses, the debtor is allowed to maintain control of the business after "restructuring" to make the business more profitable. The "debtor in possession" can cancel contracts. In federal bankruptcy court, the court must approve the decisions made by the debtor in possession. So decisions that hurt workers as a result of Chapter 11 restructuring are ultimately being made by the state acting on behalf of the capitalist class through the bankruptcy court.

What should labor do? Would it have been enough to reject the contract concessions and launch a fight against Chrysler? There is no guarantee that such an approach would have been effective, and it would have put labor even more on the defensive, allowing the media pundits to paint the UAW as the obstacle to "saving Chrysler." Simply fighting a defensive contract-by-contract, company-by-company struggle is a recipe for defeat.

Workers have shown that they are ready to fight back, as the Republic Door and Hartmarx struggles have illustrated. Labor needs to launch a broader fight-back initiative, a political fight against the attempt of the capitalists to solve their economic crisis on the backs of the workers.

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