The Coming Attack Against Auto Workers -- And You

The real story bubbling within the auto industry is not the news that Toyota vaulted over General Motors in worldwide auto sales. Rather, it's the growing ideological -- not economic -- drumbeat that is gathering targeting the livelihoods of tens of thousands of auto workers. And this is a direct attack against a decent standard of living for every worker. That means you!

The ideological assault goes something like this: American auto companies are in trouble. The trouble is caused by "generous" benefits paid to auto workers. Solution: cut those benefits to save the auto companies.

Yesterday's Wall Street Journal typified the rhetoric that I've been seeing for some time now, rhetoric that has picked up in the past few months and is certain to get even louder. In a piece on DaimlerChrysler, columnist Dennis Berman wrote:

Forget about making better cars. Or even about the rise of private equity. The best way to understand the sale of Chrysler Group is as blood sport between parent DaimlerChrylser and its North American unions.

Is DaimlerChrysler willing to get fully ruthless with its employees, in spite of its well-hewn image as loveable corporate citizen? The answer will make for some gripping theater in the months ahead. That is because this deal really is about persuading the company's unions to roll back their own health and pension benefits.

I want to explain why these attacks, by in large, are ideological, not economic, in nature. If they were economic, then, a whole other set of issues would be on the table beyond cutting rank-and-file workers pay, health care and pensions. Let's see how.

First, the real burden to auto companies is health care costs. If the auto executives and their counterparts actually dealt with the economics of health care -- as opposed to ideology -- they would wake up and be avid supporters for a single-payer health care plan. Enacted this year, such a plan would immediately lift off auto companies tens of billions of dollars -- that's BILLIONS -- in health care costs for current and, most notable, retired workers.

This is nothing new. Almost two years ago, I cited General Motors as the prime example of a company that should be arguing that single-payer health care is an economic necessity. Many others have made that point before and since. And, yet... these guys are unwilling to break from their ideological framework, even though the economics are unassailable.

Second, it is not rank-and-file workers pensions that are causing a financial problem for auto companies, or, for that matter, many other big companies. CEO pensions are the problem. I pointed this out last summer by highlighting a terrific article in the Wall Street Journal. Here are two snippets from that article:

Even as many reduce, freeze or eliminate pensions for workers -- complaining of the costs -- their executives are building up ever-bigger pensions, causing the companies' financial obligations for them to balloon.

Companies disclose little about any of this. But a Wall Street Journal analysis of corporate filings reveals that executive benefits are playing a large and hidden role in the declining health of America's pensions. Among the findings:

* Boosted by surging pay and rich formulas, executive pension obligations exceed $1 billion at some companies. Besides GM, they include General Electric Co. (a $3.5 billion liability); AT&T Inc. ($1.8 billion); Exxon Mobil Corp. and International Business Machines Corp. (about $1.3 billion each); and Bank of America Corp. and Pfizer Inc. (about $1.1 billion apiece).
* Benefits for executives now account for a significant share of pension obligations in the U.S., an average of 8% at the companies above. Sometimes a company's obligation for a single executive's pension approaches $100 million.
* These liabilities are largely hidden, because corporations don't distinguish them from overall pension obligations in their federal financial filings.
* As a result, the savings that companies make by curtailing pensions for regular retirees -- which have totaled billions of dollars in recent years -- can mask a rising cost of benefits for executives.
* Executive pensions, even when they won't be paid till years from now, drag down earnings today. And they do so in a way that's disproportionate to their size, because they aren't funded with dedicated assets.


When General Motors cites retiree costs, the giant auto maker has a point: It owed nearly 700,000 U.S. workers and retirees pensions that totaled $87.8 billion at the end of last year.

But $95.3 billion had already been set aside to pay those benefits when due.

All of these assets are earning investment returns, which offset the pensions' expense. GM lost $10.6 billion in 2005. But deep as its losses have been, they would have been far worse without the more than $10 billion per year in investment income that the GM pension plan for the rank and file generates.

The pension plan for GM executives is another matter. Unfunded to the tune of $1.4 billion, it detracts from GM's bottom line each year.

To underscore: workers pensions are funded, CEO pensions are not.

More recently, I also pointed out the vast CEO pension riches now coming to light because of new disclosure rules. So, the obvious solution is to first cut CEO pay and pensions deeply. If you want economic solutions, to paraphrase Willie Sutton, go where the money is.

Third, as a matter of economics -- and, to be fair, a tad of ideology -- it's worth noting what auto workers "generous" pensions amount to: an average of $32,000 if you worked 30 years and retired. And that monthly payment by the company GOES DOWN once a worker begins to collect Social Security.

It's ironic that the ideologues are calling for cuts in auto worker pensions, of all places. After all, it was Henry Ford himself who used to say that he wanted to pay his workers enough money so they could buy Ford cars. Exactly how do the ideologues think retired auto workers, not to mention other workers, will be able to participate as consumers in the fall and winter of their lives if they are asked to live on less even as expenses like health care, rent and gas go up?

And that's where this all comes back to you. We all need to see the coming attack against auto workers as a direct attack on the ability of average people to make a fair wage and retire with dignity and respect. The attack against auto workers will be lead by the same voices who have fashioned a global economy with rules that enrich a few and impoverish the many; the same people who have created, in our country, the chasm between rich and poor and the obscene spectacle of CEO legalized robbery with very little resistance from our elected leaders.

Our response has to be very clear: The auto worker pension is not the "gold" standard. It is the decent and fair standard.