Contract Concessions and the Crisis in Auto

By Bruce Allen

For years I have been writing articles and talking at a meetings concerning developments in the auto industry in Canada. I have consistently presented a set of arguments built around a longstanding observation that I have made concerning what is happening in the auto industry. I have argued that the multinational auto corporations have been using their control over investment decisions to systematically dismantle and take away all of the gains made by North American autoworkers since the United Auto Workers (UAW) was born in the mid-1930s. This means that these corporations have been withholding their capital in order to advance their agenda in a way not so unlike the way we as autoworkers used to either withhold our labour or threaten to withhold our labour in order to advance our collective bargaining agenda and make and build upon gains.

But in recent years the tables have been turned. The collective bargaining process in the North American auto industry has been stood on its head. We as autoworkers no longer go to the bargaining table in order to win our demands. We go to the bargaining table in order to address the corporations’ demands in the hope of securing new work and remaining employed. Or at least that is what has been happening.

In 2009 this situation has gone from bad to worse for autoworkers. As retired Canadian Auto Workers (CAW) Research Director Sam Gindin recently observed, “It used to be that corporations promised jobs for concessions; now they aggressively demand more concessions alongside fewer jobs.”

The brutal reality of the situation is that this is where the trajectory of concessions bargaining has taken us since it began to really develop in the industry in Canada in 1993 and more than a decade before that in the United States. In Canada that development immediately followed the announcement of a massive restructuring of General Motors North American operations in 1992 and logically coincided with auto corporations in Canada engaging in a concerted drive to extract contract concessions at the local level in order to gut local collective agreements and weaken the power of the union on the shop floor. Significantly and quite logically as well these developments also coincided with the North American auto corporations’ relentless drive to implement variants of the Toyota Production System and other lean work reorganization strategies in their operations.

One set of concessionary collective agreements at the local level followed another throughout the 1990s in Canada and this phenomenon has continued into the current decade. This process has not only continued. It has has deepened. These concessionary collective agreements have crippled the power of the union on the shop floor of Canadian auto plants and beat the union into a state of increasing submission not so unlike what has happened in the U.S. since the beginning of the 1980s. This state of increasing submission has been reflected in the wholesale abandonment of an adversarial relationship by local unions toward the automotive employers. Consequently, the union’s agenda, particularly at the local level, has evolved and become more and more indistinguishable from management’s agenda.

Locally managements have responded by consciously taking advantage of this weakening of the union’s power on the shop floor due to both this ongoing weakening of our local agreements and to workers’ pervasive fear of job losses by shrewdly and meticulously integrating shop floor union leaderships into the process of managing operations without compromising management’s agenda. Increasingly rank and file workers have found it harder to tell the difference between the message they hear from in-plant union leaderships and what they hear from the boss. As a result of this the corporations have increasingly prevailed in the battle for the hearts and minds of the automotive workforce. They have increasingly achieved ideological hegemony because the union no longer has an identifiable agenda of its own given that securing and retaining work at any price has increasingly become the sole priority of auto union leadership locally and Canada wide.

This puts in context the efforts of the CAW leadership to constantly promote and encourage handouts of government monies to the auto corporations in order to attract new investment in auto plants in Canada. This likewise puts in context the conspicuous absence of any open criticism whatosever of these corporations by the CAW simultaneous with and reinforcing this advocacy of government handouts to them. Very significantly a fundamental truth has been forgotten along the way. Namely, that when the agenda of the union becomes essentially one and the same as the agenda of the employer the very reason for the union to exist as an independent entity is effectively called into question.

This brings me to the developments of approximately the past 24 months. In addressing them I am compelled to focus on GM in Canada with some reference to developments in my own local union. I do this knowing that these local developments are typical of what is going on generally in the industry in Canada.

The brutal truth of the matter is that the CAW has now engaged in four sets of concessionary contract bargaining with GM in approximately the last two years. In doing so this has born out something former CAW National President Buzz Hargrove said about two years ago when he remarked to the CAW’s national council that nowadays in the auto industry we are always negotiating. Significantly in saying this Hargrove displayed amnesia on his part by forgetting that such a practice has been in effect for many years in the U.S. where the United Auto Workers has been negotiating what are called Modern Operating Agreements. Modern Operating Agreements involve the continuous negotiation of contract concessions designed to enhance the competitiveness of local operations and to ostensibly improve their chances of survival.

That said the first of these four sets of concessionary negotiations with GM were conducted at the local level in Oshawa, Ontario via what was termed a “shelf agreement” and then in St. Catharines, Ontario via what was called a “Competitive Operating Agreement”. Both of the resulting local agreements gutted and rewrote existing local collective agreements from start to finish giving the corporation almost everything it wanted locally in exchange for the promise of new work. In St. Catharines this meant new transmission work that has yet to arrive and which has been put off until 2012 and may never arrive give the state of the industry. In Oshawa this yielded work on a new Camaro.

Next in March 2008 then CAW National President Buzz Hargrove opened the 2008 contract negotiations half a year early. He did so based upon a belief that collective bargaining would be tougher when the existing contracts with the Detroit 3 expired in the autumn of 2008.

This was a pivotal turning point. We went from negotiating one set of concessionary local collective agreements to negotiating major contract concessions at the corporation wide or master level. Wages and pensions were frozen. Cost of Living Allowances (COLA) increases were “temporarily” suspended. A week’s vacation per year was given up. Starting wage rates were lowered from 85% of the established rate for each job classification to 70% of the established rate with the full rate to be paid only after three years of service. All the while the union leadership proclaimed that it had successfully resisted a United Auto Workers (UAW) style two tier wage and benefit structure involving drastically reduced starting rates of pay and benefit entitlements for new hires. Most importantly, co-pays for benefits were substantially increased with the amounts of money to be paid by workers increasing in each successive year of the collective agreements thereby setting the stage for continuous increases in these co-pays.

Then came last year’s global economic meltdown. Following it and the ensuing global capitalist crisis the CAW was back at it again in March 2009 giving even more contract concessions. At GM the union conceded about $7.00 per hour in wage and benefit concessions. The contract was extended for another year with no wage or pension increases meaning we actually now had a 4 year contract. This effectively marked the end of the CAW’s long standing, very vocal opposition to long term collective agreements meaning agreements of more than three years duration. Our Xmas bonus was negotiated away. Additional co-pays on benefits were introduced. The door was open to a Canadian version of the UAW’s Voluntary Employeee Benefits Association (VEBA) which relieves corporations of full, direct responsibility for employee benefits and effectively guarantees the ongoing erosion of benefits via underfunding of this separate benefit fund. Coverage for long term care was reduced. Dental benefits were frozen at 2008 levels through to 2012.

Despite all of these giveaways they were still not enough in the view of Chrysler and the U.S. and Canadian governments. Chrysler wanted $19.00 per hour worth of wage and benefit contract concessions citing labour costs at Japanese transplants in North America. The Canadian and Ontario provincial governments supported Chrysler’s position and put a gun to the union’s head saying there would be no government money for the cash strapped corporations in Canada otherwise. The CAW quickly gave in to them.

With the resulting much more concessionary collective agreements at Chrysler in April newly hired employees will have to work 6 years before getting the established full rate of pay. New hires will now also have $1.00 per hour deducted from their wages to go to pay for their pensions if and when they retire. Their pensions will be capped at the amounts paid out for 30 years of credited service meaning you can work 40 years and will still get the pension of someone who has worked only 30 years. The waiting period for Sickness & Accident benefits was increased. Semi-private hospital care was eliminated. Refunds on education tuition for family members were reduced. A rebate paid to employees for new car purchases will end. The establishment of a VEBA to administer benefits went from being an item for discussion to a certainty.

Worst of all contractual language was negotiated at the corporate wide or Master Level to allow for local arrangements where outside suppliers will be able to locate on site at and even inside Chrysler plants just like the experimental plants in Brazil developed by Ignacio Lopez formerly of Volkswagen in the 1990s. This supplier park concept will produce outsourcing of our work on a huge scale and devastate the power of the union on the shop floor of Detroit 3 auto plants in Canada.

Then in a matter of weeks these sweeping contract concessions were suddenly deemed to be not enough for General Motors even though GM’s CEO had previously said that the contract concessions negotiated with the CAW in March were good enough. The Canadian federal and Ontario provincial governments adopted the same position.

This brings us to where we are today. Namely we are faced with further concessions particularly affecting pensions at GM which have even exceeded those contract concessions negotiated at Chrysler. If these additional concessions are not subsequently matched at Chrysler then there will no longer be a pattern collective agreement in the auto industry in Canada ending a practice of negotiating industry wide collective agreements that has been absolutely critical to all of the gains North American autoworkers have made in the past. If they are to be matched then it will mean that the CAW will have to go back to the negotiating table at Chrysler. Ford of Canada meanwhile is sitting back waiting for the cascade of contract concessions to end at their competitors. Ford of Canada has publicly made it clear that it fully expects to get just as much and the CAW leadership at Ford is preparing to deliver similar concessions and will try to scare its membership into accepting them.

In short Canadian autoworkers are being assaulted at a breathtaking pace. What is more the cascade of contract concessions will certainly continue because, as I indicated, the establishment of a VEBA for healthcare benefits means there will be an erosion of our benefits on an ongoing basis. This is due to the certainty of inadequate funding of the VEBA because when health care costs rise due to inflation additional monies to cover the additional benefit costs will not be put into the fund making reductions in benefits unavoidable. The downward spiral for Canadian autoworkers consequently has no end in sight unless and until the union’s rank and file finally says no to these corporations; corporations in the case of GM and Chrysler who will likely emerge from bankruptcy protection to become very profitable again.

In short autoworkers never created this crisis. We are in no way responsible for it. But we are paying the price for this crisis in the auto industry with a cascade of contract concessions on a monumental scale.

What is taking place is a quintessential example of Capital taking advantage of a crisis for which it bears sole responsibility in order to deal a historic and crushing blow to workers who have led the way for the entire working class. Accordingly the emerging outcome of these developments will be a historic setback for the entire working class in Canada comparable in its potential consequences to the defeat of the air traffic controllers in the United States in 1981 at the hands of Ronald Reagan and the defeat of the British coal miners in 1985 by Margret Thatcher. It logically follows that what we should be seeing is all of organized labour in Canada and beyond mobilizing to support Canadian autoworkers in the face of this enormous onslaught we are being subjected to.

Accordingly in view of these things the relative silence of the leadership of almost all of the rest of the labour movement in Canada in response to this onslaught is worse than reprehensible. It is treacherous. Likewise the response from the leadership of the social democratic New Democratic Party (NDP) in Canada has been grotesquely inadequate with the leader of provincial Ontario NDP being virtually alone in coming to the defense of autoworkers and then doing so only to a very limited extent with regard to the issue of protecting autoworker pensions.

Simply stated we are isolated in the face of this historic onslaught. The situation could hardly be worse. Disaster is staring us immediately in the face because we are in the process of being crippled and essentially all we are getting in response from our leadership are exercises in damage control and empty rhetoric about fighting again another day and possibly regaining some of the things we have just lost. Indeed it is absolutely impossible to take any of their claims about fighting again another day seriously given the duration, extent and acceleration of the retreat which has been taking place and the auto and labour leadership’s general unwillingness to mobilize the membership and confront Capital in response to its onslaught against us.

To the contrary, as previously indicated, in the auto industry we have a union leadership very much in the habit of helping to scare the membership into accepting one set of concessionary collective agreements after another all the while stating that there is no alternative. They do this while knowing full well and sometimes even acknowledging that making government economic aid to the auto industry contingent upon workers taking contract concessions is a phenomenon unique to Canada and the United States. They know that even right-wing governments in countries like Germany and France would not dare to attach such conditions to aid for the auto industry. Workers and their unions in those countries would absolutely not stand for it and would be too likely to wage fightbacks that would terrify any government. Indeed Opel workers in Germany are not facing demands for contract concessions and Opel is subsidiary of GM.

What is more the option of public ownership of the industry is not even being considered let alone being seriously advocated as an alternative worth fighting for. This is the case even while tens of billions of dollars of government monies are being poured into GM and Chrysler.

In conclusion we are currently witnessing three related crises. One is the global economic crisis of capitalism. A second is the crisis specific to the auto industry. This second crisis simply would not exist in North America were it not for last year’s economic meltdown, the very costly privatized American health care system and the disproportionate number of retired workers relative to active workers in the plants; a phenomenon that exists entirely due to corporate decisions designed to lower the age of the workforce and avoid the training costs that would be generated by the layoff of low seniority workers and the retraining of those who replaced them on their jobs.

The third crisis is a worsening crisis of leadership in the Canadian labour movement. This is clearly demonstrated by these events unfolding before our eyes, particularly in the auto industry, and by the wholly ineffectual response of the current labour leadership to it. In other words the crisis of the labour movement is a crisis of labour leadership.

Bruce Allen is the vice president of CAW Local 199.