Wednesday 24 December 2008
by: David Cho and Zachary A. Goldfarb, The Washington Post
In agreeing to provide federal assistance to General Motors and Chrysler, the White House demanded the firms cut worker compensation to the levels paid at the US divisions of Toyota, Nissan and Honda. (Photo: AP)
Labor leaders seek to renegotiate White House terms on auto bailout.
The nation's automakers are preparing to ask for wage and benefits concessions from their workers in early January to meet the conditions of a $17.4 billion federal aid package, but labor officials say they will seek to renegotiate the terms of the bailout rather than make those sacrifices.
The remarks by union leaders have set up yet another contentious battle in the auto industry.
In agreeing to provide federal assistance to General Motors and Chrysler, the White House demanded the firms cut worker compensation to the levels paid at the U.S. divisions of Toyota, Nissan and Honda. But Ron Gettelfinger, president of the United Auto Workers, said earlier this week that he would seek to remove the wage-reduction provision of the loan, calling it "an undue tax on the workers" who have already made "major" sacrifices for the benefit of the auto industry.
Gettelfinger said that what is being asked of the autoworkers - who agreed to concessions in 2003, 2005 and 2007 - is "unrealistic." He has said he wants to work with President-elect Barack Obama to remove the wage provision.
The White House defended the terms of the auto bailout, saying that every stakeholder in the car companies would have to make sacrifices for the firms to survive.
"These firms have to become viable, and that means they have to look at all of their costs and bring them into line so that they can compete in today's global economy because they have come to the taxpayer asking for assistance, and that's the least the taxpayer can ask for in return," said White House spokesman Tony Fratto.
Greg Martin, a GM spokesman in Washington, said he was optimistic about the coming negotiations with the UAW.
"We'll really start the heavy lifting as soon as the calendar turns over," he said. "We've been working very closely with them to get our costs in a much more competitive line, and we have every confidence that that collaboration is going to continue and that we are going to meet the terms of this loan agreement."
Critics of U.S. automakers say that they pay their workers, who are unionized, far higher wages than those of nonunionized workers at foreign-owned automobile plants. But union leaders say many of their members actually make less. In many cases, the truth depends on how the compensation is calculated - whether it includes bonus pay and benefits, for instance.
The stakes in the talks between the unions and the automakers are high. If GM and Chrysler are unsuccessful in convincing labor officials, as well as bondholders and other stakeholders, to go along with a broad restructuring plan, the government could call off the loans and let the companies declare bankruptcy or fail. The companies have until March 31 to prove they will remain financially viable.
The deadline and other restrictions "send a clear signal to everyone involved," President Bush said last week. "The time to make the hard decisions to become viable is now - or the only option will be bankruptcy."
Because the aid is being provided through the executive branch instead of through new legislation, Obama can alter the terms once he takes office.
Transition officials so far have not offered their views on the terms of the bailout, which they described as a "framework."
Those officials did not return messages seeking comment yesterday.
Obama on Friday called the loan package a "necessary step ... to help avoid a collapse of our auto industry that would have had devastating consequences for our economy and our workers."
The administration on Friday decided to give GM and Chrysler $13.4 billion immediately and $4 billion more in February if the companies meet targets for extracting concessions from unions and bondholders. The federal assistance will come from the Treasury Department's $700 billion Troubled Asset Relief Program and could be exchanged later by the government for as much as a 20 percent stake in the companies. Ford said it did not need government aid at this time.
The federal loans, which will carry an interest rate of 3 percent above a standard interbank lending rate, were necessary to avoid a "disorderly" collapse of an industry that supports hundreds of thousands of jobs, Bush said.
Most of the terms of the loans were based on a failed legislative effort to give Detroit $14 billion in aid.
But the provision that requires the car companies to match wages at their Japanese rivals was inserted by the White House when it took over the effort to prevent a collapse of GM and Chrysler.
Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said that the condition was an "unfair assault on working men and women."
"I believe that the incoming administration and the Congress should take whatever steps are necessary to remove" the provision, he said in a statement last week.
The White House said lawmakers lost the right to dictate terms of the loan after the Senate failed to pass a bill to help the automakers.
"Congress lost its opportunity to be a partner because they couldn't get their job done," Fratto said. "This is not the way we wanted to deal with this issue. We wanted to deal with it in partnership. What Congress said is ... 'We can't get it done, so it's up to the White House to get it done.'"