In the summer of 1978, the airwaves were filled with the phrase “just when you thought it was safe to go back in the water” as Jaws II was hitting the theaters. For those who have worked on the Alabama Site, it is 1978 all over again. Having gone through the Delphi bankruptcy, we held on tight as the process played out in court and we continually got smacked down by a bankruptcy judge who only looked at the company’s needs. The Benefit Guarantee that was negotiated in 1998 extended a lifeline to us and in September of last year GM announced they were assuming the UAW Delphi pension plan. However, our relief was short lived as GM showed up in Washington requesting a bridge loan in November.

With GM’s bankruptcy filing in June of this year, our nightmare started all over again just like Roy Scheider’s in Jaws II. Elected officials, conservative pundits and our enemies everywhere have pooled resources to wage war on the domestic auto industry and our union members. But, most of what has been said is totally false, misleading and downright wrong. The two most vocal critics of GM and union members have been Senators Bob Corker of Tennessee and Richard Shelby of Alabama.
Each has been downright nasty in their approach to their opposition - calling the workers – our members-over paid thugs and accusing the UAW of running these companies into the ground.
While most Alabamians many feel this is a mid-west issue, many have forgotten the manufacturing footprint that Detroit’s automakers once had in Alabama. General Motors operated manufacturing facilities in Athens and Tuscaloosa, Ford in Sheffield and Chrysler in Huntsville. As of the end of March this year, 10,341 Alabama citizens receive a pension check from GM, Ford or Chrysler. So, when Senator Shelby suggests dumping retirees, it isn’t just people in Michigan, Ohio or Indiana who are at risk but also over 10,000 of his own constituents.

Then of course there is the freshmen Senator of Tennessee Bob Corker. Corker is a real estate developer who was elected to the senate by way of a single racist campaign ad. Corker has repeatedly demanded that UAW workers take pay cuts and retirees lose their health care. What hasn’t made the press is the State of Tennessee has pledged over $530 million dollars toward the Volkswagen plant being built in Chattanooga. Another fact that hasn’t been made public is that Corker owns most of the land adjacent to the new Volkswagen facility. After Corker finally realized that shooting his mouth off may be placing the GM assembly plant in Spring Hill, Tennessee in jeopardy, Corker reversed course and started defending the site and suggested that President Obama would close the site because Tennessee had voted for McCain. The White House press secretary stated the White House would not be involved in which plants remained open and which ones would close. The White House went on to say that Corker assumed the President would play politics with such important decisions because that is what he would do if he were President.

The Credit Crisis

In 2008 the credit markets hit the wall, the result of an issue that had been brewing for years. The bust of the technical stocks in the late 1990’s helped usher in a recession that began in 2000, with the government countering the issue by dropping interest rates. As rates fell, the monthly payment on a home fell with it and more and more Americans refinanced or bought larger homes. As the economy continued to slide as a result of the Republican policies, foreclosures began to rise. To cover their losses, banks began to package bad mortgages and sell them off as mortgaged backed securities to hedge their risks.

In June of 2007, two hedge funds owned by Bear Stearns collapsed due to skyrocketing foreclosures. As this epidemic spread, the housing market began to decline. These mortgage securities held tons of home mortgages whose payoff was much higher than the market value of the houses. In March 2008 the Fed staved off a Bear Stearns bankruptcy by assuming $30 billion in liabilities and engineering a sale to JPMorgan Chase for a price that was less than the worth of Bear’s Manhattan skyscraper.
In August of 2008 government-sponsored entities Freddie Mac and Fannie Mae saw their stock prices plummet and the government stepped in again to take control. In September of 2008 the financial world was rocked further, with insurance giant American International Group, being bailed out by the Fed in an $85 billion deal. These events essentially shutdown the credit markets for both corporate and private lending drying up resources for everything from capital improvements for companies to the purchase of a new vehicle.

President Bush’s Secretary of the Treasury Henry Paulson introduced a bill that would provide a $700 billion bailout of the financial institutions to shore up the financial markets and stem the nose dive on Wall Street. After much debate in Washington, the measure finally passed. This was a true “bailout” for the money was provided to cover the bad loans that had been made. There were no provisions for these banks to pay this money back. However, instead of using this money to free up credit and restart lending, most banking institutions sat on the money to boost their bottom line and increase bonuses for the same banking executives who created the mess with the reckless lending that had been taking place.

The Industry
In 2007 the UAW agreed to contracts with the Detroit Three that narrowed the gap of pay and benefits between organized and unorganized automotive plants. The concessions the UAW made were to put the companies back on sure footing to secure the future. At the helm of the new contracts was language that would allow the companies to move future cost of retiree health care off the books to improve their bottom line. The Detroit Three would create VEBA’s (Voluntary Employee Beneficiary Association) which were trust funds that would take lump sums of money from the companies and assume the cost of retiree health care. This helped the companies by cleaning up their balance sheets and the union benefitted by getting the money for this health care up front in the event of a bankruptcy by one of the three Detroit manufacturers.

At the time Ford Motor Company was in the worse shape and teetering on the edge of bankruptcy. They were able to secure private financing and borrowed billions to address their cash flow issues. This is the only reason that Ford hasn’t had to ask the government for loans at the current time. When credit was available, they borrowed then.

In the spring of 2008, GM was beginning to realize the financial benefit from the concessions the UAW made and sales were improving. Privately held Chrysler was still struggling and entered into talks with GM for a merger. However, all that came tumbling down with the collapse of the credit markets in late summer. Almost overnight, credit for a new vehicle became almost impossible to secure. Only 25% of consumers qualified for a loan on a new car, essentially closing the market to 75% of potential buyers. The credit crisis required such a high credit score, the average consumers no longer qualified. In addition, GM and Chrysler could no longer go to the bank to borrow money for capital improvements. The industry was hit with a double whammy of sales stopping at once and no money available to them. This meant that each company had to use their cash flow to fund day to day operations with limited revenue coming in based on the reduction of the credit market. This was why Ford’s financial situation was not as dire, because they had secured $30 billion in financing prior to the crash. This drain of cash flow is what put GM and Chrysler at the doors of Washington in November, once their cash reserves had been pulled down and they couldn’t get the money from the banks.

They were requesting “bridge loans” to get them through the downturn in the market. Not a “bailout” as the media called it. It was here that our “friends” Corker and Shelby began making demands of auto workers and retirees. Shelby roared on TV about how GM should “dump their retirees.” Corker made his demands to slash wages and benefits, when in actuality wage and benefits had nothing to do with the situation.

In Washington the elected “experts” beat the Detroit Three with a big stick of misinformation telling them they needed to have more fuel efficient cars, cars that people wanted, better designs and more productive factories. If these so called “experts” would have looked at the facts they would have discovered that GM has the best fleet CAFÉ rating of any major manufacturer. While Toyota builds a number of fuel efficient cars (this is because their primary market is Europe and Asia where fuel prices have been at $5.00 per gallon for years), their pickup trucks are much less fuel efficient than GM’s, giving GM the best fuel rating for their entire fleet. Plus, the Harbor Report that gauges the productivity of automotive plants published their annual report of the most productive plants. The 2008 report found gains at GM, Ford and Chrysler that put them as good or better than the transplants. As a matter of fact, Toyota’s productivity has actually fallen from the previous year. The report actually credited the UAW with making the gains possible. The reason that Toyota, Honda and Nissan were not in as dire financial shape was the much smaller size of their manufacturing footprint here. While GM operated 43 plants in the United States, Toyota by comparison has 11. GM’s problem had more to do with their size than their products.

The Government
The morning the House voted on the bridge loans, our old friend Richard Shelby circulated a memo among Republican representatives stating this vote would give the Republicans “a way to get back at labor for the 2008 Federal elections.” Shelby was willing to sacrifice all the workers and retirees at GM, Ford and Chrysler – including about 13,000 active and retired Alabamians over a political grudge. Not to mention the over 1,000,000 jobs nationwide that are tied to the auto industry.

President Bush lobbied hard for the bridge loans because he knew the risk to the economy should the domestic automotive industry fail. Just before leaving office Bush granted the first loans to keep the companies solvent and then “kicked the can down the road” to the Obama Administration.

The first loans came with targets that must be met by the end of February or the loans were to be recalled essentially signing the death warrants for the companies. In the mean while, the debacle over the banking bailout coupled with the misinformation campaign waged against the Detroit three by the conservative media – with Fox News and Rush Limbaugh leading the charge- swayed public opinion against helping the domestic manufactures. This public outcry against any additional loans placed President Obama in a difficult position of assisting the industry. The President assembled the automotive taskforce to help restructure the industry. This restructuring was not easy and has included some bitter pills for us to swallow, including the decision to steer both Chrysler and GM toward bankruptcy.

At the UAW Region 8 Leadership Meeting in June, UAW Vice-President Cal Rapson who is in charge of the GM Department stated “I have to tell you, President Obama is our friend. The public sentiment against the industry has made it hard for him to do much. The Automotive Task Force came in and tore up our contracts. While this group is made up of smart people, they know nothing of the automotive industry. As a matter of fact, the bulk of them even drove foreign cars. We didn’t want bankruptcy but the more we got into it, the more it seemed to be the only way out of the issue we were in.”

Prior to GM filing bankruptcy, the UAW negotiated and ratified amendments to the 2007 agreement to meet the requirements outlined in the bridge loans. These changes should prevent further concessions from our membership in bankruptcy court. The pundits are screaming socialism at the President.

Even many of our members say the same thing. But, let’s look at what would have happened if Senator McCain had been elected president. McCain has said repeatedly no to loaning GM and Chrysler money. If there had been no loans, then GM today would be liquidated as oppose to Chapter 11 bankruptcy. In liquidation the pension fund would be transferred to the general fund to repay creditors. Plus, the VEBA and ALL retiree health care would be gone. Delphi in the past few months has terminated both retiree health care plans and their pension plan. We are outraged that our salary brothers and sisters have had these enormous hardships placed on them. Without the bridge loans and the bankruptcy financing the federal government has provided, each of you reading this report would be without health care and about a 40% reduction in your pension check. In addition, the PBGC has said that if GM dumped their pension plan it could very well bankrupt the PBGC.

Before you criticize President Obama too much, realize without his actions your pension plan and health care could be totally wiped out. While we don’t like everything that has transpired with the Automotive Task Force, no action could have meant no pension check in the mailbox on the first of the month.

The Future
While we are still not completely out of the woods, things are far better off than they could have been. It is also important to remember the things Senator Richard Shelby and Senator Bob Corker have said about us. The next time you hear someone spouting disparaging remarks about auto workers, remember it is your friends in the conservative media – Fox News and Rush Limbaugh- that have led this media campaign against us. If America’s working families – particular those in the auto industry have ever had a wakeup call – this is it.

For the second time in four years, here we are again swimming in the shark infested waters of bankruptcy. I shudder to think where we would have been without the UAW and a President who has been willing to shoulder the criticism to save an industry that is vital to America without totally wiping out the workers and retirees who created this industry. Hopefully, we have learned our lesson and in the future we can tell the difference between the sharks of politics and the lifeboats of humanity.