Big PHARMA's offensive against world's poor
GM Eliminates Jobs--the effect of outsourcing
Lay Convicted--Greg Palast
Immigration illegal, legal, and cheap labor
Exxon Posts Record Profits
Bankruptcy hammer for lower union wages
Gates Foundation
Bankruptcy hammer for lower union wages


From Green Left Weekly, February 8, 2006.
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UNITED STATES: More bosses opt for Chapter 11 'bankruptcy’ swindle

Eva Cheng

Last September, Delphi Corporation, the largest US auto parts maker, demanded from its current and retired workers huge cuts in wages and entitlements. When the United Auto Workers union refused to agree to the cuts, Delphi filed for “bankruptcy protection” in October. The UAW was given until December to accept Delphi's terms or the company will get the bankruptcy judge to void Delphi’s existing labour contracts. The deadline for the union to agree has been extended to February 17.


Taking a lead from Delphi’s blackmail, other big US auto producers have stepped up their pressure on the UAW to accept big cuts in auto workers’ wages and conditions. In October, General Motors struck a deal with UAW officials that will save GM US$1 billion a year at the direct expense of its current and retired workers. In December, the Ford Motor Corporation obtained a similar deal with the UAW, saving the company $850 million annually.  Workers ratified the two union deals with great reluctance — 61% of GM union members voted in support while only 51% of Ford's union members did so.


The Ford-UAW deal, however, didn't stop Ford from announcing on January 23 that it will eliminate 30,000 jobs and close 14 plants across the US over the next six years. This followed a GM decision a few months earlier to slash 30,000 jobs and close a dozen US plants completely or partially through 2008. GM used a short-term operating loss to justify its escalating attacks on its workers. It announced in late January a loss of $8.6 billion for 2005. But as late as November 2005, GM still had $19 billion in cash on its balance sheet. Ford actually made a profit of $2 billion for 2005 despite a pre-tax loss of $1.6 billion for its North American operations.

Delphi is flagging the risk of bankruptcy to pressure its current and retired workers to accept terms that they wouldn't agree to otherwise. However, according to the information Delphi provided in October as part of its “bankruptcy” filing, it still had $1.6 billion of cash in hand in addition to a $4.5 billion credit line from the world’s two biggest banking firms, Citigroup and J.P. Morgan Chase. Would these financial vultures give a really ailing firm such a huge credit line?


Delphi management also made clear that once it emerges from “bankruptcy” in 2007, it will propose giving its top 500 managerial employees $88 million in cash bonuses, with the top four managers sharing $8.9 million. Delphi’s executives continue to be eligible for generous severance packages, which could amount to a total pay-out of $145.5 million if they were all terminated.  Delphi's “bankruptcy filing” is essentially a scheme to force its present and former workers into financing its owners' profits. If business is really so difficult, shouldn't the shareholders share the pain by accepting little or no profit for a while?


Delphi isn't the only company that is using the “bankruptcy filing” trick. Nor will the Delphi saga affect only Delphi workers and retirees.  Through many earlier struggles, auto workers have won among the best conditions among US workers. Such gains had trickled down to workers in other industries. Now, the “give-backs” being blackmailed out of auto workers are likely to be used as models for similar “give-backs” by bosses in other industries.

The Chapter 11 hammer

Assisted by the 1978 Bankruptcy Act, US corporations can use the pretense of bankruptcy as an excuse to seek “protection” from certain creditors — mainly their own workers — so that these corporations can ruthlessly slash their workers’ pay, entitlements and pensions. Until recently, this weapon was held largely in reserve. But since 1998, beginning with a number of steel companies, an increasing number of US firms, have used Chapter 11 to void their labour contracts.  Though the Chapter 11 provision was first created in 1938 to deal with genuine bankruptcy cases, the 1978 law turned it into a potential corporate tool to screw workers. In theory, only those companies on the verge of collapse can file for such a protection. In reality, a company whose profit is squeezed can take this route to force its workers and/retirees to fund its way back to satisfactory profitability.


Writing for the October 23 Washington Post, steel industry analyst Mark Reutter revealed that some 150 major US corporations are currently in some stage of bankruptcy reorganisation, including four leading US airlines.  Reutter observed that Chapter 11 “permits management to petition the court to void labor contracts and substitute whatever terms it chooses. Properly stage-managed and set in motion, the restructuring process can steamroll the union, peel away retiree benefits and dump pension obligations onto the PBGC” — the US government’s Pension Benefit Guaranty Corporation. {More federal corporate welfare—that doesn’t get reported or tallied as such—jk}

Pension attack

The PBGC plays the role of a pension provider of the last resort — promising to deliver a very modest payment — when a retired worker’s last employing company no longer wants or is capable of honouring the company’s pension obligations. PBGC helps ease the risk of social instability that might otherwise be caused by desperate pensioners.  [Funds were once required to be set aside to meet future pension obligations.  Through regulatory changes these funds are not required to be securely sequestered—jk]

While younger firms focus on attacking their current workers, their more established counterparts seek to target their retired workers as well. The corporate bosses seek to create the impression that health care and pension provisions are “welfare” extras they provided out of their generosity. It's nothing like that. Health care insurance and company pensions are part of a remuneration package of which the weekly wage is only a component part. Pension and health care insurance for retired workers are merely deferred remuneration for work performed by workers while they were in active service. Any attempt to reduce or renege in honouring such payments amounts to increased exploitation of labour.  But this is exactly what more and more corporate robber barons are seeking to do. Standard and Poor's (S&P) credit rating agency observed in a January 27 note to its clients that pension cutbacks “have become a part of the US business landscape” and that this practice is being extended to the telecom and technology sectors “both of which are, on the whole, fiscally sound”. This is clear evidence that the cutbacks aren't prompted by a company's genuine financial problems but as a means to boost profits.


A key cutback is through replacing “defined benefit” pension schemes by “defined contribution” ones. In the former case, retirees receive a guaranteed income, adjusted for inflation. But no such adjustment is allowed for in the latter case, leaving benefit recipients with a steadily declining real income. Even for the remaining defined benefit schemes, there is a growing shortfall in the funds actually set aside to back such obligations. The underfunding of the defined benefit schemes of the S&P 500, which lists the stock prices of the top 500 US firms, was $164.3 billion at the end of 2004. S&P expects the shortfall to grow to $182 billion for 2005.


Reutter gave the following description of how the owner of the Bethlehem Steel Corporation used the PBGC to make a profit out of “bankruptcy”: “Some 95,000 retirees and dependents lost their health-care plan in 2003 when the bankruptcy judge sold the company's assets to International Steel Group, a company controlled by billionaire financier Wilbur L. Ross. “Meanwhile, the PBGC was left with the responsibility of paying $4.3 billion in underfunded Bethlehem pensions over the next 30 or so years. Because of the less generous terms of PBGC's pension formula, some steelworkers lost 50 percent of their expected pensions as well as their health benefits.  “Earlier this year, Ross sold International Steel to London-based Mittal Steel Co., picking up $267 million in profit on the sale. Ross's investment fund has since amassed $4.5 billion, some of which he plans to use to make acquisitions in the auto parts industry, he said recently. One of his possible targets? Delphi. He has made it clear, in recent interviews, that he is carefully watching the company and its Chapter 11 reorganization.”


The PBGC now suffers from a long-term deficit of about $23 billion. A December 16 report on attributes this to the termination of several large pension plans in the airline Band steel industries. The current cutbacks in the auto industry are set to make the PBGC shortfall even worse.


The nature of capitalism is to maximize profits. Since major corporations own the press, and a radical press will raise practically nothing through advertising, the average American hears scant little about the 55,000 deaths from VIOXX, the destruction of the environment, or the ways U.S. corporations now get out of pension fund obligations.  Below is an article on the once secured, now unsecured retirement—also cutting of wages.  The U.S. has under the Republicans as of 2005, lost 3,000,000 manufacturing jobs due to the lack of tariff protection and outsourcing.