Constitutional Death of the UAW
December 17, 2008
“Congress and UAW need look in the mirror first”
During the past several weeks there have been all kinds of finger pointing
and blame going on over the automakers’ failures. The CEOs blame the customers
for not purchasing American brand vehicles, the Feds point a finger at the
banks and their failure to lend money, conservative members of Congress place the
onus on the high cost of Union members’ wages and benefits, liberals point
their fingers at mismanagement and excessive CEO compensation while UAW leaders
blame the conservatives, the banks, the greed of the stake holders as well as
the consumer for not buying American. Ironically, when Gettelfinger offered to
terminate the JOBs Program and continue the two tier wages for new hires in
his presentation before the committees. He, by his own admission, pointed a
finger at his members wages and benefits as reasons for the automakers demise.
All the above has accomplished was cover up the real reasons behind the
failure of the American automakers, especially GM and Chrysler.
During the past 14 years I have scoured thousands of pages of data reported
by the automakers and the media. I have read everything from annual stock
holder reports, SEC filings, to 5500 benefit reports trying to make heads or tails
of how the automakers keep their books. If there is one thing I learned from
my experience, it was to be extremely sensitive to and cautious of the numbers
the automakers and media spew out when they claim the automakers are in
financial distress. Members of Congress and average Americans usually do not follow
or recall historical facts of events that took place just one to two years
ago, i.e.: 2007 contract negotiations. My sensitivity to the numbers allowed me
to notice that the numbers being crunched during Congressional hearings and
which are being used by the media today, are the same numbers GM used during
the 2007 contract negotiations to gain concessions from the UAW. In fact, they
were the same numbers used during the UAW vs. GM Henry 1 and Henry II
The problem here is simple. How can any member of Congress vote on a bailout
or loan without knowledge of the accounting procedures and the “real”
numbers of the industry they’re contemplating to bailout? Why didn’t Congressional
members, especially those in the Senate, require GM and Chrysler to make
transparent their company books to see exactly what went wrong?
Well, the question above would have unveiled something Congress wouldn’t
want Americans to know. That the true onus for the failure of the auto companies’
must include the huge lack of Federal oversight of those companies dealings,
a situation that was created by corporate lobbyist and by members of
Congress. It was the gradual incremental deregulation of the industry that took place
over the past two decades that afforded the financial managers of the auto
companies the freedom to cook their books in a method similar to the methods
Bernard Madoff used to cover up his ponzi scheme. As I write this, the Chairman of
the Security and Exchange Commission has admitted that S.E.C. was guilty of
not performing enough oversight of Madoff’s operation which allowed Madoff’s
to get away with his wrong doings for so long. If the truth was known it was
the lack of regulations that caused the S.E.C. to ignore Madoff’s gambit. Note.
Notice how financial experts are now predicting that other schemes will
surface now that Madoff was caught. I predict that one of the schemes if not the
next one the SEC uncovers will involve Rick Wagoner.
Over the decades corporate CEOs and lobbyist have lobbied congress
relentlessly to rescind existing regulations and demanded fewer new regulations. As a
consequence, Congress systematically rewrote, and amended federal regulations
such as ERISA, Federal labor laws, free trade legislation, IRS Codes, and
especially the Federal Accounting Standard Board (“FASB”) regulations, weakening
as many oversight provisions in federal law as they could. It was this lack of
regulation and oversight that has allowed the CEOs of the automakers to
mismanage their companies and drive them into the ground
During the Congressional hearings there was a call for the resignation of
Rick Wagoner, remember? However, the call for his resignation quickly subsided
and fell to the wayside. WHY?
Allow me to refresh your memories once again. When George W. Bush was
president he had his own hand picked staff. For over 7 years his Chief of Staff was
Andrew Card. Funny thing was, before Andrew Card became W’s Chief of Staff, he
lobbied for General Motors Corporation for years and at one time was the
highest paid lobbyist in Washington D.C. I doubt if George W. would agree to sign
any bill that would include language that would force Wagoner to resign.
Furthermore, media attention of a congressionally mandated resignation of
Wagoner could open the flood gates to investigations by the SEC and the media
that could expose conspiracy and fraud like nothing Madoff could ever dream up.
Truth is GM has not been in the business of manufacturing or selling
vehicles for decades. The company’s last real attempt was when Roger B. Smith created
Saturn Corporation. Since then GM has operated as a Stackable Available Money
Business. This is when managers use creative accounting methods to use
pre-tax dollars over and over again. If GM books were made transparent Congressional
Committees would find that GM’s accountants have been reporting the same pre
tax dollar twice and three times in their annual reports and Federal filings.
Excellent examples of this are the benefits funds set up by GM. They have
reported full funding of benefits plans over and over again to be disputed by
Federal agencies. One day the PBGC would report that the trust were underfunded,
then, the next day GM would report that the funds were fully funded, simply
put, nobody but Rick Wagoner and Ron Gettelfinger know how much real money is
in our pension and Other Personal Employee Benefits plans (“OPEB”). My
research has uncovered Master Trusts that are made up of comingled smaller trust
funds, eg: GM has a “Master Trust” for pension funds. That Master Trust is made
up of UAW, IAM, IUE, non union represented hourly plans as well as salaried
employees’ pension funds. This enables the accountants to transfer funds from one
trust to another, thereby, allowing the accounting gurus to use the same
dollars two and three times over so they can make each fund appear as fully funded
even though their not.. As for OPEB plans, I mentioned one in my December 11,
2008, “Constitutional Death of the Union” how all three unions’ SUB plans
are comingled under one Master Trust which allows for the same abuses as the
pension plans mentioned above.
Ironically, Ford Motor and the UAW created a VEBA in 1996 for all of the
benefits plans including Healthcare for UAW represented employees. It was called
the FORD – UAW Benefits Trust. Again, are you surprised to learn that the UAW
was involved in a VEBA as far back as1996.
A question needs to be asked of your members in Congress, why don’t you
demand Wagoner’s resignation as a condition for the bail out? Answer, if Congress
was to push for Wagoner’s resignation then they would have to demand the
resignation of Ron Gettelfinger and the other members of the International
Executive Board who were implicitly involved and enabled Wagoner in his Stackable
Available Money scheme. The Democrats in Congress will not cut off the hand that
feeds them. Secondly, don’t forget what I wrote above, that his resignation
could open the door to all kinds of problems for Federal officials and members of
Congress in Washington!
They win when they Obfuscate and Confuse
To get a better handle on just how complex all this is, during my 2004
efforts to uncover how much real money was in the joint funds, I discovered there
are over 20,000 General Motors “Ledger Accounts.” Amongst those accounts were
several for joint funds, eg: “Joint Training Programs and Specific Funds”
Account 5855, there was also the Central Office Transfers To the “CHR”
-Subaccount 14445. There were others such as Health & Safety 5851-14442, Overtime
Penalty accrual was to be recorded in the National Fund in account 5850 -14421. In GM
’s 19000 subaccounts, GM has an account for tax exempt cost for lobbying. Oh,
you did not know that companies could write off certain expenses for
lobbying? Now you can see why Congress will never reform lobbying laws.
That is twenty thousand or more accounts, each with sub-accounts that
Wagoner and his financial officers can use to move figures back and forth from one
account to another to make the numerical reality something other than what it
seems. Amazing isn’t it? However, remember all the above was made possible by
laws passed by members from both sides of the aisle over the decades,
especially senior members of the banking committees such as Chris Dodd and Richard
Yes our UAW bosses have played an important implicit roll in destroying our
benefit plans. The Union had members who sat on all joint administrative
committees that covered everything from the JOBS program to healthcare, as well as
our pensions. As far back as 1984 the UAW has had three members on the
Corporate Union Committee on Healthcare Benefits. The UAW also had three members on
our Pension plans, on our SUB, and Jobs programs. Why didn’t they raise hell
years ago when they saw that GM and the other automakers were not fully funding
our plans as the companies promised to do in our contracts? Labor agreements
are commitments made by “both” parties not just us union members, the
companies managers made contractual obligations to their employees and it’s the unions
job to police and make sure managers live up to those commitments. The UAW
should have held GM’s and Chrysler’s feet to the fire and demanded that they
fully fund the commitments the CEOs made to the Union’s members during the life
of our past agreements.
It is really ironic how members of Congress and especially the pontiffs in
the media won’t ask one really simple ye very important question of Wagoner.
Instead they accept what propaganda the Automaker’s spin masters regurgitate
during news conferences. For example; according to a December 15, 2008 report in
Automotive News, General Motors is loosing 67 million dollars a day. Allow me
to repeat that “GM IS LOOSING $67 million a day!” Automotive News also
reported that GM has over 853 ,000 unsold vehicles (a 139 day supply) on lots all
across America and that figure was since September 30, 2008. Here’s the
question Congress and the media should be asking Rick Wagoner. With that many
vehicles in stock, WHY DIDN’T HE SHUT DOWN GM’S OPERATIONS FOR THE THIRD QUARTER OF
Here’s why! The automakers are required by law to file financial reports
every quarter with the SEC. If GM was to shut down its operations temporarily in
the last quarter of the year then all GM could report would be two very
1) GM would have to report what portion of the company’s expenditures
for that quarter represent SUB benefits paid to its laid off workers.
2) Leaving the remaining portion or Fixed Marginal Cost that would
basically represent the managerial cost of running the company.
Heaven forbid that to happen, for such a report would for the first time
include a definitive cost of labor, separating labor cost from managerial waste.
Wagoner and the UAW could not have some one in Washington or the media
learning how GM and the Union have covered up the company’s financial mismanagement.
Hell, some one might even go to jail over it, which in my opinion someone
I support the bail out or loan, which ever you wish to call it. First of
all, I have problems with anyone in Washington D.C. demanding that the domestic
automakers give up any concessions for the bail out money since it is the U.S.
Congress that should be held directly responsible for the mess the auto makers
are in today. It was the senior members of Congress who created the loose
atmosphere of deregulation and oversight that encouraged managers and the CEOs of
the businesses to mismanage their companies and abuse their powers. Secondly,
I do not agree with giving the foreign automakers tax breaks and incentives
while Congress and the President turn their backs on the domestic companies.
Foreign companies have received over $3.5 billion in give-a-ways by states over
the years. Remember, these were give-a-ways, not a loan. (footnote number 1)
I can accept the idea of corporate officials occasionally mismanaging their
companies. They have a need to satisfy their share holders and sometimes they
have to bend the rules to get it done. However, when CEOs systemically defy
regulations and break rules for the greed of their stake holders then greed
becomes a culture and only Federal and State oversight can protect Americans.
Greed is a key characteristic of a capitalistic system and it must be controlled.
Strong regulations are needed to protect corporate officials from themselves
and to protect our nation’s workers and tax payers from the predatory
capitalistic nature deregulation provides corporate managers and their stake holders.
However, as a UAW member, I find myself being more disappointed in the UAW
leadership, because it was they who did not call into question the actions of
the companies when they became aware of what the number crunchers were doing to
our benefits. They cannot claim any excuse for their poor diligence, they
cannot say they did not know what was happening. It was Ron Gettelfinger who
hired a top notch accounting firm from New York to review the automakers books
during the 2007 contract and healthcare negotiations.
Every UAW, IUE and IAM member, retired or active, should demand
accountability from those who were supposed to protect our interest.
Onward in Solidarity Bill Hanline
(Footnote No. 1)
Greg LeRoy, GJF’s executive director said “And while proposed federal aid
to the Big 3 would take the form of a loan, the vast majority of subsidies to
foreign auto plants were taxpayer gifts such as property and sales tax
exemptions, income tax credits, infrastructure aid, land discounts, and training
grants,” he said.
Honda, Marysville, OH, 1980, $27 million*
Nissan, Smyrna, TN, 1980, $233 million**
Toyota, Georgetown, KY, 1985, $147 million
Honda, Anna, OH, 1985, $27 million*
Subaru, Lafayette, IN, 1986, $94 million
Honda, East Liberty, OH, 1987, $27 million*
BMW, Spartanburg, SC, 1992, $150 million
Mercedes-Benz, Vance, AL, 1993, $258 million
Toyota, Princeton, IN, 1995, $30 million
Nissan, Decherd, TN, 1995, $200 million**
Toyota, Buffalo, WV, 1996, more than $15 million
Honda, Lincoln, AL, 1999, $248 million
Nissan, Canton, MS, 2000, $295 million
Toyota, Huntsville, AL, 2001, $30 million
Hyundai, Montgomery, AL, 2002, $252 million
Toyota, San Antonio, TX, 2003, $133 million
Kia, West Point, GA, 2006, $400 million
Honda, Greensburg, IN, 2006, $141 million
Toyota, Blue Springs, MS, 2007, $300 million
Volkswagen, Chattanooga, TN, 2008, $577 million
Total: more than $3.58 billion
* total of direct subsidies to all Honda facilities in Ohio
** includes about $200 million for expansions of Smyrna and Decherd plants
List does not include joint ventures with U.S. companies
These data, drawn primarily from contemporary media accounts, are very
conservative. They do not account for inflation; some would be worth far more in
today’s dollars. They do not include any estimate of subsidies granted to
hundreds of foreign-owned auto supply companies that have located in the same areas,
virtually all of which were also heavily subsidized. Finally, they do not
reflect later news accounts, which often place higher subsidy values.