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 

healthcare lawsuits. 

  

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 

Shelby. 

  

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 

2008?   

  

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 

significant things. 

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 

should! 

  

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.