12-11-05,10:12am

Democrats on the House Committee on Education and the Workforce [held] an E-Hearing Dec. 6 - 15, 2005, on the situation at Delphi, General Motors and the American auto industry. Below is testimony submitted by UAW President Ron Gettelfinger and UAW Vice President Richard Shoemaker.

The crisis in the U.S. auto industry is much bigger than any one company, or even any one industry. It represents a crossroads for our economy and our country. What’s at stake is the kind of future we will choose for America and its working families.

The crisis is well-documented. Auto trade deficits continue to climb as more auto jobs are shifted to other countries – recently GM and Ford announced their intentions to double the amount of parts they source from other countries. GM recently announced it will close multiple facilities and slash 30,000 jobs. Ford is also rumored to be planning plant closings and job cuts. Delphi, through the bankruptcy process, is threatening to close plants, eliminate thousands of jobs, and slash wages and benefits for the employees who remain. And many suppliers, including Tower Automotive, Collins & Aikman and Meridian, to name a few, are also in Chapter 11, with workers’ jobs and incomes at risk. The U.S. has already lost hundreds of thousands of auto parts job, and we are in serious danger of losing more.

The U.S. automotive manufacturing model is broken.

Some would have us believe that American companies simply can’t be competitive with foreign companies, that American workers are greedy, unwilling and unable to compete in the global economy, and that the current path of de-industrialization is necessary as we transition to a service economy. If Delphi CEO Steve Miller’s vision is fulfilled, poverty level wages and benefits will be the norm in the auto industry.

We reject those beliefs. With fair trade and a level playing field, American companies and workers can compete in a global economy – not on the basis of poverty-level wages, but on our productivity, quality and capacity for innovation.

Unfortunately, prevailing policies have crippled American manufacturers and undermined workers’ competitive efforts. For years we’ve fought for a comprehensive industrial policy that balances and promotes the interests of American manufacturers and their workers. Instead, what we have is a system that actually creates and permits competitive disadvantages including currency manipulation, unfair trade policies, and an unequal distribution of social costs.

At the root of many of the problems rippling through the parts sector is the market share decline of the Big Three. Some of that decline is simply due to increased competition, but much stems from an uneven playing field. The Big Three and older suppliers have enormous retiree health costs due to their large number of retirees and an older workforce. This is placing them at a significant competitive disadvantage compared to the Japanese and German transplants that have few retirees in the U.S., as well as auto operations in other countries that have national health care systems. It’s estimated that retiree health care and the impact of an older workforce on health costs adds nearly $1,300 to the cost of each Big Three vehicle.

The UAW has reacted responsibly to this crisis.

At Delphi, our union and the company agreed just last year to a much lower wage structure for new employees, who would be hired as Delphi’s business expanded and current workers retired or flowed back to GM.

At GM, our union and retirees stepped up to the plate and negotiated a plan to restructure retiree health care to reduce the cost to the company, while keeping coverage affordable for our retirees. Our active members agreed to give up some of their pay. Our retired members were willing to pay more for their health care.

At auto manufacturers and suppliers alike, our union has been a willing partner, stimulating productivity and efficient work practices.

Unfortunately, the problems faced by the auto industry are bigger than one company or even the industry will be able to solve – they require congressional intervention.

Congress should send a clear message to the U.S. Trade Representative not to tamper with the 25% pickup truck tariff. If a trade deal with Thailand were to eliminate that tariff, over 82,000 UAW jobs would be at risk.

Congress should not further jeopardize the auto industry by imposing burdensome pension funding obligations on older manufacturing companies at a time when they can least afford it.

Congress should enact tax and other incentives to encourage the domestic production of alternative fuel/advanced technology vehicles and their components. Right now, most of the advanced technology vehicles on the market are assembled overseas – and none of their key components are built in this country. If nothing is done in this regard, the University of Michigan has demonstrated that the U.S. will lose 200,000 more automotive jobs as advance vehicles gain a larger share of the market.

Congress should pass legislation targeting unfair currency manipulation in China and Japan. Current practices are giving a significant unfair competitive advantage to producers in those countries, thereby contributing to the loss of auto jobs in the U.S.

Congress should require that all trade agreements have strong, enforceable worker rights protections. This will prevent a race to the bottom.

Congress should act to reform our corporate bankruptcy laws so that companies cannot use Chapter 11 proceedings as a strategy to reject collective bargaining agreements and gut retirees’ pensions and health care benefits. Current law does not promote meaningful negotiations or a proper balancing of interests. Reforms should require good faith bargaining with unions, provide greater protection for wages, pensions and health care benefits, and put more limits on unfair executive compensation schemes.

Congress needs to address the issue of retiree health legacy costs to help level the playing field with the Japanese and German transplants. We see several potential ways to accomplish this, including modifications in the existing TAA health care tax credit, loan guarantees for costs associated with retiree health care costs to make it easier for the auto companies and parts suppliers to finance their retiree health care obligations, and a federal catastrophic reinsurance program. Any such relief should be tied directly to investment in domestic production and employment to insure a vibrant auto manufacturing presence in the U.S.

Finally, we need to continue to work for a comprehensive solution to the nation’s health care crisis so that all Americans – working or retired, men, women and children – have access to affordable health care. That is a basic human right, and it is a disgrace that a nation as rich as ours does not provide it.