Use Bankruptcy Laws to Force Bigger Givebacks, Break Unions
By Chris Kutalik
November 2005 Issue
in heavily unionized
Bankruptcy-as-a-strategy first became prominent during the restructuring of the steel industry in the late 1990s, then spread to the airlines after 9/11, leading to a virtual freefall in the bargaining power of unions there.
the October 8 Chapter 11 filing by
Shedding a Legacy
affected industries have much in common. The business press describes them as
"ailing legacy industries," which is code for densely organized
These industries have had defined-benefit pensions, good retiree health care, good low- or no-cost health care, relatively high wages, and other benefits. But many firms in these industries are no longer interested in keeping these "high towers" around.
the long boom of the '90s, many
the similarities among industries go beyond broad trends; they even include the
same cast of characters.
said in a recent press conference, "[
Another part of this strategy is to shift pension costs to taxpayers by defaulting and leaving the bill to the Pension Benefit Guarantee Corporation, a federal government agency created in 1974 to protect workers' pensions from companies going under. Pensions picked up by the PBGC pay out at significantly lower rates, many topping out at 60 percent of the original.
Many companies started underpaying into their pension funds in the late 1990s. As the 2001 recession hit, these companies were underfunding to the tune of hundreds of billions of dollars: $305 billion in 2002 and $278 billion in 2003, according to the PBGC. To restore investor confidence, managers sought a way out of paying up on their obligations. Chapter 11 fit the bill.
number of bankrupt companies have been able to renege completely on pension
payments by either using the threat of a court-ordered abrogation of their
labor contracts (US Steel,
To add insult to injury, retiree health care benefits have also been under the restructuring axe. Many retired steelworkers had to face cost jumps of hundreds of dollars a month after smaller, "leaner" firms emerged from bankruptcy.
What to Do?
This trend presents enormous challenges for unions. If leaders continue with the strategy of appeasement through concessions, the situation will grow even grimmer. Concessions don't save companies, and appeasement only breeds more boldness on the employers' part.
On the other hand, a militant piecemeal strategy is unlikely to work either. The courage - and foresight in identifying the severity of this new round of corporate restructuring - shown by the Aircraft Mechanics Fraternal Association at Northwest has unfortunately run up against a wall, as the airline continues to operate with outsourcing and labor from other unions.
Non-striking gate/ramp agents, flight attendants, and pilots - all in separate unions - are facing the fallout from Northwest's September 14 bankruptcy filing and its subsequent filing of a motion to open their contracts October 12.
represented by the UAW, IUE-CWA, and the Steelworkers are all separately facing
the same at
A cross-union response is clearly needed.
This response needs to unify union efforts first in affected industries and then around the movement as a whole in a counter-strategy. Marches, rallies, inside strategies, intermittent strikes, and industry-wide sympathy strikes need to be advocated for at the local level and enacted on the national.
potential power exists. To protest outsourcing and speedup, the UAW struck two
auto parts plants in
"People fought and died to win the benefits and wages that we've gotten over the years," said Al Benchich, president of UAW Local 909. "It wasn't just handed to us. So now we'll probably have to take to the streets again to keep what we've won or get it back."