“Americans love a comeback story.” General Motors CEO Daniel Akerson was referring to his company’s Nov. 18 Initial Public Offering of preferred and common stock on the New York Stock Exchange. (Detroit News, Nov. 19) Akerson’s “Americans” — wealthy investors — showed their love by purchasing 451 million GM shares by the end of the day.
The day began with Akerson ringing the bell to signal the start of trading. The confident CEO revved the engine of a sporty new Chevrolet Camaro. The opening price was $33 per share. The price closed at $34.19 and rose another seven cents the next day.
At the time of the 2009 bailout, GM stock sold at a 75-year low of 75 cents a share. What would cause a nearly fifty-fold increase in value in such a short time? Did GM suddenly acquire new assets that would increase the worth of its holdings? On the contrary, 11 plants and a number of warehouses, along with some 1,500 dealerships, have been closed as part of the post-bankruptcy restructuring.
Stock prices have little to do with the real value of a company’s assets. They are a reflection of how much an investor is willing to gamble that a company will make profits. In the first three quarters of this year GM has made $4.2 billion in net profit. Profits are made by exploiting labor.
When the bosses are able to cut wages or to make more products with fewer workers, what they keep for themselves in the form of profit goes up. During the bankruptcy process the United Auto Workers union made huge concessions. Now GM’s North American unit has made $4.9 billion in profit in the first three quarters of this year. Per-vehicle profits are estimated to be around $2,000. The UAW-represented workforce, who once numbered 500,000, now hovers around 50,000. It takes about 30 hours of labor to build a vehicle. Even if we take the grossly inflated cost of labor that GM claims — $75 per hour — the bosses still get almost as much in profit per vehicle ($2,000) as the workers earn in wages and other compensation ($2,250).
Gov’t colludes to shed jobs, slash wages
With 2007 and 2009 concessions, shedding tens of thousands of higher-paid workers and hiring 7,000 new workers at half the pay of “traditional” employees, labor costs have fallen dramatically. Workers are seeing more of the value they produce go to profits than to their own wages and benefits.
That high rate of exploitation was the major selling point in a two-week “road show” in which GM Vice Chairperson Steve Girsky and North American President Mark Reuss gave 85 presentations to potential investors. The company’s prospectus stated, “We have substantially completed the restructuring of our North American operations, which has reduced our cost base and improved our capacity utilization and product line profitability” through “salaried and hourly headcount reductions” and “labor agreement restructuring.”
To “save” GM the federal government loaned the company almost $50 billion. The U.S. Department of Treasury demanded major contract changes from UAW members. Voting “no,” workers were told, would mean no loan and thus Chapter Seven liquidation. UAW workers voted to allow GM to close a significant number of facilities, but weren’t told which ones would close until after the vote.
Much of the work has shifted to low-wage countries. The prospectus even bragged, “Approximately 43 percent of our vehicles are manufactured in regions we believe to be low-cost locations, such as China, Mexico, Eastern Europe, India and Russia.”
Wages of future U.S. employees are frozen at $14 per hour until 2015. Now the UAW leadership has allowed GM to recall some laid-off workers at the lower wage in a Michigan assembly plant. It’s reasonable to assume that the Treasury put pressure on the union to go along with the 50 percent pay cut.
It was to effectuate a rapid and drastic streamlining of operations — President Barack Obama used the phrase “lean and mean” — that the capitalist state temporarily took control of GM. Now that the task is “substantially completed,” the government is in the process of returning the company to private hands. In two days the federal government’s share of GM was reduced from 61 percent to 33 percent. Through the stock sale and payments on the loan GM has repaid $23 billion to the government.
The state orchestrated a “comeback” on the backs of the workers, and this is the reason for the bosses’ bravado. In the days leading up to the IPO, Akerson boasted that in an improved economy, increased sales volume would allow GM’s net profits to rise to $13 billion a year. By the second day of trading that estimate had jumped to $19 billion. (Detroit News, Nov. 20)
Union must break with capitalists
Akerson is assuming that, despite negotiating vague language on “equity of sacrifice,” the UAW will not get back what it gave up. When the CEO rang the bell, UAW International President Bob King was standing right behind him. “We’ve made a lot of sacrifices,” King told the Detroit News. “This IPO shows that was the right decision.”
In fact what the IPO shows is that GM has increased the rate of exploitation, and done so with UAW leadership’s cooperation. On the shop floor, the expansion of the two-tier wage scale has led to the erosion of worker solidarity. Until King breaks up the decades-old partnership with the bosses, the prevalent mood among the rank-and-file will be one of frustration and demoralization. To make that break, however, what is needed is rejection of increased wage exploitation and profits. The entire capitalist system must be challenged.
Despite the orientation of the union leadership, some autoworkers are trying to figure out how to reverse the givebacks that GM — and Ford and Chrysler — have taken from them. At a Nov. 14 meeting in Toledo, Ohio, a group of anti-concession activists began planning a demonstration outside the North American International Auto Show in Detroit next year. There, and at the national Bargaining Convention in the spring, they will focus on the fight to overturn the two-tier wage scale and bring back equal pay for equal work.
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