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Autoworkers push for real ownership of troubled car companies

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Retired Jeep Chrysler worker Michele Mauder knows hers is an uphill struggle, but it is one she is tackling with gusto. In quick visits to Washington, D.C., to lobby members of Congress, and in house meetings in Michigan and Ohio, Mauder is struggling to save the American autoworker.

chrysler-assembly-line“No one else is talking about saving jobs,” Mauder says. Pointing to Chrysler’s proposed deal with Fiat, “they’re talking about Fiat building small cars and shipping them here to sell through Chrysler’s dealer network. That doesn’t help taxpayers, workers or retirees,” she says.

While any number of corporate and government committees are discussing ways to save America’s “Big 3” auto companies — GM, Ford, and Chrysler — Mauder says the only way to do it that benefits workers, communities, and taxpayers, is to fundamentally restructure the way the companies do business and make the employees the owners. Together with about 200 active and retired autoworkers, including some former members of Chrysler’s senior management, she has formed the American Auto Workers Ownership Committee (AAWOC) to promote the idea of employee ownership. Mauder is president of the committee. Robert Mason, who says he formerly helped plan corporate strategy in the office of the CEO of Daimler/Chrysler, is the chairman of the group.

“I am hopeful, with a new administration, that they will look at some new alternatives,” Mauder says. The group’s efforts to meet with the administration’s auto task force have been unsuccessful so far.

Mauder’s basic idea is simple: the federal government should take over GM, Ford and Chrysler; finance retooling for smaller, greener cars, and sell companies to their workers. “Let’s cut out the big gas guzzlers that aren’t selling and replace them with fuel efficient cars,” she says. Instead of importing electric or fuel-efficient cars, “we want our people to build them,” she says.

Current plans being floated by GM and Chrysler call for the federal government and the United Auto Workers union (UAW) to own the majority of each company. The AAWOC opposes those plans. “We want all of the workers, from the lowest-paid line worker up through senior management, to own the companies, not the Union,” says Mauder, who was a union representative for four years while she worked at Jeep. “Right now, the International Union has negotiated nothing for the employees,” she says.

Mason points out that the federal government already controls GM and Chrysler and is restructuring their long-term debt. The question everyone is looking at is what happens after that. The AAWOC says: issue new equity and put it in a trust fund to distribute to employees under an employee stock ownership plan (ESOP). Employees then would buy the stock with the profits the companies make. Mauder and Mason recommend structuring concessions to assure a profit. They say base pay and benefit package should allow the companies to make “one dollar profit” at current sales levels.

“We all know employees have to give concessions, but we should get something in return so that when the companies become viable again we get something for our concessions,” Mauder says. And that “something” should be ownership. Mauder adds, however, that labor and labor-related costs account for only one-third of the auto companies’ fixed costs, and only 5 percent of their corporate budgets. Cutting management costs and trimming product lines also have to be part of the restructuring plan, she says.

According to the ESOP Association, approximately 11,500 U.S. companies have ESOPs, and they involve over 10 million employees. At 7,000 of those companies, the ESOPs are large enough to affect corporate strategy, and about 2,500 of those companies are 100 percent employee-owned through ESOPs.

Mauder argues that 100 percent employee ownership through an ESOP will reorient the corporate strategies of the domestic car companies away from short-term stock prices and towards their long-term viability. In part, that is because employees can’t cash out their stock until they leave the company or retire, at which time the company buys it back from them. As stockholders with limited cash out opportunities, employees would have an incentive to work for the company’s long-term health and to select directors, who do the same. She looks to employee ownership as model for growing auto and other manufacturing jobs in the U.S. and revitalizing communities that depend on them.

This is Mauder’s second ESOP proposal. When Daimler decided to sell Chrysler in 2007, Mauder put together a proposal for buying the company with a leveraged ESOP. She got help from experts at Kent State University and had the backing of her local union. The International Union, however, opposed the plan, she says, and supported the sale of the company to Cerebus, a private equity firm. “Jeep has had numerous owners. We made money for Chrysler, but we were just getting swallowed up in their mess,” she said in explaining her initial motivation for looking into employee ownership.

AAWOC is Mason’s second attempt to shop employee ownership, too. Independently of Mauder, he says he championed the idea of an ESOP in senior management when Daimler decided to sell the American automaker and even put together a model of how it could work. But, “the notion of 100 percent employee ownership wasn’t popular,” he says. Later, he learned about Mauder’s effort. In December 2008, he contacted her through work after the crisis at Chrysler had become public knowledge. “I told her this was the only thing that could work,” he says.

“This is the only solution with an upside potential for workers,” Mauder says, and by developing production and new technologies in the U.S., it is also the only solution with an “upside potential” for U.S. taxpayers and communities.

AAWOC’s model is for national auto companies that “right-size production” to the market instead of “super-sizing demand” with incentives, as Mauder and Mason explained in a recent pitch to Congressional leaders. “We believe in competition, but we also believe the Big 3 should cooperate more,” she said. “Instead of competing so drastically, they should complement each other. Each one should do what they do best. So, if Chrysler makes a good minivan and Ford and GM don’t, Ford and GM should stop making minivans,” she says, “and then let’s cooperate on research and development.”

Pointing to the $7 million that the Obama administration has allocated for a study by the Boston Consulting Group of the future of the auto industry, Mason says, “They are going to come up with the traditional recommendation to cut your way to prosperity. All we’re saying is let’s at least look at another way. Carve out some of that money for a minority report. If it is not viable, we’ll go home.”

“We want our people to be a part of the process and for them to get something in return for what they give up,” Mauder says. – Peter Downs (pdowns@speakeasy.net)

Peter Downs, a writer and editor based in St. Louis, is a former autoworker and former local UAW officer. In 1988, he authored a commentary, published by the St. Louis Post-Dispatch, that called on General Motors to start production of hybrid gas/electric cars.

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Written by writer. Edited by editor.

April 30, 2009 at 3:25 pm

Posted in Uncategorized

2 Responses

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  1. Great story Peter!

    Tom Laney

    May 1, 2009 at 5:24 am

  2. Peter,

    Yours was the most perceptive article yet on the importance of the strategy being developed by the AAWOC. To give you some insights on the big picture behind this strategy, as a member of the AAWOC team, I’m attaching a few papers that I think you would be interested in. We need a new Walter Reuther, as you will see in the attachments.

    Thanks again for your positive view of the struggle Michele and Robert have been leading. The key question remaining unresolved in my opinion is “When will the UAW wake up to be part of the solution and how do we wake them up to become champions of the new solution?”

    Own or Be Owned,

    Norm Kurland
    http://www.eei-consultants.com
    703-243-5155

    Norm Kurland

    May 4, 2009 at 2:42 pm


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