Gettelfinger: New Bankruptcy Rules, Fair Trade Keys to Rebuilding Auto Industry

by James Parks, Jul 31, 2006

Proposed new federal legislation would close the two biggest loopholes that allow corporate abuses in the bankruptcy process—and would be a big first step in protecting the hard-earned benefits of workers and retirees, union leaders say. 

The Fairness and Accountability in Reorganizations Act of 2006 (S. 2556, H.R. 5113) would prevent corporations from taking advantage of loopholes in the federal bankruptcy law that provide huge compensation deals for executives even as a company cuts wages and benefits for workers and retirees, UAW President Ron Gettelfinger told a congressional roundtable earlier this month.

The bill, introduced by Sen. Evan Bayh (D-Ind.) and Rep. John Conyers (D-Mich.), also would allow bankruptcy judges to consider the financial condition of a company’s entire operation, both foreign and domestic, when considering whether it is necessary for the company to renege on its collective bargaining agreements, close plants, eliminate jobs and reduce wages and benefits. 

That’s exactly the situation the UAW is facing today in its ongoing contract talks with bankrupt auto supplier Delphi Corp. Gettelfinger told reporters Delphi is dragging out negotiations toward Aug. 11, the date the bankruptcy court will resume hearings to determine whether the auto supplier can reject its contracts covering 33,000 of its U.S. workers.

Delphi filed for bankruptcy in October and immediately began calling for concessions from union members. And while demanding concessions from workers, Delphi is rewarding its executives with tens of millions of dollars in bonuses this year and hosting lavish cruises.

Delphi and other companies increasingly are using the bankruptcy process to impose deep wage and benefit cuts their employees rejected during contract talks. Before filing for bankruptcy, Delphi sought wage cuts of nearly 40 percent, but UAW members have insisted the company’s problems must be approached based on the principle of equality of sacrifice, instead of forcing rank-and-file workers to pay the entire price for management mistakes.

The AFL-CIO considers the Bayh-Conyers legislation an important first step toward preventing companies from using the bankruptcy process to undermine employee retirement security. Damon Silvers, associate general counsel of the federation, told the roundtable the law as it stands must be changed.

Our bankruptcy law and bankruptcy judges are allowing companies to file bankruptcy in the United States and pursue punitive measures against their employees while insulating profitable foreign subsidiaries and the cash flows from those subsidiaries in the bankruptcy process. This both is grotesquely unfair to employees and other creditors and is an effective subsidy to non-U.S. operations. 

Gettelfinger also called for a partnership among workers, management and government to reinvigorate the auto industry and turn around America’s manufacturing base through new approaches to trade, pensions, taxes and health care. The plan calls for incentives for all automakers and parts suppliers to build flex-fuel and advanced technology vehicles, such as hybrids and clean diesels, and their key components here in the United States.

Fair trade policies, according to Gettelfinger, should end currency manipulation by countries to make U.S.-built vehicles less competitive by thousands of dollars, require nations to dismantle tariff and non-tariff barriers to U.S.-built autos and require other countries to honor internationally recognized human and worker rights.

Tax code changes should eliminate corporate incentives to shift production and jobs overseas, Gettelfinger said, while pension changes should encourage better funding of  benefits that would not drive companies out of the defined-benefit pension system.

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