GM Strike Shows How The Economy STILL Doesn’t Work For The 99%
About 46,000 GM workers went out on strike yesterday. It’s another case study in how the economy still doesn’t work for the 99%. The company has had strong profits for years. It’s already paid out tens of billions of dollars to stockholders. But it wants worker concessions – even as it’s scheduled to pay investors another half-billion dollars this Friday.
Here’s what’s on the table in GM contract negotiations, according to media reports:
- Permanent jobs for the 7% of GM’s employees who are now working as temps. The UAW wants these jobs to be permanent – better jobs with better wages. (Right now, GM temps earn about 30% less than permanent workers.)
- Reopening idled plants. Last winter, GM announced it would stop operations at four US factories – upending the lives of thousands of families just before Christmas. The Lordstown, Ohio plant was idled even though its workers had agreed to $118 million/year in concessions to keep it open. The union wants these factories reopened.
- Capital investment. GM released a press statement touting its offer to make “$7 billion in investment at its US plants” – over the next four years – as somehow being a concession to the labor union. Once upon a time, corporate managers invested in their company’s future as a matter of routine prudence. (How can a corporation last, without it?) Now our economy is so upside-down that GM’s management wants special credit for investing in its own factories.
And here are some things that, in our opinion, should be on the table:
- Stockholder dividends. Last year, GM paid out more than $2 billion in dividends to stockholders. But its profit-sharing with employees was only about one-quarter that amount. Who do you think was more responsible for the corporation’s 2018 profits?
Stockholders get dividends just because they owned a share of stock on a particular day. They haven’t done anything to “earn” that money other than buy the stock. Yet GM gives stockholders four times as much profit-sharing through dividend payments as employees receive.
This Friday, September 20, GM will pay another half-billion dollars to its stockholders. As of Saturday, GM will have paid a total of about $10.7 billion in dividends since 2015.
Yet management wants to keep the idled plants closed, and keep 7% of its workforce as lower-paid, short-term hires.
- Stock buybacks. Money that a corporation spends buying back its own stock isn’t available for R&D or capital investment. It’s not being used to pay down corporate debt. It’s not available for new jobs or wage increases or employee benefits – or to lower product prices and increase consumer demand. In the words of one investment manager, “Buybacks are a nonproductive use of capital. There is never a business reason for a buyback. There is also no hope of a payback for the corporation.”
GM has quite a history with stock buybacks. Economist William Lazonick tracked all GM’s buybacks between 1986 and 2002 and, writing for Bloomberg, calculated that if GM had just banked the money instead, “it would have had $35 billion in 2009 to stave off bankruptcy and respond to global competition.” Instead, taxpayers had to bail out the company – and we lost more than $10 billion on that deal.
But that didn’t stop the buybacks. Since 2015, GM has spent $10.6 billion on buybacks – and there’s still another $3.4 billion authorized to be spent on buybacks “at the discretion of management.”
All that money could have been spent on higher wages or lower product prices. Or invested in the company’s future, or banked against a rainy day. But that’s not the corporate culture at GM.
Instead… remember that $118 million/year the Lordstown employees gave up, to keep their factory open? That give-back started in January 2018 – about the same time GM gave $100 million to Wall Street investors by buying back shares of its own stock. - Pension fund shortfalls. According to GM’s most recent Powerpoint for investors (slide 12), employee pension funds are underfunded by $10.5 billion. Other post-employment benefits are underfunded by $5.7 billion. Yet GM spent $10.6 billion on stock buybacks with no “business reason” and “no hope of a payback.”
- Other debt. That same Powerpoint slide shows $15.4 billion in outstanding debt. That $10.6 billion GM spent on buybacks could have cut the corporation’s debt level by two-thirds. And if GM hadn’t done buybacks and hadn’t been so generous with dividends, it could have avoided that debt entirely. But taxpayers bailed GM out of bankruptcy once already, so maybe GM execs assume we’d do it again.
This is why America’s economy doesn’t work for the 99%. Corporate executives – the people paid to make the strategic decisions – only care about short-term stockholder payouts.
Remember, GM’s management thinks that investing in the company’s future is a concession to the union.
If the union is the only party in these negotiations that cares about GM’s future… then the UAW needs to put the whole future-risk problem on the bargaining table. That $3.4 billion which can be spent on stock buybacks at any time, at management’s discretion…? Getting rid of that authorization needs to be on the bargaining table. Borrowing while paying out billions to stockholders…? Needs to be on the bargaining table. Pension fund shortfalls…? That’s borrowing from workers’ futures, and it needs to be on the bargaining table.
And the UAW needs to make sure the public understands which side cares about GM’s future – and which side wants to make sure taxpayers don’t ever have to bailout the company again.
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Reposted from NH Labor News
