Workers have done their share
LES LEOPOLD in the Los Angeles Times
A large portion of those losses came when the
autoworkers were compelled to help bail out GM in 2008 as it went bankrupt.
The worker concessions included a decade-long wage freeze for those hired before 2007, lower pay and benefits for new hires including the elimination of defined pensions, and the shift of the healthcare benefit fund from the company to the union.
The concessions also permitted the use of lower-paid temp workers who
could earn $18 an hour working alongside a longtime employee earning $32 per
hour while doing the same tasks.
The union wants to end these concessions
while also gaining a 40% wage increase over the next four years to match the
40% compensation increases received by Big Three chief executives over the
last four years. The UAW has said that if contract negotiations don’t advance by
Friday, it will expand the strike beyond the three plants currently
targeted.
The federal government’s $80-billion bailout and
worker concessions saved GM. Many who supported the bailout expected the
company, when it returned to profitability, to invest heavily in electric
vehicle research, development and production: The taxpayers saved GM, so now GM
should help ameliorate global warming that harms us all.
But Wall Street had other ideas. In 2015, it swooped in to capture these newly minted profits by pressuring GM management to conduct a stock buyback of $8 billion.
Made possible by the Securities and Exchange Commission’s Rule 10b-18, put in place in 1982, buybacks are a method of profit extraction allowing companies to use their profits to buy back their own shares, thus increasing the value of all outstanding shares.
Hedge funds and the like take large stock positions in
companies, demand buybacks that quickly increase the price of their shares and
then cash out with significant profits.
This pattern happened with GM in the years
following the bailout: The giant hedge fund Appaloosa Management joined with
other funds to buy up 2.1% of GM shares. These efforts succeeded and then some:
GM announced $5 billion in buybacks in March
2015, another $4 billion later that year and another $5 billion in
2017. At the same time, the company planned to cut 14,000 jobs and idle five
automotive plants.
In addition to rewarding Wall Street share-sellers, stock buybacks also increase the pay of top corporate executives. As of 2021, stock awards and options made up 82% of total CEO compensation.
Approximately 75% of all non-financial corporate
profits went to stock buybacks in the decade after the
automaker bailout. In the 12 months ending in March 2022, buybacks transferred $1.5 trillion of
corporate profits to share-sellers. Stellantis, which purchased Chrysler, Fiat,
and Peugeot in 2021, even had the audacity to announce a $1.6-billion stock buyback in
February ahead of negotiations with the UAW.
Today none of the Big Three are worried
about bankruptcy: Collectively they are expected to earn $32 billion in profits in
2023. The automakers claim those profits are desperately needed to make the
historic shift to electric vehicles and fend off their nonunion competitors
such as Tesla. Meeting the UAW demands, they claim, would cut those investments
while forcing the companies to move more production to lower-wage areas here
and abroad.
What they neglect to say is that Wall
Street’s shadow also hovers over these negotiations. As Stellantis made
crystal-clear when it authorized stock buybacks this year, the industry is more
than willing to divert badly needed investment funds into the pockets of top
executives and powerful Wall Street firms.
A stock buyback, of course, does not strengthen the company. It does not create investment in new plants and equipment. It does not upgrade the skills of the workforce. And it does not improve health and safety or increase research and development to mitigate climate change.
In fact, it decidedly detracts from all of these critical
functions by eating up the money to fund them. Billions spent on buybacks means
billions less not only for workers’ wages but also for developing high-quality,
affordable electric vehicles to forge the transition to a green, sustainable
economy.
For the first time in a generation the labor movement is held in high esteem by the American public. It is widely understood that working people need the protections only collective bargaining can provide.
This puts unions like the UAW at the forefront of the struggle to
protect jobs and the environment. Perhaps these difficult negotiations can help
us all realize just how much stock buybacks threaten both economic fairness and
the health of our climate.
© 2023 Los Angeles Times
LES LEOPOLD is
the director of the Labor Institute in New York--working with unions, worker
centers, and community organizations to build a national economics educational
campaign. He is the author of "How to Make a Million Dollars an Hour: Why
Hedge Funds Get Away with Siphoning Off America's Wealth" (2013).