Unions have figured prominently in the talks concerning the fates of two moribund companies in two troubled American industries: the Boston Globe and Chrysler. The first dispute is happening without intervention from the federal government, while the second is proceeding with the assistance of the Obama administration’s tender mercies.
Let’s see how it’s all going. The WaPo announces that the Globe’s parent company the NY Times has now threatened to close the Globe within 60 days, announcing that it will file a notice of intent as required under the Worker Adjustment and Retraining Notification law (that’s a lot of newspapers in one sentence, isn’t it?).
The action may just be a bargaining chip designed to force the recalcitrant Globe unions to their knees; the unions think so, calling it a “bullying” tactic. Or the Times may really mean it—after all, there’s no love lost between New York and Boston (as former Globe columnist Eileen McNamara says, the Times “has treated New England’s largest newspaper like a cheap whore. It pimped her out for profit during the booming 1990s and then pillaged her when times got tough…”).
Well, what’s a newspaper to do? Fail to react by making cuts when times (or The Times) get rough?
Yesterday I wrote about some of the market forces that have pummeled not just the Times and the Globe, but newspapers around the country. These papers have also lost some of their ability to react flexibly to changing economic realities because of the growth and power of the unions involved.
If you look carefully at the WaPo article, you’ll see this interesting paragraph at the very end [emphasis mine]:
The Globe quoted the head of the Teamsters local, which represents the newspaper’s drivers, as saying his union had come up with the $2.5 million in salary and benefit cuts demanded by the company. But the Times Co. is also said to be seeking to eliminate seniority rules and lifetime job guarantees for some union members.
I’m trying to think of other professions with lifetime job guarantees, and all I can come up with are tenure for professors and teachers, and members of the Supreme Court. Is it usual for these to be offered to newspaper employees? And what’s the history of this policy at the Globe? Here’s a bit of background:
All full-time Globe employees hired before Jan. 1, 1992, were given lifetime job guarantees and are not subject to layoffs, according to the Guild contract. Currently, 195 of the Guild’s 700 members have lifetime jobs, including [union President] Totten and three other top Guild leaders.
This article goes into the present situation in greater depth. Which Globe unions are involved? It seems that drivers lack such guarantees, pressmen have them but won’t say exactly how many of their members qualify, and mailers revealed that 145 out of a total of their 245 members are guaranteed jobs for life.
Some concessions were recently made on this score by unions in a meeting that lasted until the wee hours of the morning. The article is murky about exactly what they might be.
I’m not anti-union; I understand that, historically, they protected workers who needed protecting, and gave some power to the previously powerless. But, as with so many things, there’s been an over-correction, resulting in a situation in which the unions are not necessarily doing their members any favors in the long run. If a company’s hands are tied with unrealistic and over-the-top union benefits (such as lifetime guarantees appear to be), everyone will go down with the ship. In such a situation lifetime guarantees are worth exactly nothing—because the company itself will be dead.
Once the government enters the picture, however, all bets are off. This brings us to the second situation: Chysler. President Obama showed his dramatically pro-union nature very clearly during the campaign, at least to anyone who was listening. He cannot afford to waver; unions are the source of a great deal of his money and his voters, and he’s come through for them in the Chrysler negotiations, big time.
Hedge fund managers, you see, have a civic duty to lose large amounts of other peoples’ money in order to ensure that the UAW makes as few sacrifices as possible in a bankruptcy…Which brings us to the real question, which is, when did it become the government’s job to intervene in the bankruptcy process to move junior creditors who belong to favored political constituencies to the front of the line? Leave aside the moral point that these people lent money under a given set of rules, and now the government wants to intervene in our extremely well-functioning (and generous) bankruptcy regime solely in order to save a favored Democratic interest group.
No, leave that aside for the nonce, and let’s pretend that the most important thing in the world, far more interesting than stupid concepts like the rule of law, is saving unions. What do you think this is going to do to the supply of credit for industries with powerful unions?
In order to understand just how unusual and lopsided the UAW/Chrysler deal is, just read the NY Times on the subject. Calling it the “Cadillac of bankruptcies” (and here I thought Cadillac was a GM product)—at least where the unions are concerned—the Times points out that the UAW:
…has received upfront protection from the Treasury Department for its pension plan and the fund that will take over responsibility for retiree medical benefits. Moreover, that fund, called the voluntary employee beneficiary association, or VEBA, will control 55 percent of the equity in the new Chrysler once it emerges from bankruptcy, and hold a seat on the Chrysler board.
Not too shabby—especially compared to similar situations:
Labor and restructuring lawyers said such a comprehensive deal going into bankruptcy was rare.
“This is extraordinary, truly extraordinary,” said Mary Jo Dowd, a partner in the financial and bankruptcy restructuring practice at Arent Fox in Washington. “I never would have thought a year ago that this would occur. These are truly unusual times.”
Asked if he could recall any other union that fared as well, David L. Gregory, a labor law professor at St. John’s University, replied: “Nobody’s even close.”
Yes, the UAW has made some concessions. But they are small (the Times notes that members retain “healthy wages and benefits”) compared to what has been demanded of the creditors whom Obama is busy bad-mouthing and “not standing behind” in his continuing effort to demonize the rich. Now basic contract law goes down the tube as he refuses to favor these creditors in the proper and agree-on order when bankruptcy occurs, and he disses them for not being self-sacrificing enough. Of course, the unions aren’t required to be so noble; only the vile rich people (who in many cases happen to stand in a fiduciary relationship regarding the investments of people who aren’t so rich) are required to be martyrs to Obama’s welfare state.
And it seems that as Chrysler goes, so goes GM:
“This confirms the fear, which right along has been that the Obama administration is more sensitive or beholden to the unions than the bondholders,” Fridson [CEO of a credit investment firm] said. “It makes it clear that GM bondholders aren’t likely to be able to work out anything outside of bankruptcy.”…
The bondholders shouldn’t be surprised that the unions are getting preference over investors in an Obama administration, Egan [president of Egan-Jones Ratings Co] said.
“If the government is providing money to these entities, they’re going to be looking out for labor’s interest first and foremost,” he said. “You may claim it’s unfair, but that’s the political reality and the time and cost of suing the federal government is prohibitive in most cases.”
In other words, Obama holds the power and will wield it in favor of the unions, so resistance is futile. The long-term dampening effect on investment in these companies doesn’t seem to bother our President, who appears to believe that a government-managed company favoring its workers above all else (sound familiar? I hear it’s been tried) is what we need in order to prosper.
And he’s counting on many of his supporters to be jubilant about the news—and on the rest of them to be too busy or too disinterested to follow the twistings and turnings of these complex events.