< HOME  Thursday, December 22, 2005

Ford workers BITE bullet, while creditors collect INTEREST

Unionized workers at Ford Motor Co. narrowly ratified a tentative cost-cutting deal aimed at saving the troubled automaker almost $1 billion by reducing health-care benefits.
This follows a similar settlement between GM and its workers that was reached in October and was recently approved by a district court.

Ford's deal still awaits court approval. But, unlike GM's deal, ratified by 61% of GM workers, Ford's deal was ratified by only 51% of Ford's union workers. This suggests that approval might not be forthcoming. For the workers' sake, I hope it's not.

It's funny (or not so funny, depending on which side of the bargaining table you're on) how history repeats itself.

If we could learn from history, what would it teach us?

Patience and Prudence

Bankers function by reference to prudence. It's imprudent for them to do anything until they have to.

--Brian Freeman, Executive Director, Chrysler Loan Guarantee Board.

This quote from Going for Broke: The Chrysler Story begins the chapter detailing Chrysler's 1979-81 reorganization under the Chrysler Loan Guarantee Act.

Like Ford and GM now, Chrysler was having financial difficulties that required "sacrifices" from all concerned. Let's examine the concessions.
Within weeks of [Carter] signing [the Act], the United Auto Workers pared $425 million from its contract. [sound familiar?]
Who else buckled? State and local governments, dealers, suppliers, and the Mayor of Detroit, one after another.
Meanwhile, "for close to six months, [bankers] seemed nearly...impassible, immovable and insurmountable."
They didn't budge until they were forced to choose between voluntary concessions or bankruptcy orders.
And when it came to implementing the Act, "bankers and lawyers" found its terms "comfortingly vague."

Bankers could not tell "whether concessions referred to deferrals of interest payments or outright gifts."

"Congress doesn't understand finance," remarked then Chrysler's assistant treasurer.

At the time, Chrysler was "choking on debt and struggling to cope with interest rates around 20%."
Given what we know about INTEREST and fractional reserve banking, we're forced to ask what concessions? It's all icing.

Thankfully, 49% of Ford union workers know better.
Tom Laney, for example, knows that if his fellow workers agree to these concessions now, "[Ford] will want more in 2007 and more and more later. It will be like feeding blood to a shark. [no exaggeration]

He adds that "[i]f William Ford Jr. came around the plant with his hand out asking for money, most people would probably be reluctant to reach into their wallet." [would you?]
Let's hope the court agrees with Tom.


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