Public Employee Press

The World of Work
Bankruptcy
Corporate weapon against working people

When you fly on a U.S. airline, you have a 50-50 chance of traveling in a carrier that is already in bankruptcy court or threatening to file for bankruptcy to cut pay, cancel pensions and wipe out union contracts.

Chances are, the car you drive has parts produced by workers whose employer is operating under bankruptcy protection.

Delphi Corp., the country’s largest auto parts supplier with 185,000 workers worldwide, is trying to walk out on its $11 billion commitment to retirement benefits for its unionized employees. If Delphi succeeds, the floodgates could open wide for a tidal wave of bankruptcies in the auto industry.

The Delphi case is a stark example of how far the economic and political conditions have shifted in favor of business over the last generation.

In 1979 and 1980, Robert S. “Steve” Miller was a hotshot finance expert who helped the Chrysler Corp. avoid bankruptcy by engineering a government bailout.

Today, only three months after Delphi made him its chief executive, Miller has steered the company into bankruptcy court. A corporate restructuring specialist, Miller headed Bethlehem Steel when it filed for bankruptcy in 2001.

Business practice
“We took this action because we are determined to achieve competitiveness for Delphi’s core United States operation,” Miller said Oct. 8, when Delphi filed for bankruptcy. “We simply cannot afford to continue to be encumbered by high legacy issues [retirement obligations] and burdensome restrictions under current labor agreements that impair our ability to compete.”

The wave of bankruptcies in the first decade of the 21st century is rooted in the 1983 bankruptcy of Continental Airlines. Then, people were outraged when the airline laid off thousands of workers, hired cheaper replacements for pilots and flight attendants and voided union contracts.

But in these callous conservative times, bankruptcy seems to be regarded as a legitimate business practice to hold down wage and retirement costs, not merely a last-ditch effort to save a company going out of business.

In September, Northwest Airlines filed under Chapter 11 of the U.S. Bankruptcy Code even though it had $1 billion in cash on hand. In fact, on the morning of the filing, the Washington Post noted that research reports from five Wall Street firms downplayed talk of Northwest’s imminent bankruptcy and held to their “buy” recommendations on its stock.

The debate over Supreme Court justices has focused public attention on how far U.S. courts have shifted to the right on social issues. But the conservatives who control the White House and Congress have also filled the bankruptcy courts with judges who are overwhelmingly sympathetic to businesses.
Arthur Luby, a lawyer who represented the Transport Workers Union in concession bargaining in 2004, said that in 90 percent of the bankruptcy cases he studied, the court let companies throw out their union contracts.

Biased judges
“By training and the nature of their business, bankruptcy judges essentially view their mission as looking after these failed businesses,” attorney Daniel Katz told the BNA Daily Labor Report. Katz represents the Communications Workers in the U.S. Airways bankruptcy case.

“From that perspective, it’s a tough place for a union, and there are good reasons why a union would want to settle matters outside the court,” Katz said.

Meanwhile, on the shop floor at Delphi, workers face a chief executive who says he needs them to accept wage cuts from an average hourly pay of $27 to as little as $10 in order to meet global competition.

Union member Gene Collins works for a Delphi plant in Dayton, Ohio, making auto shock absorbers and suspension parts. He told the Detroit News, “They’re using the sledgehammer of bankruptcy to force pay cuts on us.”