Jobs bank programs -- 12,000 paid not to work
Big 3 and suppliers pay billions to keep downsized UAW members on payroll in decades-long deal.

By Bryce G. Hoffman / The Detroit News
Monday, October 17, 2005

"We just go in and play crossword puzzles, watch videos that someone brings in or read the newspaper," he says. "Otherwise, I've just sat."

Pool is one of more than 12,000 American autoworkers who, instead of installing windshields or bending sheet metal, spend their days counting the hours in a jobs bank set up by Detroit automakers and Delphi Corp. as part of an extraordinary job security agreement with the United Auto Workers union.

The jobs bank programs were the price the industry paid in the 1980s to win UAW support for controversial efforts to boost productivity through increased automation and more flexible manufacturing.

As part of its restructuring under bankruptcy, Delphi is actively pressing the union to give up the program.

With Wall Street wondering how automakers can afford to pay thousands of workers to do nothing as their market share withers, the union is likely to hear a similar message from the Big Three when their contracts with the UAW expire in 2007 -- if not sooner.

"It's an albatross around their necks," said Steven Szakaly, an economist with the Center for Automotive Research in Ann Arbor. "It's a huge number of workers doing nothing. That has a very large effect on their future earnings outlook."

General Motors Corp. has roughly 5,000 workers in its jobs bank. Delphi has about 4,000 in its version of the same program. Some 2,100 workers are in DaimlerChrysler AG's Chrysler Group's job security program. Ford had 1,275 in its jobs bank as of Sept. 25. The pending closure of Ford's assembly plant in Loraine, Ohio, could add significantly to that total. Those numbers could swell in coming years as GM and Ford prepare to close more plants.

Detroit automakers declined to discuss the programs in detail or say exactly how much they are spending, but the four-year labor contracts they signed with the UAW in 2003 established contribution caps that give a good idea of the size of the expense.

According to those documents, GM agreed to contribute up to $2.1 billion over four years. DaimlerChrysler set aside $451 million for its program, along with another $50 million for salaried employees covered under the contract. Ford, which also maintained responsibility for Visteon Corp.'s UAW employees, agreed to contribute $944 million.

Delphi pledged to contribute $630 million. In August, however, Delphi Chairman and Chief Executive Officer Robert S. "Steve" Miller said the company spent more than $100 million on its jobs bank program in the second quarter alone.

"Can we keep losing $400 million a year paying for workers in the jobs bank and $400 million a year on operations? No, we cannot deal with that indefinitely," Miller said in a recent interview with The Detroit News. "We can't wait until 2007."

Guaranteed employment

The jobs bank was established during 1984 labor contract talks between the UAW and the Big Three. The union, still reeling from the loss of 500,000 jobs during the recession of the late 1970s and early 1980s, was determined to protect those who were left. Detroit automakers were eager to win union support to boost productivity through increased automation and more production flexibility.

The result was a plan to guarantee pay and benefits for union members whose jobs fell victim to technological progress or plant restructurings. In most cases, workers end up in the jobs bank only after they have exhausted their government unemployment benefits, which are also supplemented by the companies through a related program. In some cases, workers go directly into the program and the benefits can last until they are eligible to retire or return to the factory floor.

By making it so expensive to keep paying idled workers, the UAW thought Detroit automakers would avoid layoffs. By discouraging layoffs, the union thought it could prevent outsourcing.

That strategy has worked but at the expense of the domestic auto industry's long-term viability.

American automakers have produced cars and trucks even when there is little market demand for them, forcing manufacturers to offer big rebates and discounts.

"Sometimes they just push product on us," said Bill Holden Jr., general manager of Holden Dodge Inc. in Dover, Del., who said this does not go over well with the dealers. "But they've got these contracts with the union."

In Detroit's battle against Asian and European competitors that are unencumbered by such labor costs, the job banks have become a major competitive disadvantage.

Breaking the banks

Analysts say the jobs bank could be a bigger issue than health care in the 2007 contract negotiations, particularly at Ford. It has a younger work force than GM, meaning any workers Ford sends to the bench are likely to stay there for a while.

"Ford is under pressure from investors to cut costs," said Roland Zullo, a research scientist at the University of Michigan's Institute of Labor and Industrial Relations. "At the same time, the unions are going to be under pressure to protect jobs."

Given that, he expects a compromise that allows for the jobs bank to continue but not on the scale of the current programs. "There's going to be a lot of give and take," he said.

But does the jobs bank make any sense in a climate of shrinking profits and declining market share?

"Labor wants the (jobs bank) because they want protection for their members," Zullo said. But he added that the jobs bank was also designed to help the companies by ensuring that skilled workers did not take their talents elsewhere.

"Companies invest in training," he said. "It protects that investment."

The investment only makes sense when viewed from a long-term perspective, a vantage point Wall Street is not known to favor.

"If they're going after the job banks, that would signal to me that the folks at the top have lost faith in their ability to recoup market share," Zullo said. "That would suggest to me that they really don't see a turnaround."

Analysts and labor experts believe some sort of compromise is inevitable as pressure builds on Detroit automakers to lower operating costs.

"The union probably realizes the money to pay for these programs probably doesn't exist," Szakaly said. "There's going to have to be some give on the jobs bank."

While the job banks may exemplify the sort of excesses that give unions a bad name, experts say it is wrong to cast all the blame in the direction of Solidarity House. He said the leaders of GM, Ford and Chrysler also bear some responsibility for the current problems.

"If these guys built cars people wanted, this wouldn't even be an issue," Szakaly said.

'Put out to pasture'

That view was echoed by Dan Cisco, another member of the jobs bank at Michigan Truck, as he drained a cup of coffee with Pool and other idled workers at Rex's restaurant in Wayne last week.

Ten members of UAW Local 900 are currently assigned to the jobs bank at Michigan Truck. They are all gun-welder repairmen -- or "gunnies." It is a classification each says they earned through decades of hard work.

And none of them is ready to give it up.

While some might envy their life of leisure, workers like Cisco, 56, feel humiliated by the program.

"I felt like I was useless -- like I was put out to pasture," he said. "It's just like how they treated the veterans. During the war, we were heroes. When we came back ... "

Cisco adjusts his cap, emblazoned with the familiar silhouette of a captive American POW, and sighs.

Michigan Truck, which builds the Ford Expedition and Lincoln Navigator full-size SUVs, used to be one of Ford's most profitable plants. Today, the nation is turning away from the big trucks and sport utility vehicles it builds.

Cisco, Pool and eight other gunnies from Michigan Truck have been in the jobs bank program since their positions were eliminated in July. They all have more than 36 years with Ford and are among the highest-paid workers in the plant. They say the company is asking them to accept one of the $35,000 retirement packages it is offering to trim its blue-collar headcount.

Most say they have no interest in retiring -- or spending the rest of their careers doing crossword puzzles.

"We want training," Dale Hall said.

Classes are available, the workers said. They have been invited to take courses on bicycle repair, home wiring and poker. Silk-flower arranging is also available.

"They might as well just give us a basket-weaving class, set us in the corner and let us feed the pigeons," Cisco said.

Community service

Not everyone in the jobs bank is spending their time marking it.

Dan Costilla, a member of UAW Local 602 in Lansing, was a body shop worker at GM's Lansing car assembly plant until it was closed in May. Now, instead of grinding joints, he rides herd over 16 of his former plantmates, making sure they keep their appointments at the local thrift store or Head Start program.

"I'm making sure that everything's going smooth," he said.

In the five months since Costilla and his co-workers have been unemployed, they have been busy mowing lawns for the handicapped, patching roofs for senior citizens and chaperoning youngsters on field trips to the zoo. It is all part of a community service effort organized by the union, with the support of the company.

"They realized you could only sit so long at the job bank office," Costilla said. "Your bones, they get sore after a while sitting down."

Bob Bowen, former president of UAW Local 849 in Ypsilanti, said the original intent of the jobs bank program was that idled workers would be gainfully employed on community projects or learning new skills -- real ones that they could actually use on the assembly line.

"The idea was not to have people loafing," Bowen said. "But that was a concern."

The problem, he said, lies in the way the jobs bank is administered.

Instead of setting up a central authority to manage them, responsibility was largely left to union locals across the country. Some organized community projects and job training. Others passed out decks of cards and hooked up VCRs.

Ken Pool said he can only take so many more World War II documentaries and crossword puzzles.

He and the other members of Michigan Truck's jobs bank planned to meet with a lawyer. They have already filed numerous grievances, accusing the company of age discrimination, but have heard nothing from the union or the company.

Now they are going to see if the courts can help.

As for Costilla and his colleagues, they are getting ready to go back to work at GM's new Delta Township plant. Costilla acknowledges that many of the union members are not looking forward to going back to work at the factory.

"The majority of us would rather stay here doing what we're doing," he said.

"You're not on the line, chasing a car."

You can reach Bryce Hoffman at (313) 222-2443 or bhoffman@detnews.com.