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Decline of Auto and Airline Industries

As an article in the New York Times observed in September of last year: “Airlines and automobiles have long been considered the industries in which labor was strongest, but now they are the fields in which labor seems most embattled, largely because of the companies' staggering financial losses.” As the year progressed, this trend would only get worse.

In the automobile industry, General Motors and its spin-off/automotive parts manufacturer, Delphi, led the charge to the bottom. Ford Motor Company was not far behind.


In October of last year, Delphi demanded wage cuts down to $10 an hour (a 63% cut), an increase in the percentage that workers pay for health care costs (27%, up from 7%), and a reduction in monthly pension benefits (to under $1,500 from the current $3,000). At the same time that Delphi made these demands of workers, the company approved a boost in severance pay for all executives, in the event they lose their jobs. The very next day, Delphi filed for bankruptcy. After much criticism of the severance pay plan, Delphi executives later announced that they would take pay cuts.

In February, however, a federal bankruptcy judge authorized Delphi’s plan to give its own executives as much as $38 million in bonuses against the protests of workers, politicians, and Delphi’s creditors. Meanwhile, Delphi has sought to close 21 of its 29 manufacturing sites and void the current labor contract, so that it can impose wage cuts. The UAW threatened to strike if Delphi unilaterally altered the collective bargaining agreement.


In March, GM announced a fundamental restructuring of its salaried employee retirement plans, shifting from traditional pension plans to 401(k) plans. GM also announced it would cap health care benefits for salaried retirees, a move that drew criticism from GM retirees. In March, GM continued its restructuring when it announced that it would fire hundreds of salaried employees. GM has 18% fewer salaried workers now than it did in 2000.

In June, United Automobile Workers president Ron Gettelfinger braced union members for more tough times ahead, indicating that further concessions were necessary to sustain the failing industry.

In July, General Motors and Delphi announced that 47,600 employees had accepted the company’s buyout offer or had taken an early retirement. Under the buyout plan, employees with 10 years of service were offered $140,000—while employees with less than 10 years of service were offered $70,000—in exchange for foregoing retirement benefits and health insurance. Those employees who took an early retirement received $35,000 and retired with benefits. As one commentator has noted, buyouts have become increasingly common practices for employers, as such companies as Wendy’s International, Verizon, FedEx, and The Dallas Morning News have offered buyouts to workers. Ford Motor Company also utilized buyout plans earlier in the year in a cost-cutting move.

Ford cuts jobs

In January, Ford Motor Company announced that it would cut up to 30,000 jobs—25% of its North American workforce—and close 14 plants in an attempt to cut costs. This announcement came after Ford had cut 10,000 jobs the year before, leading one commentator to ponder how Ford could save $250 million last year courtesy of the American Jobs Creation Act.

All told, GM and Ford collectively plan to cut approximately 60,000 jobs over the next six years. The U.A.W.’s membership of 600,000 workers last year reached its lowest point since 1942.

North of the border, DaimlerChrysler announced that it would eliminate about 1,600 jobs in its Canadian plants. Ford Canada workers also agreed to a new labor deal that would eliminate 1,100 jobs in the next 3 years.


Yet, in one sense, the automotive industry may be simply following in the steps of the once-strong airline industry. Airline employees have seen major wage and benefit cuts in recent years. As one commentator noted, “Within the world of aviation, airline pilots used to be one step down from astronauts. Now they feel one step up from bus drivers.” Pilots are not the only airline employees to feel the crunch. Flight attendants have seen similar reductions in pay and benefits, and in this post-9/11 world, these workers face additional work-related stressors.

Northwest Airlines

Northwest Airlines has had its fair share of labor and financial turmoil in the past year. In late summer of last year, 4,430 mechanics, cleaners, and custodians went on strike against the airline. Meanwhile, Northwest filed for bankruptcy on September 14, 2005. At the time of the filing, four of the six largest U.S. carriers (Northwest, Delta, United, and US Air) were operating under bankruptcy protection.

Then, in March, the Labor Department began investigating whether Northwest systematically shortchanged its employee pension fund since 2002, and then, one day before having to make a $65 million payment to the fund, filed for bankruptcy.

The airline was also accused of insensitivity recently. Northwest distributed an advisory booklet containing a section entitled “101 ways to save money.” Among the suggestions: shopping at thrift stores, buying jewelry at pawn shops, taking a date to the woods or to the beach, giving homemade cards and gifts, taking short showers, and not being “shy about pulling something you like out of the trash.” The booklet was designed to be distributed to employees who will likely lose their jobs in the near future. Needless to say, workers did not receive the booklet kindly. After receiving complaints from employees, Northwest stopped distributing the booklet and issued an apology.

A bankruptcy judge authorized Northwest to throw out its union contract with flight attendants. Northwest is seeking $195 million in wage and benefit cuts from flight attendants, who have threatened to strike.


In September of last year, some 18,300 Boeing machinists went on strike, with the key issues revolving around pensions and employee health care. In December, Boeing averted a strike by engineers and technical workers when it agreed to increase wages and benefits.


Delta Airlines filed for bankruptcy on September 14, 2005, the same day that Northwest Airlines filed. In March, Delta and its pilots went to arbitration, as Delta sought to eliminate the collective bargaining agreement and eliminate up to $325 million in pay and benefits. In June, the airline sought to terminate its pilot pension plan, in a move similar to that taken by United and US Air under bankruptcy.

American Airlines

In 2003, American Airlines workers agreed to a $1.6 billion wage and benefit cut. Yet, last year, despite the fact that the airline posted net losses of $600 million—its fifth consecutive annual loss—several top executives received bonuses exceeding $1 million. Needless to say, this news did not please the union workers who made sacrifices to get the company back to a stable position.

Mesaba Airlines

Flights attendants, pilots, and mechanics for Mesaba Airlines are uniting and pooling resources in their fight against the airline, which is trying to impose wage and benefit cuts. According to airline and labor experts, this effort represents a rare instance in which three separate unions are working so closely together.