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The effort to “save” Chrysler had little to do with protecting the jobs and living standards of Chrysler workers. Rather, the federal bailout was aimed at paying off the banks and other creditors with money extorted from UAW members, while shutting down or selling off large sections of the company. By the time the bailout bill was passed, some 31,000 Chrysler workers were already on indefinite layoff, and the company had closed four plants in Detroit and announced plans to shut its largest facility, Dodge Main, in the Detroit enclave of Hamtramck, with the loss of 5,000 more jobs.
Anger mounted against the blackmail being organized by the company, the government and the UAW bureaucracy. Under the pressure of the rank and file, the UAW's Chrysler Council voted to reject the demand for a three-year wage freeze, written into the Chrysler aid bill passed by Congress.
Chrysler Chairman Iacocca responded by moving up by six months the closure of Dodge Main and announcing that the company would run out of money by January 1980. In the face of this provocation, the UAW leadership continued to reject any struggle against Chrysler and the Carter administration. Instead Fraser said he welcomed the decision to close Dodge Main early because it would pressure Congress into passing a new federal loan guarantee package.
Wage cuts, plant closings and mass layoffs
The day after the shutdown of Dodge Main, Fraser signed a new deal with Chrysler, accepting a total of $475 million in give-backs. The contact included the elimination of 23 paid personal holidays, the deferral of wage increases in the second and third years of the agreement, the loss of Christmas bonuses, and other concessions that amounted to $4,000 in lost wages and benefits for each worker. When Canadian auto workers rejected the same package, saying they did not recognize the right of the US Congress to dictate the terms of their contract, Fraser offered to cut another $25 million from US workers.
On January 7, 1980, Fraser joined President Carter at the White House for the signing of the bailout bill. Worn down by the union's sabotage, workers reluctantly accepted the agreement signed by Fraser in ratification votes the following month.
With the massive concessions in hand, including another $125 million from white-collar workers, Chrysler management proceeded to sell off unprofitable sections of the company. Under the terms of the federal bailout, a five-member Loan Guaranty Board was set up, headed by Federal Reserve Chairman Paul Volcker and Treasury Secretary Bill Miller. The board was empowered to review corporate decisions and supervise significant expenditures by the company until the loans were repaid. According to author Doron Levin, in his Behind the Wheel at Chrysler: The Iacocca Legacy, Miller immediately pressed for permanent cutbacks in the company's workforce, telling Iacocca “You haven't thrown off any ballast yet. When the ship starts to sink, the first thing you do is get rid of ballast.”
Over the next few years Chrysler closed nearly 30 factories throughout the US, including four assembly plants, and reduced its blue-collar workforce from 98,000 to 45,000. It slashed the number of white-collar employees from 40,000 to 22,000. Younger, more militant workers in Chrysler's Detroit's plants were targeted as part of a drive to break down resistance to further concessions and speedup.
In a government report drawn up during the debate on the federal loan guarantee, Detroit was described as one of the areas “known to have some of the most inefficient and troublesome workforces available.” Chrysler dealt with this problem by shutting nearly a dozen factories in the Motor City and wiping out nearly 40,000 jobs in the metropolitan area. The official unemployment rate in Detroit, which had never recovered from the downturn of 1974-75, jumped to 14.6 percent.
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