December 12, 2008
push for relaxed pension rules
Why rescue Big
Three?: 'Cascade of financial damage' awaits with failure of
Fort-Shelby Hotel make an unlikely comeback
for giant Marathon coker drums
employers push for relaxed pension rules
By Marty Mulcahy
Following this fall's calamity in the money markets, as well
as the loss of construction man-hours brought on by the declining
economy, multi-employer pension plans that serve building trades
unions aren't looking for a financial bailout - but they are
looking for a change in federal rules to keep them out of a deeper
In a Nov. 19 letter to leaders on the House Ways and Means
Committee, which holds sway over union pension rules, the Multi-Employer
Pension Plan Coalition wrote "to express our deep concerns
over the worldwide financial crisis that has resulted in an unprecedented
and precipitous drop in the plans' invested assets
Specifically, members of the coalition said they were looking
for relief from the Pension Protection Act (PPA) of 2006, a law
designed to improve the health of pension plans by imposing new
accounting rules, changing funding requirements for plans, and
establishing benchmarks for plans to show they are staying solvent.
Since the PPA was adopted, pension plan administrators had
been counting on an improving stock market and increased man-hours
over time to improve funding positions. Then came the crash on
Wall Street - and there's no clear end in sight to higher unemployment
and a stock market and economic outlook that are probably not
ready to move in a happy direction.
The coalition asked Congress for relief for pension plan administrators
that would relax funding rules. Failure to do so, the group said
in its letter, "would jeopardize the financial viability
of contributing employers, and/or require correspondingly deep
cuts in the benefits for covered employees, to meet the ambitious
funding requirements" of the Pension Protect Act.
John Tesija, a funds attorney for a dozen Michigan-based pension
plans, said to simplify a very complex set of rules, assume that
a pension fund was 70 percent funded last summer, and was attempting
to reach the 80 percent funding level that would put it in a
good "green zone" for the new federal pension funding
rules. The Pension Protection Act shortened the period for funds
to meet those higher funding goals to a ten- or 15-year time-frame.
"Now, this fall, the market creates a 20 or 30 percent
loss, so now the fund is only at a 40 or 50 percent funding level,"
Tesija said. "And man-hours are down in all the trades.
That's a tremendous hole for a fund to crawl out of in a shortened
period of time."
If the pension funding time frames are not lengthened to 20
years or longer, as the coalition is requesting, the Pension
Protection Act calls for increased funding contributions by employers
and workers, or benefit cuts for retirees. "No one wants
to see that," Tesija said.
The coalition represents some 10 million active and retired
workers, and includes a diverse group of 50+ unions, employer
associations, large employers, trade associations and other industry
advocates seeking to preserve 1,530 multi-employer defined benefit
plans. The group is no Johnny-come-lately: it was formed to promote
the interests of multi-employer plans after the U.S. market contraction
from 2000 to 2002.
AFL-CIO Building Trades Department President Mark Ayers said
affiliate union leaders are encouraging Congress "to take
action that would provide additional time for plans to meet the
funding mandates (in the Pension Protect Act), and to gauge the
market contraction and lessen its adverse impact on employment
and benefit security in the short-run."
Even the U.S. Chamber of Commerce supports relaxing the pension
funding law, signing on to a letter that said "unless the
funding rules are modified, they will cause an increase in unemployment
and slow economic recovery."
The coalition urged Congress to act before the end of the
year. They wrote, ominously, "for many of the stakeholders,
delaying action may push the ability to weather this economic
storm beyond the point of no return."
rescue Big Three?: 'Cascade of financial damage' awaits with
failure of rescue
By Thomas I. Palley
Special to Press Associates
DETROIT (PAI) - Bankruptcy of the nation's Detroit-based "Big
Three" automakers - who aren't as big as they used to be
- poses a fundamental threat to the U.S. financial system's viability.
That means funds from the $700 billion bank bailout law, called
TARP money, can legitimately be allocated to the auto companies.
The question will come up again, because congressional Democrats,
finding that the car company execs had no good plan for how to
use the cash, sent them away to construct viable rescue plans
for their firms - and told them to come back with the blueprints
at the beginning of December.
But even if Congress agrees to allot money to rescue the firms
- and, more importantly, their workers - congressional GOP opposition
and the GOP Bush regime Treasury's opposition to the bailout
is a monumental blunder. It is absolutely critical that the Big
Three get help as quickly as possible.
The financial crisis that began in 2007 has been persistently
marked by clouded thinking and haphazard policy making. Now,
the Treasury is headed for a mistake of historic proportions
with its refusal to bail out the Big Three automakers.
Make no mistake, if Detroit's Big Three go bankrupt, the perfect
storm really will have arrived with a collapse in both the real
economy and the financial sector. This financial threat means
the TARP bailout funds authorized by Congress can legitimately
be used to support the automakers. Treasury's refusal risks a
general meltdown, the consequences of which will extend far beyond
Proponents of a Big Three bailout, including the United Auto
Workers, have emphasized the enormous job losses associated with
a bankruptcy scenario. Those include jobs directly provided by
the automakers, as well as jobs with parts suppliers, auto dealers,
and the car transportation industry.
They also could include job losses among unionized workers
in industries that supply raw materials that go into cars. Those
raw materials include steel, rubber, plastic and - for consumption
These job losses will then be multiplied locally and nationally.
Lost wages will reduce consumption, causing additional job cuts,
while factory closures will reduce investment, thus hurting employment
in capital goods industries. Lost incomes will also cause lower
tax revenues, resulting in public sector employment cutbacks.
Other arguments for a bailout are that the automakers are
essential for closing the U.S. trade deficit, and their demise
could see another surge in imports. The automakers are also the
backbone of American manufacturing, driving advances in manufacturing
technology and they are needed if America is to be a world leader
in the coming "green" transportation revolution.
Additionally, the Big Three are vital to national security,
supplying important military transportation assets. Lastly, bankruptcy
will impose massive costs on the government's Pension Benefit
Guaranty Corporation (PBGC), further worsening the fiscal outlook.
All of this is true. But missing from this array of arguments
is the damage Big Three bankruptcy will do to financial markets.
In one fell swoop, the hard-won gains to stabilize the financial
system will be blown away.
The Big Three and their auto finance associates (such as GMAC)
are huge debtors whose liabilities are held throughout the financial
system. The auto firms told Congress they have been talking to
Treasury about financing for GMAC, Ford Motor Credit and Chrysler's
financing arm, but have gotten nowhere.
If the car companies and their finance subsidiaries go bankrupt,
the insurance industry will quickly enter a spiral of collapse
as it is likely a large holder of these debts. Pension funds
will also be hit, imposing further costs on the PBGC.
However, the greatest damage risks coming from the credit
default swaps (CDS) market that brought down American International
General, the huge insurer that is now virtually owned by the
federal government. Huge bets have undoubtedly been placed on
the bonds of GM, Ford, Chrysler, and GMAC, and bankruptcy will
be a CDS "triggering event" requiring repayment of
Moreover, a Big Three bankruptcy will bankrupt other firms,
risking a cascade of financial damage as their bonds and equities
fall in value and further CDS events are triggered. This is the
nightmare outcome that risks replicating the Crash of 1929.
Opposition to the bailout is surfacing the worst of conservative
economics that has already got us in this mess. Federal Reserve
and Treasury opposition to hands-on intervention meant they were
slow to understand the financial system could not be saved by
just ring-fencing the commercial banks. Now, they are failing
to understand the systemic financial significance of the Big
Conservative hatred of unions is also on display, when it
is union weakness that has caused wages to stagnate and forced
America to rely on debt and asset price inflation as the engines
of growth. Instead, the conservatives are demanding the UAW slash
its members' wages and benefits to unrealistically low levels
- even after the union and the car companies have already agreed
on a two-tier wage-and-benefit system that significantly slams
Another conservative charge is a bailout would infringe "free
trade" rules, but it is these rules that have fostered the
trade deficits that destabilized and undermined the American
economy - and the car companies. UAW President Ron Gettelfinger
made that point in his congressional testimony. The reality is
world trade will suffer far greater damage from the global economic
fallout of a Big Three bankruptcy.
There's at least one Republican, Tennessee Sen. Bob Corker,
who questions the need for three U.S. auto firms. How do we know
the others in the GOP even want auto companies to survive?
Lastly, that old conservative favorite of moral hazard is
again on display, with claims that American manufacturing will
become a permanent beggar of government funds. The fact is business
always lobbies Congress for favors and tax breaks, and the Lehman
Brothers' experience should have taught the foolishness of mixing
moral hazard parables with crisis management.
There are undoubtedly colossal problems in Detroit, and the
Big Three could never be convicted of an excess of imagination.
But "free trade" economic policy has also contributed
to their current condition through trade agreements and an over-valued
dollar that have promoted auto imports, as Gettelfinger pointed
out to Congress. The car companies did not.
All of this must be fixed. But sacrificing the Big Three will
accomplish none of this and risks the real prospect of an economic
(The author is the former chief economist of the AFL-CIO
and former chief economist of the U.S.-China Commission).
help Fort-Shelby Hotel make an unlikely comeback
DETROIT - It's not as grand as the recently opened Westin
Book-Cadillac a few blocks away, nor is it modern and flashy
like the city's three new casino hotels.
The DoubleTree Fort-Shelby Hotel opens this month as a simpler,
unpretentious but elegant addition to the city's burgeoning stock
of hotels. Slated to open Dec. 15, the renovated hotel will have
204 rooms on floors 2-10, and 56 apartments on floors 11-22.
The top two floors will be made into luxury penthouses.
"We're in pretty good shape, we're at the point where
we're putting the finishing touches in," said Thomas Simko
on Dec. 2. He's vice president of operations for The Brinker
Group, which is managing the Fort-Shelby renovation. "To
see this place in May 2007, and then now after the phenomenal
restoration, it's like night and day. The building is just beautiful."
About 150 Hardhats were on the job in the days before the
hotel was slated to open, taking care of those finishing touches.
The lobby and the first floor restaurant were a buzz of activity,
as was the magnificently restored main ballroom. "They've
done a very good job, we've been pleased with the overall experience,"
Named after a long-buried fort near the building at Lafayette
and First Streets, the original construction on the Fort-Shelby
took place in two different phases. First a 10-story building
was completed in 1917, and when that proved successful, a 22-story
tower was added in 1927.
The first tower was completed two years after the opening
of the now-demolished Detroit Statler Hotel, which set the standard
for new hotels in the city at the time.
According to the Forgotten Detroit website: "Though not
as large or grand as the Statler, the Fort Shelby offered patrons
many new innovations. Like the Statler, each room had a bath
with running water. The building was fireproofed. The guest rooms
all offered modern heating.
"There was a hotel-owned automobile garage built across
the street. The restaurant equipment was the most modern then
available. The hotel's most notable feature were the servidors.
A servidor was a compartment built into a guest room door. Each
side of the compartment had a door and a signal. A guest could
place an item of clothing needing pressing into the compartment
and a hotel employee would open the servidor from the hall to
collect it. It could also be used to deliver items to the guest
without disturbing them.
"The servidor's most praised service was its removing
the need to tip employees. The Fort Shelby offered the first
servidor service in Detroit." (The servidors didn't make
a return to the renovated hotel).
The Pick Hotel chain took over operations of the Fort-Shelby
in 1951. By the early 1970s, the hotel was losing money, and
it closed in December 1973.
As a hotel, the building has basically been empty since that
time. A first floor bar closed a decade ago, leaving the hulking
building completely abandoned. Windows were broken, and trees
grew from the rooftops, and the roof leaked.
A comeback for the hotel was seen as highly unlikely, and
it took years to assemble the right combination of investors
and tax credits to fund the $82 million renovation of the building.
A deal finally came together about two years ago.
The building was completely gutted and a new floor plan put
into place that allowed for larger guest rooms. Simko said the
main structural problem was on the west side of the building,
where a six-story steel column was rotted by the incursion of
rainwater from a leaky roof drain. The fix involved encasing
the column in concrete.
"Initially we had to overcome the structural restoration,
but overall it's been a pretty straightforward job," Simko
said. "Now, in the latter stages, there really aren't so
THE ORNATE CEILING in the Detroit DoubleTree
Fort-Shelby's Crystal Ballroom is painted by Kal Saaidi of Painters
Local 37, working for Madias Brothers.
FINISHING TILE WORK at the front desk of the
DoubleTree Fort-Shelby Hotel in Detroit is Emerus Shaw of Bricklayers
and Allied Craftworkers Local 1 and Hospitality Stone.
THE FORT-SHELBY Hotel was built along Lafayette
Ave. in two stages - the 10-story section in 1917 and the 22-story
addition in 1927. The spiffing up of the exterior masonry is
one of the most striking aspects of the renovation.
journey for giant Marathon coker drums
DETROIT - One of the first major tasks associated with the
Marathon Petroleum Co.'s Heavy Oil Upgrade Project (HUOP) was
the installation of a pair of "coker drums."
Built in Spain, then floated across the Atlantic Ocean through
the St. Lawrence Seaway to Southwest Detroit, the drums weighed
more than a million pounds each and required tons of special
care by the building trades. The massive drums were lowered into
place on Nov. 1 and Nov. 3. Mission accomplished.
"There was so much pre-planning, we went over everything,"
said Boilermakers Local 169 General Foreman Terry Sullivan, working
for Mammoet USA, Inc., part of a Dutch company that specializes
in hoisting and transporting heavy objects. "We set one
on Saturday, the other on the next Monday. We couldn't have done
it without a great crew. We had the right guys for the right
Upon arrival at docks on the Rouge River, the coker drums
were offloaded from barges and onto "golhofers," -
multiple axle flatbed trailers with wheels that can turn in an
direction and handle uneven terrain. They transferred the coker
drums more than a half mile to the Marathon site.
According to Marathon, the new hardware is part of their "delayed
coker" processing system at the plant, which will convert
asphalt-like material into liquid petroleum fuel blend components
and petroleum coke (a coal-like substance). It also will allow
the refinery to thermally convert and upgrade heavy Canadian
crude oil into higher quality products such as gasoline, diesel
and petroleum coke.
Construction on the refinery upgrade began last June and was
originally expected to cost $1.9 billion and be complete in 2010.
But due to "current market conditions," Marathon announced
Oct. 31 that they are "reevaluating the project construction
schedule," working on a new timeline and cost estimate,
expecting to complete the analysis by the end of the year.
ONE OFTHE TWO "coker drums" - each
weighing more than a million pounds - is wheeled into place at
Marathon refinery in southwest Detroit. Photo by Terry Sullivan
THE SECOND OF TWO coker drums at Marathon
Oil Refinery in Southwest Detroit is lowered into place.
Bush takes parting shot at unions
In a final-days attack on workers' rights, President Bush
on Dec. 1 issued an executive order that denies collective bargaining
rights to about 8,600 federal employees who work in national
security, law enforcement and intelligence.
Nearly 1,000 of the workers currently are represented by a
union, and some have been for more than 30 years. The biggest
group affected by the order is the 5,000 employees of the Bureau
of Alcohol, Tobacco, Firearms and Explosives (ATF), which is
now part of the Justice Department.
Peter Winch, national organizer for the American Federation
of Government Employees, the largest federal employee union,
says the union is determined to fight the executive order. "Bush's
actions are within his legal discretion, but he has abused that
discretion," Winch said. "There is no reason for this
action. Nothing has happened from yesterday to today to change
the national security situation to require such a change.
"We're asking President-elect Obama when he takes office
to review all exclusions (from collective bargaining) since 1978.
Several exclusions by this president were not done for national
security reasons, but to stop unions."
In the executive order, Bush said it would be inconsistent
with "national security requirements" to allow the
employees to engage in collective bargaining over the conditions
of their employment.
This is the same rationale the White House used in 2003 to
deny bargaining rights to workers at the Transportation Security
Agency, in one of the first shots in the Bush administration's
war on federal workers.
- James Parks, AFL-CIO
Most Americans approve of unions
Despite the best efforts of corporate-backed anti-union groups,
the Bush White House and anti-worker politicians demonizing unions
on the campaign trail, most Americans continue to approve of
unions, as they have for the past seven decades.
The latest update from Gallup on union support shows 59 percent
of those surveyed back unions, while 29 percent disapprove of
them. According to Gallup:
"Americans have generally held a favorable view of unions
for decades - with no less than 55 percent of Americans saying
they approve of labor unions in Gallup polls conducted from 1936
Not surprisingly, most of the support comes from Democrats
and independents. Seventy-two percent of Democrats approve of
labor unions, compared with 63 percent of independents but only
38 percent of Republicans.
Also, most respondents said unions should have more influence
(35 percent) or the same amount of influence (28 percent), while
32 percent want to see less union influence.
The results reflect what other pollsters have found about
public support of unions. More than three-quarters of Americans
(77 percent) support strong laws, such as the Employee Free Choice
Act, that give employees the freedom to make their own choice
about whether to have a union in their workplace without interference
from management. Also, some 60 million workers say they would
join a union today if they could.
- Mike Hall, AFL-CIO