More UAW workers bankrupt
Autoworkers who used to thrive on overtime now find it tough to keep up their lifestyles.
By Louis Aguilar / The Detroit News
Going broke
• The United Auto Workers' legal department has handled the bankruptcies of nearly 10,000 members, retirees and their families in Michigan since 2002.
• The typical auto worker in Michigan has lost five hours of overtime per week since 1997 -- an average annual loss of $10,000 per worker.
• Personal bankruptcy rates in the state rose to an all-time high last year when more than 63,700 residents sought protection from creditors. The number of bankruptcies filed this year through Aug. 30 has already surpassed 2004's record by 15,720.
• Chapter 7 bankruptcy is liquidation. Chapter 13 includes the opportunity to repay debts, often at a reduced interest rate.
Source: Court records, Michigan Dept. of Labor & Economic Growth
Going broke
The UAW's legal department has handled the bankrupcies of nearly 10,000 members, retirees and their families since 2002. With the recent cutbacks in total income, do you find your self living beyond your means?
Yes, I'm drowning in debt
I'm struggling, but cutting expenses
No, I live within my means
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DETROIT -- Oscar Gray achieved the good life during 28 years of hard work at Delphi Corp. -- a six-figure income, a nice home in Holly and two vehicles.
But as Michigan's auto industry tanked in recent years, the forklift operator lost huge amounts of overtime pay and gradually sank into financial ruin. Saddled with $469,000 in debt, he declared bankruptcy last month.
Gray isn't alone. Once the symbol of blue-collar prosperity, Michigan autoworkers are going bankrupt in alarming numbers as vehicle production declines and overtime pay dwindles.
The United Auto Workers' legal department has handled the bankruptcies of nearly 10,000 of its members, retirees and their families in Michigan since 2002, according to Detroit News research of court records. UAW lawyers estimate that Chapter 7 and Chapter 13 filings in Michigan have been growing at a 10 percent annual clip in recent years.
The bankruptcies show that many Michigan autoworkers are failing to scale back their lifestyles in the face of massive changes slamming the state's bread-and-butter industry.
Gray didn't lose his job. His health isn't failing, and he is not going through a divorce -- the typical reasons many declare bankruptcy.
Gray has been losing overtime. His gross pay was cut $16,000 one year, sliding to $87,000, and may dip again because Delphi is considering a Chapter 11 filing.
"You count on something your whole life and then it gets jerked around," Gray said.
While layoffs have soared, it's often autoworkers still on the job who are drowning in debt.
Loss of overtime is one of the top reasons autoworkers have sought bankruptcy protection the past four years, say attorneys for UAW Legal Service Plan. The plan provides free legal aid to UAW members, retirees and immediate family members.
The typical autoworker in Michigan has lost five hours of overtime per week since 1997 -- which means an average annual loss of $10,000 per worker, according to the Michigan Department of Labor & Economic Growth. For workers in the hardest-hit plants, the loss of income can be far greater.
Overtime at major factories, such as Ford Motor Co.'s Wayne and Wixom assembly plants and General Motors Corp.'s Pontiac East plant, has dropped sharply or been eliminated. In years past, workers at those plants regularly clocked significant overtime.
In addition to a drop in overtime pay, annual cash bonuses paid by Detroit automakers to factory workers have declined in recent years as profits have decreased or disappeared. At Ford, where bonuses averaged $6,700 as recently as 2000, profit-sharing payouts averaged $600 for 2004.
Lavish lifestyles persist
Despite the loss of time-and-a-half pay, some Michigan autoworkers continue to live large.
Many bankrupt autoworkers own two homes -- one is usually up north -- which means multiple mortgages. Most have two or more cars and sometimes a boat or snowmobile payment, according to information culled from cases filed by autoworkers in U.S. Bankruptcy Court in the Eastern District of Michigan.
The Detroit News reviewed 88 Chapter 7 and Chapter 13 bankruptcy cases filed by UAW Legal Services in the past six months. Of those, 23 were active autoworkers who didn't appear to have catastrophic medical bills based on the creditors listed.
Many broke autoworkers have tens of thousands of dollars worth of credit card debt. Target, Best Buy and Home Depot are common creditors seeking payment.
Autoworkers aren't the only ones who live beyond their means. Too many American workers don't save enough money, a host of studies show.
"What's unique to autoworkers is that their lifestyle was dependent on overtime pay, especially veteran autoworkers," said Lou Glazer, president of Michigan Future Inc., an Ann Arbor think tank studying work force and economic trends.
Oscar Gray's income from Delphi's Delco facility in Flint topped $100,000 as recently as last year. But parts makers like Troy-based Delphi are struggling due to high raw material costs, weaker sales at the Big Three automakers and global pricing pressures. Several large parts makers have been forced into bankruptcy.
Delphi, which was spun off from GM six years ago, swung to an operating loss of $290 million last year and is in a three-way fight with GM and the UAW over cutting labor and health care costs. If Delphi doesn't obtain relief from uncompetitive labor costs soon, its CEO says the parts maker may file for bankruptcy.
All that means Gray's overtime isn't likely to come back soon. Other workers and companies are grappling with similar circumstances. The bankruptcy cases filed in the past six months included current workers from Ford, GM and DaimlerChrysler AG, as well as parts makers American Axle & Manufacturing Inc., Collins & Aikman Corp., Detroit Diesel Corp., Federal-Mogul Corp. and Visteon Corp.
Many workers contacted about their bankruptcies did not want their names to be published.
One assembly line worker at GM's Pontiac truck plant said he saw his annual income drop by $20,000 -- not an uncommon occurrence -- last year as demand for full-size pickups softened. "Overtime was always there, man. Maybe it would go away for a month or so, but it would always come back," said the autoworker.
When the 15-year GM veteran's overtime was cut early last year, the autoworker ran up $65,000 in credit card debt to pay for items such as his monthly satellite dish subscription. He took out cash advances to meet his mortgage payment for his Leelanau County cottage and his payments on two pickups. His overtime never came back, and in February, he filed for Chapter 7 bankruptcy. He's $320,000 in debt.
Debt adds up
Piling up credit card debt is the way most autoworkers go broke, says Jennifer Bidwell, an attorney for UAW Legal Services Plan.
"They still are collecting their salary, so they think it's OK," she said.
By contrast, most laid-off workers immediately cut their expenses, Bidwell says. Many bankrupt autoworkers who lost overtime fail to cut expenses in a major way.
If autoworkers are in trouble, then Michigan's economy is in trouble, Glazer said.
"They remain the engine of the Michigan economy, mainly because there are so many of them," he said. "You can imagine the ripples. If they don't spend, then everything goes down: housing prices, the number of successful restaurants, you can almost go down the line."
This is a period of record bankruptcy filings in Michigan. Personal bankruptcy rates in the state rose to an all-time high last year when more than 63,700 residents sought protection from creditors, according to court records, up 2.3 percent from 2003 and up 38 percent from 2001.
The number of bankruptcies filed this year through Aug. 30 has already surpassed 2004's record by 15,720, according to court records.
The staff at UAW Legal Service has witnessed similar increases. Two years ago, the number of bankruptcies processed by the union peaked at 3,351 and appears on pace to match that record this year. The rise is partly due to coming changes in federal bankruptcy laws that will make it harder for many consumers to escape debt. Those changes take effect Oct. 17.
The UAW doesn't keep track of how many bankruptcy cases are a result of workers who lose overtime, but "it's definitely a trend that's been going up noticeably the last several years, at least since 2001," said Matthew Mason, president of the UAW Legal Services Plan.
Five other attorneys with the legal service plan in Metro Detroit also have seen a noticeable increase in filings. All said, it was one of the top reasons many autoworkers are seeking bankruptcy protection.
The rise in personal bankruptcies among autoworkers may be "cyclical," UAW spokesman Roger Kerson said. "There's no data to show that overtime is being threatened for most of our members.
"Members could get their overtime back in the future. It all depends on vehicle demand."
In any event, another dark financial cloud may be brewing. Retirees make up another large group filing for bankruptcy, Mason said, which was a claim verified by the other UAW attorneys.
Given that most autoworkers are nearing retirement age -- the average GM worker is 50 -- the rising tide of broke autoworkers could just be starting.
Detroit News librarian Pat Zacharias contributed to this report. You can reach Louis Aguilar at (313) 222-2760 or laguilar@detnews.com.
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