Monday, February 26, 2007

New UAW pattern: givebacks

Wednesday, February 21, 2007
New UAW pattern: givebacks
Negotiations will be defined by concessions as automakers target health care, other benefits.
Louis Aguilar / The Detroit News

YPSILANTI -- The upcoming contract talks between the United Auto Workers and Detroit's automakers could force the union to accept more job cuts, lower wages for new workers and more responsibility for retiree costs, a top auto industry economist said Tuesday.

It's even possible that Ford Motor Co., in the midst of financial "meltdown," could push the union for across-the-board pay cuts of as much as 20 percent, said Sean McAlinden, vice president of research of the Center for Automotive Research in Ann Arbor and a longtime supporter of organized labor.

"The value of what we produce in Detroit has been severely reduced," he said. "That's never been clearer."

McAlinden said the contract negotiations beginning this summer will be tough, but he sees no chance of a full-fledged strike that would devastate the already weakened union and auto companies.

Speaking before about 150 suppliers, bankers, state officials and auto executives at Eastern Michigan University, McAlinden said the traditional "pattern" agreement reached with one automaker and then imposed upon the others is in jeopardy due to declining market share and sales by Detroit's automakers. He said the unionized work force at Detroit's Big Three and suppliers Delphi Corp. and ACH, a Ford-owned grouping of former Visteon Corp. operations, has fallen to 178,000 from 316,000 four years ago. He predicted another 20,000 UAW jobs will be lost by 2011 on top of those announced in the Big Three's current restructurings.

No state is more vulnerable to those job losses than Michigan, where UAW-protected auto jobs have been the economic engine of the state for decades. Now the core values of the UAW and Michigan's way of life are being challenged like never before, McAlinden said.

The union's four-year auto contracts expire Sept. 14. The domestic automakers' declining market share, its aging work force and cheaper nonunion labor both abroad and in the South have eroded the union's power, he said.

At least one other leading economist disagrees with McAlinden's assessment, saying the union still has plenty of leverage.

"I think it misses the complexity of the situation," said Harley Shaiken, a labor expert at the University of California, Berkeley. "The paradox is the industry is weakened but the UAW is quite strong within the industry."

In past contract negotiations, the UAW has seen itself as defining -- and defending -- the middle-class standard. But this year, McAlinden argued, negotiations will be defined by concessions -- particularly in easing the automaker's enormous health care costs. Among the demands automakers may seek from the UAW, according to McAlinden:

Ford Motor Co. may need as much as a 20 percent cut in wages and benefits for hourly workers as an emergency concession, which could lower Ford's costs by $1.4 billion per year for four years.

GM may seek a reduction in health care costs for retirees and active workers, as well as cuts in the cost of the jobs bank in which laid-off workers receive most of their pay. GM could seek more buyouts for its hourly workers, which could make way for any Chrysler workers if GM were to buy Chrysler, he said.

DaimlerChrysler AG will seek to gain health care concessions equal to those already granted to GM and Ford.

"Benefits and pensions will dominate the discussions," McAlinden said.

Representatives for the Big Three said Tuesday it's premature to discuss the contract talks.

GM spokesman Dan Flores, who attended the presentation, did say "there are still competitive gaps that exist" that need to be addressed by the automaker and the union.

The automakers also may push for a permanent second-tier wage and benefit agreement for new hires as the Big Three seek to cap total labor cost increases at 2 percent a year, McAlinden said.

Most UAW hourly workers are paid an average of $28 an hour, compared to $26 an hour or less for nonunion workers at U.S. plants owned by foreign automakers, McAlinden said.

Detroit's automakers must reduce total labor costs for building vehicles in North America in order to compete with foreign automakers, he said.

"If these rates aren't matched by the UAW, the Detroit Three will replace very few workers. They will move capacity to Mexico or offshore," McAlinden said.

Last year, Ford's total labor cost in North America was $3,227 per vehicle. GM last year spent $3,289 per North American-built vehicle on labor, including $2,339 per vehicle for wages and health care for active workers and $950 for retiree health care.

Toyota Motor Co. has a huge advantage because it has few retirees and doesn't offer a UAW-style early retirement option after 30 years of service.

McAlinden also predicted employment levels will be set in plant-level agreements -- not the master labor agreement. The result is that UAW locals will compete with each other for jobs.

"The war of all against all -- the nightmare of every bargaining chair and local president -- is under way," he said.

You can reach Louis Aguilar at (313) 222-2760 or

Big Three goals

The Center for Automotive Research's Sean McAlinden said Tuesday that Detroit's automakers must gain labor cost parity with Asian rivals during this year's contract talks with the United Auto Workers union in order to survive. Some of the items the companies may seek:

General Motors Corp.: Reduce health care costs for retirees and active workers, as well as cut the cost of the jobs bank in which laid-off workers receive most of their pay.

Ford Motor Co.: Reduce health care and jobs bank costs and get unions at plant levels to ratify new flexible manufacturing agreements that eliminate some work rules.

DaimlerChrysler AG's Chrysler Group: Health care concessions equal to what Ford and GM have. The union did not grant Chrysler the same concessions it gave Ford and GM in 2005.

All three: Possible lower wages for new hires. Also try to match the labor costs of Asian rivals. Also try to replace retiree health care liabilities with trusts funded by equity or debt.

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