Saturday, July 14, 2007

UAW juggles outside pressure

Friday, July 13, 2007
Daniel Howes
UAW juggles outside pressure

The Wall Street analyst, eager to discuss the United Auto Workers' imminent contract talks with Detroit's automakers, looked across the table this week and told me what "the Street" expects come September:

First, a landmark deal to essentially shift some $70 billion in retiree health-care liabilities to union control. Second, a two-tier wage structure to pay new hires a fraction of what current workers make and offer fewer benefits. And third, obliteration of the pay-for-no-work "jobs bank," Detroit's monument to dysfunction.

Gee, is that all?

The start of potentially landmark contract talks still are roughly two weeks away. Yet armchair experts already are rushing ahead to declare more forcefully than the automakers themselves what must be accomplished, and they're trading accordingly.

But they're forgetting to ask what can be accomplished in dicey negotiations influenced more by economics, trust, relationships, internal union politics and public theater than outsized expectations shaped by computer models and elite MBAs.

Union mega-deal expected

Fueled by ratification of the UAW's concessionary deal with bankrupt Delphi Corp. and expectations of something similar in September, shares in former Delphi parent GM are up 23 percent since June 1 to $37.54 and Fitch Ratings on Thursday removed GM from negative watch. Ford shares surged more than 15 percent to $9.64 by July 2, but have since settled back to $8.96.

Bottom line: Wall Street already is pricing in the "transformational" deal Detroit's automakers would dearly love to deliver, but can't guarantee -- mostly because they understand better than twentysomething hedge fund sharpies that crafting a national contract is more complex than ordering a pizza:

"I'll take an extra large, please. Give me a Voluntary Employee Benefit Association that will enable the union to pay retiree health care, topped with lower wages for new hires. No jobs bank -- it gives me indigestion -- or I won't pay for it."

No wonder UAW President Ron Gettelfinger already sounds like a harried father wearied by incessant bleating from the back seat. "We're not going into negotiations in a concessionary mode," he said this week, striking a necessary tone of defiance.

His union is facing an existential crisis -- three automakers in various stages of distress, bankrupt suppliers like Delphi and Dana winning massive concessions to stay afloat, union wages and benefits under siege -- and everyone's already decided how this drama has to end.

Or what?

Just asking, but are the actions of Gettelfinger's UAW those of a union leadership refusing to come to grips with the life-threatening challenges facing Detroit's automakers and their biggest suppliers? Has there been a strike against Dana? Or Tower Automotive? Or Collins & Aikman? Or Delphi, the mega-supplier Gettelfinger and the UAW sound like they love to hate?

No, no and no.

These contract talks are likely to be a watershed for the UAW and, certainly, Gettelfinger's legacy as president. They're about making GM, Ford and Chrysler more financially competitive, not destroying the union and what it has to sell to current and would-be members.

Bargaining, not demanding

Establishing a mega-VEBA for retiree health care theoretically is the big play this time. It could safeguard those benefits from the ravages of a bankruptcy at GM, Ford or Chrysler and remove a costly liability from the automakers -- a potentially huge win for both sides.

Kill the jobs bank? Why, when a) massive buyouts basically are emptying them anyway and b) preserving them, if only as a mostly empty shell (for now), improves the chances of creating a VEBA with the UAW?

Demand two-tier wages? Now, when ranking labor relations executives at Detroit's automakers will tell you (privately) that pay scales rank about 17th on their list of issues with the UAW?

Back in 2004, the UAW agreed to two-tier wages for new hires at Delphi and Visteon, the former Ford Motor parts unit. But the dirty little secret, which became clear in the denouement of the UAW-Delphi talks, is that these pressured suppliers basically don't need more people -- at least not for very far into the future.

What those suppliers, and especially Detroit's automakers, need more are competitive work and operating rules at local plants -- rules that typically are shaped by local bargaining.

There's a reason they call this quadrennial Detroit dance "bargaining" and not "demanding." Viewed empirically, the UAW has more to give to help make the automakers competitive, but the union can't give enough to guarantee Detroit's success and still be the union that Reuther built.

By the sound of things, ol' Ron would be less cranky if the automakers didn't talk at all about the upcoming talks, if Wall Street just waited to form expectations and render judgments until, say, Sept. 15, if the news media didn't focus on the stakes, the pressure points and potential outcomes.

It doesn't work that way, anymore than jetting into Detroit for a few meetings and heading back to New York the same day is adequate to understanding one of the great industrial dramas of our time.

Daniel Howes' column runs Mondays, Wednesdays and Fridays. You can reach him at (313) 222-2106, or Catch him Fridays with Paul W. Smith on NewsTalk 760-WJR.

© Copyright 2007 The Detroit News. All rights reserved.


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