Was the UAW’s show of force just showbiz?

Roland Jones • Profile • E-mail

After weeks of negotiations, the “Big Three” U.S. automakers look close to sealing historic new labor contracts with the United Auto Workers (UAW) union, restructuring the expensive benefit costs that the industry has enjoyed for decades.

On Monday, General Motors said a new four-year contract it has agreed with the UAW will transfer an estimated $46.7 billion worth of retiree health care liability from the company to the union and significantly reduce labor costs, improving its ability to invest in new products and technology.

But the path to the historic deal with the union — reached last Wednesday as Chrysler clinched a similar, albeit tentative, deal with the UAW — was interrupted by two high-profile strikes at GM and Chrysler in the last three weeks, and observers are wondering what’s going on with the nation’s largest auto union.

Last Wednesday, 45,000 unionized workers walked off car production lines and out of warehouses in a nationwide strike against Chrysler, but they were back at work the next day. Two weeks earlier, a strike against General Motors over the same labor contract negotiations — the first in nearly forty years — concluded two days later. Ford has yet to agree a new labor contract with the union.

The short strikes may have been more for show than an actual inability of the parties to agree on a new labor contract said David Cole, chairman of Center for Automotive Research in Ann Arbor, Mich.

“It’s hard to know what the real rationale was for the strikes, but it seems they were something designed to show that what the automakers and the union had agreed on was really important,” Cole said. “Now they can go to their members and say we have made concessions on wages and on health care costs, but we have fought for an agreement on job security.”

By making concessions that allow GM to reduce its costs, placing the company on a more even playing field with Asian rivals like Toyota, the UAW has freed it up to develop new products. At the same time, the UAW has secured a slate of impressive job assurances from the automaker, which has pledged to build certain new cars in certain plants, guaranteeing work for UAW members, albeit at a lower pay rate, Cole said.

GM’s agreement with the UAW means it has transferred responsibility for auto workers’ health care costs to the union in the form of a funded trust, while a tiered wage structure means that when workers retire they will be replaced with new workers that have a wage and benefit structure half what it is for current employees, reducing costs for the automaker. On a per car basis that amounts to a saving of about $300 per vehicle for the new wage structure and about $700 per vehicle for the health care reduction, Cole said.

“This will take a few months to a year to be realized, but when it comes to GM and Toyota their costs will essentially be close to zero, and that’s why we think this is a big step; a transformational step,” he said. “If GM had the same health care costs that Toyota has it could bring out five new products a year with the money they’d save, that’s how significant this is. So the UAW, by bringing together this deal, they have enabled American automobile manufacturing to compete against anyone in the world. And with the high value of the euro and the weaker dollar you could even see automobiles build here and sent to Europe.”

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