Malcolm Smith’s arms ache terribly, but he doesn’t tell his boss for fear of losing his job on the line at General Motors’ Hamtramck plant.
“Whatever comes up, I tell the man, `I’ll do it,’ ” said Smith, who has been laid off for four of the last eight years and bounced among three GM factories.
For Smith, as for many GM workers, job security is the big concern.
But many Ford and Chrysler workers’ minds are elsewhere. Observing their firms’ booming sales and enjoying ample overtime, they wonder how the companies will share the prosperity with them.
This is the United Auto Workers’ quandary as the union negotiates with the nation’s Big Three automakers for a contract to replace one that expires Sept. 14 for 430,000 workers:
How will the union reach a contract with the automakers that will stem its staggering 40 percent job loss in the last two decades as it also taps into the industry’s rebounding fortunes?
The UAW still sees itself as the pattern-setter in wages and benefits for the nation’s blue-collar union members, and it wants to keep up the high-wage, high-benefits tradition.
As soon as the automakers last week reported combined profits of more than $2 billion for the second quarter, UAW President Owen Bieber reminded them that his workers expect to “share equitably in the industry’s comeback.”
But the new contract’s importance goes beyond the UAW’s balancing act. This may be one of the most critical contracts ever for the union and for GM, the industry’s troubled, but recovering, giant, analysts say.
After slinking through one of its worst periods, GM seems on the edge of a comeback. Still, Wall Street analysts, whose pessimism about GM’s actions helped spur a round of plant closings and a board revolt against former Chairman Robert Stempel, say GM must also not back down on its cost-cutting. Despite GM’s overall $889 million profit in the second quarter, its North American operations again lost money.
“The No. 1 concern is that GM come away with a contract that significantly lowers their payroll costs. That is the bottom line. That is what we want to see,” said Phil Fricke, an analyst with Prudential Securities in New York.
Critical for the union and the automakers is which company will be the lead target in negotiations. The union generally picks one, reaches a contract with it and extends essentially the same conditions to the others.
Rather than shying away from the pressure, the companies seem eager to be picked-and for good reason, say experts and company officials.
If Ford is chosen, company officials say, it will try to fashion an agreement to its needs-an agreement, they add, that would avoid a costly job-security package that would be likely to come from a contract reached with GM. For the same reasons, GM is eager to avoid the kind of high-price contract Ford and Chrysler can better afford.
No matter what happens, GM’s competitors say they are not interested in pushing for a contract that cripples GM. Not only would it be bad for the U.S. economy-and their auto sales-to further weaken a company that nurtures thousands of jobs, but, they explain, the industry needs a leader to stabilize it.
And GM has no trouble speaking its mind.
With GM leading the way and the others joining in a lament about the industry’s shrinking consumer demand and foreign automakers’ challenges, the automakers are eager to cut costs.
They hope to do this by reducing health-care expenses, limiting job-security programs, sending more work to lower-cost parts and supply companies and possibly introducing a second tier of lower wages for parts workers.
The union is dead set against a second tier of wages. It also is eager to slow the transfer of jobs from the automakers to private suppliers, whose labor costs are about half the Big Three’s.
The problem of competing against lower-wage parts producers is most critical for GM, which makes more of its own parts than its two U.S. competitors do. And GM officials have made no bones about cutting the costs of their parts operations, even after the high-profile departure to Volkswagen AG of cost-cutter J. Ignacio Lopez de Arriortua.
But the union has vowed to stand by as much as possible for its parts workers, especially the 86,000 at GM.
Local UAW officials from GM parts facilities, who gathered in Detroit last week for a unionwide meeting, spent much of their time comparing the company’s cutbacks and their own coping strategies.
One of the union’s strategies is to lift the financial limit on the automakers’ job-security programs. In the last contract, the automakers agreed to set aside a total of $4.5 billion for one of the most extensive job-security nets in the nation.
Plagued by steadily slumping sales and hefty layoffs, GM’s $1.7 billion Jobs Bank, which paid full wages to laid-off workers, ran out in February. About 20,000 workers had to transfer to another job-security program that pays them a lower wage rate.
The union is equally firm about not bowing to GM’s special needs and giving up its reliance on pattern bargaining-its use of one basic contract for the three automakers. One reason for the union’s lingering feud with Caterpillar Inc. is that company’s attempt to break pattern bargaining.
Yet the UAW also seems intent on keeping GM afloat. UAW local officials said last week that they have been struck by the change in the union leadership’s attitude toward GM.
“The message is that they want to protect and preserve GM,” said one president of a Midwest local.
UAW officials acknowledge that Stephen Yokich, the union’s vice president in charge of its GM division, gets along better with GM President John Smith than with Smith’s predecessors.
Furious over job cuts last fall, before Smith took over, the union gave GM a lesson in synchronized clout, tying the company up with local strikes that threatened to bring GM to a halt. Smith made it clear he wanted to avoid such wrangling.
He has kept up this message. Before the contract talks began in June, GM said it would shift some work from Mexico to Lansing, Mich., creating about 1,000 U.S. jobs.
Not everyone is persuaded by the new, upbeat talk of cooperation, however.
“Overall, GM is still cutting. We are definitely not out of the woods. It is still a struggle,” said Ray Church, president of Local 22 in Detroit, where GM is closing a 600-worker plant.
If there is one area where the union and the companies are bound to clash, it is health care.
The union does not want to give up its health-care benefits, among the most generous in the U.S. UAW workers and retirees pay virtually nothing toward health-care premiums.
Protecting these benefits is especially important to the union, because it has an older membership, with many members nearing retirement age. The average UAW member is 46 years old, with 20 years on the job, according to the automakers.
Health-care costs translate into $1,550 for each car made by GM, $980 per car for Chrysler and $718 per car for Ford-but only about $600 for Japanese automakers’ operations in Japan, said Sean McAlinden, an auto expert at the University of Michigan. And at Japanese manufacturing facilities in the U.S., the costs drop to $100 per car, according to GM.
Those carmakers dispute GM’s figure, saying their costs per car average $475, said a spokesman for the Association of International Automobile Manufacturers.
Since 1970, health-care expenses at Ford have gone from 6 percent of payroll costs to 20 percent, say company officials. Officials at Ford and the other companies say one answer is for UAW members to share some of the costs. The other is national health-care reform.
Will the UAW be able to pull all these loose strings together and preserve thousands of jobs?
Workers such as Malcolm Smith who fear their jobs are at risk have doubts.
During his layoffs, Smith, 38, has gone to college on a company program, telling himself he must find a new career as a skilled tradesman or vocational-education teacher.
“I don’t believe in holding onto something that is slipping,” he explained.
FACTS, FIGURES ON THE UAW TALKS
Who
The talks cover 270,000 workers at General Motors, 100,000 at Ford and 62,000 at Chrysler.
When
The union will pick one of the Big Three as a negotiating target around Labor Day. Talks in Detroit will intensify as the Sept. 14 contract expiration nears.
How
If the union cannot work out a contract with the targeted company, it may shift to another. If negotiations break down, the union is likely to call for scattered strikes.
Wages
UAW workers earn a base pay of $17.37 an hour at GM, $17.38 at Ford and $17.36 at Chrysler. GM officials estimate the average wage for its UAW workers, including bonuses and overtime, was $23.74 an hour last year and that after adding the costs of insurance, job-security programs, regular benefits and other expenses, the average labor cost per worker was $42.21 an hour. Since 1978, the UAW’s wages have increased 2.9 percent when adjusted for inflation, union officials say. In contrast, overall factory workers’ real wages in the U.S. have fallen 12.1 percent since 1978, according to figures supplied by the UAW.
