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Bailout era changes how UAW bargains

July 22, 2011

Bailout era changes how UAW bargains

Pattern negotiations of past may not work under new rules

/ The Detroit News

In this new era of auto talks, the old rules no longer apply. Politics, bailouts, no-strike clauses and varying degrees of fiscal health at each of the Detroit auto companies may make traditional automaker-union negotiating tactics obsolete.

Conventional pattern bargaining — where the United Auto Workers picks a lead company to establish a baseline pact that the other two are expected to follow — may break down this year, say analysts and industry insiders.

UAW President Bob King already has said he wants to reach deals with General Motors Co., Ford Motor Co. and Chrysler Group LLC simultaneously rather than pick a lead company. Traditionally the UAW announced its target on Labor Day. The four-year agreements with the UAW expire Sept. 14.

One company source said in past years it would be possible by this point to get a fairly clear picture of the outcome, but not this year. There are too many question marks.

The biggest change this year: The union can’t strike GM or Chrysler, nor can those automakers lock them out, a condition of the 2009 bailout. Should either side declare an impasse on any point under negotiation, the matter goes to a neutral third party to decide in binding arbitration.

Ford, the only U.S. automaker that didn’t take bailout money, is under no such restrictions so its UAW workers are free to strike. The differences create an uneven playing field where Ford may be at a disadvantage.

A person briefed on Ford negotiations said there is concern that there can be no assurances of a pattern Sept. 14 if GM and Chrysler send any unresolved issues to arbitration to be decided at a later date.

And all three companies are in vastly different financial positions with Chrysler the most vulnerable and GM the most cash-rich, but Ford perceived as the fat cat for avoiding bankruptcy and paying CEO Alan Mulally $56.5 million in stock awards.

GM and Chrysler still are trying to secure their financial footings after emerging from bankruptcy in 2009. GM also is working to shed the government’s ownership stake in the company. On Thursday the U.S. Treasury sold its final stake in Chrysler.

11th-hour decision

And despite King’s stated desire to not pick a lead company, most expect the complexity of finalizing a deal will force the union’s top lieutenants to focus on a single one at the 11th hour.

“If they wanted to get the richest possible deal, then they’d go to Ford,” said Art Schwartz, a former GM negotiator and president of Labor and Economics Associates in Ann Arbor.

But targeting Ford could result in a contract GM and Chrysler will refuse to match, making GM a better candidate.

“GM is kind of in the middle, so maybe a settlement at GM will be palatable for Ford and Chrysler,” Schwartz said.

GM, following its normal practice, is prepping to be the target, said a source familiar with GM’s plans.

But most important to GM is an agreement that keeps fixed costs in check and doesn’t undo gains made via restructuring.

“We’re not jumping up and down in the media saying we want to be first,” this source said. “We believe we’re in a different place. Whether we go first or don’t, we’re going to negotiate to what we believe makes our business competitive long term.”

Chrysler, owned by Fiat SpA, wants to avoid arbitration but isn’t afraid to break pattern rather than agree to items it can’t afford, people briefed on Chrysler’s position said.

In the end, “(King’s) got to make this sellable to Chrysler,” Schwartz said.

King also could choose to alter each agreement slightly to better tailor it to company circumstances, and make up the differences in future bargaining.

“I think it’s still going to be close to a pattern agreement, but (King) might do a little more at Ford than Chrysler,” he said.

Sources at all the companies agree that wage disparities from one company to the next could result in disgruntled workers and possible ramifications in future negotiations. “It’s hard to justify to the Chrysler workers why the guy making the same kinds of vehicles over at Ford is making more money,” Schwartz said. “That’s hard for the UAW. They don’t like that differential pay stuff.”

Not everyone convinced

Pattern bargaining evolved to ensure the Big Three offered the same wages and benefits so no one company was at a competitive disadvantage. The approach worked well for decades with few deviations. In the 1980s, when Chrysler took its first government bailout, the three were thrown off pattern.

And not everyone is convinced King can pull off reaching three contracts simultaneously. His predecessor, then-UAW President Ron Gettelfinger, attempted to do so in 2003 but a week before the deadline bargaining all but stopped at GM and Ford as the UAW focused its energies on crafting a deal with Chrysler to set the terms.

“Someone will settle first,” Schwartz said. “It’s just the way it goes.”

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