New route needed for auto talks

July 25, 2011 http://detnews.com/article/20110725/OPINION03/107250356

New route needed for auto talks

UAW, Big 3 seeking new solutions to old issues

DANIEL HOWES

The United Auto Workers’ contract talks with Detroit’s automakers, beginning this week, are unlike anything this town has ever seen.

All the rules are different. The feds pushed General Motors Co. and Chrysler Group LLC through bankruptcy, rescuing the union and two of its major employers from certain collapse. Add Ford Motor Co.’s bootstrap restructuring, and a Detroit auto industry given up for dead should be reset for long-term success. In theory, anyway.

“They’re not that far removed from catastrophe,” says Arthur Schwartz, president of Labor and Economics Associates and a retired GM bargainer. “You have so many different sets of expectations going in.” Some of them could be irreconcilable.

The question now is whether all sides will use this summer’s bargaining to seize — or blow — the opportunity to maintain momentum, to show political critics and skeptical consumers that the New Detroit isn’t masking Old Detroit’s self-inflicted bad habits of mediocrity, arrogance, confrontation and greed.

What’s different?

In general, the companies are profitable and their balance sheets are leaner, free of retiree health care obligations and punishing debt. All-in hourly labor rates are within spitting distance of foreign competitors instead of woefully uncompetitive, as they’d been for decades. Profit-per-vehicle is up, and so is Detroit’s product cred. The union’s leadership also is vowing to help maintain the companies’ competitive edge because that’s the best way to ensure a future for its dues-paying members.

We’ve never been here before. Two of three CEOs are negotiating their first national contract, and Bob King is overseeing his first as UAW president. Because President Barack Obama, sponsor-in-chief of the auto bailout, is running for re-election, the specter of presidential politics also lurks in the background and could become relevant if talks veer badly off course in this battleground state.

Traditional sweeteners of base wage increases, cost-of-living bumps and sweetened pensions for union members — if they happen at all — are expected to be overshadowed by a push to expand lump-sum signing bonuses and profit-sharing programs to keep fixed costs down, to focus salaried and hourly employees on similar goals and to bolster a competitive edge over foreign rivals.

“We have to move to a different compensation system … that is based on company performance,” says Sean McAlinden, chief economist and executive vice president for research at the Ann Arbor-based Center for Automotive Research.

“That would be a sea change. In a good year, you’d make real money. In a bad year, you wouldn’t get fired. I don’t know how you sell it.”

Exactly. Both the companies and the UAW enter this year’s talks, beginning today with the UAW-Chrysler “handshake” in Auburn Hills, keen to reshape an often-adversarial relationship into one of mutual interest and shared reward. The challenge is reconciling that intent and cost consciousness with fat profits, rich executive compensation packages (namely at Ford) and the political realities of getting any deal ratified, particularly by Ford’s rank-and-file.

Under terms of the federal bailout, the UAW cannot strike GM or Chrysler this year except under narrowly defined circumstances. Impasses can be subject to binding arbitration. Any work stoppage, ugly public spat or appeal to an arbitrator risks reinforcing the negative vibes dogging GM and Chrysler, especially, and undercutting the UAW’s business-friendly case for organizing non-union foreign-owned rivals operating down South.

“If you need a referee to solve the problem, it means you are unable to solve a problem with your employer,” says a ranking industry executive familiar with bargaining strategies. “It’s not going to be a walk in the park.”

Adds McAlinden: “The union doesn’t want to go to arbitration. You never know how things will turn out. It also means their people aren’t in charge” — as well as the inconvenient fact that arbitrators’ rulings are not subject to union ratification or approval by a board of directors.

They are what they are, and both sides would have to live with the results.

The three CEOs, each facing different competitive challenges, need to show wary investors they are prepared to hold the line on the kind of burdensome obligations that pushed two of them into bankruptcy. Bargaining too hard risks fracturing fragile post-bailout relations with the UAW; bargaining too richly could push the investment community toward the exits.

And the UAW’s King, who’s spent months publicly shaping the debate, needs to show he can craft a deal that simultaneously keeps the automakers competitive even as it enables 112,000 members to share in the industry’s impressive new wealth. Without both — and contracts reached free of open acrimony, arbitration or strikes — the credibility of his bid to use a new problem-solving attitude to reverse the union’s membership decline with new recruits would be imperiled.

Bottom line: Evidence that the New Detroit is for real hinges on what bargainers do, not what their leaders or investors or the news media say over the next two months. If the congressional inquisition-turned-bailout horror proved anything, it’s that both sides in this quadrennial rite are really on the same side — and if they fail, they fail together and share the blame.

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