Profits at heart of UAW talks

July 27, 2011

Profits at heart of UAW talks

/ The Detroit News

Ford Motors Co.’s $2.4 billion second-quarter profit — its ninth straight quarterly profit — means the Dearborn automaker will have a hard time pleading hardship to the United Auto Workers union in contract talks now under way.

But Chrysler Group LLC, which posted a $370 million loss in the second quarter, has a stronger case for staving off any financial demands from the union.

While Chrysler attributed the loss to repayment of U.S. and Canadian government loans, the Auburn Hills automaker is still considered the weakest financially of the Big Three.

General Motor Co.’s second-quarter results, which will be released Aug. 4, are expected to be up from the $1.33 billion profit reported last year, according to analysts’ estimates.

GM and the UAW will kick off contract talks today with a ceremonial handshake at the company’s Detroit-Hamtramck plant; Ford’s handshake with the UAW is planned for Friday. Chrysler began talks Monday.

“Profit is a very important part of UAW thinking,” said Sean McAlinden, chief economist and executive vice president for research at the Ann Arbor-based Center for Automotive Research.

“Profits are something you share on the table with the union — no matter where you make it,” he added.

While the Detroit automakers are regaining financial strength, they start labor talks against an uncertain economic backdrop. Material costs are rising, unemployment remains high, and Ford and GM, whose sales numbers have been helped by car shortages among the Japanese automakers, could face a tougher second half.

Chrysler has a truck-heavy lineup, which hurts the company when gas prices rise, and it must spend billions of dollars over the next few years to launch cars it’s jointly developing with Italian partner, Fiat SpA, analysts say.

“There are a lot of outside forces plaguing everybody,” said Rebecca Lindland, an analyst with IHS Automotive based in Lexington, Mass.

“But all the companies are doing a good job of getting their products in order,” she added.

GM and Chrysler are supposed to be making money; that was the purpose of the 2009 bailouts, Lindland said. UAW workers also are barred from striking Chrysler and GM during talks, a condition of the taxpayer-funded bailouts.

“The unions need to approach this as a positive,” Lindland said. “These companies are back on their feet and that shouldn’t be used against them.”

UAW President Bob King has said he wants to reach an agreement that rewards workers for their share in the companies’ success, but doesn’t want to make the companies uncompetitive. Both the automakers and the union want to avoid the confrontations of previous negotiations.

Chrysler CEO Sergio Marchionne said it’s too early to tell how this will play out.

“All indications so far suggest that there is at least a shared intent to keep these organizations competitive in the marketplace,” he said.

Ford could be in the toughest spot, though.

“Ford is sort of caught between two fires,” McAlinden said. “They want to tell a great story on Wall Street and a competitive story at the plants.”

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