UAW board seat full of risks

July 28, 2011

UAW board seat full of risks


Give him this: United Auto Workers President Bob King isn’t afraid of BHAGs — Big, Hairy, Audacious Goals.

In the opening week of national contract talks with Detroit’s automakers, he vows to help keep the companies competitive even as he pledges to get his members a bigger piece of the action. He aims to organize foreign rivals even as he says the union would brand them human rights violators if they fail to accede to the UAW’s self-made “Principles for Fair Union Elections.”

And in a tribute to his comrades in Germany’s IG Metall and their prevailing “co-determination” form of corporate governance, King says the UAW can make a legitimate case for one or more seats on the boards of directors of Detroit’s automakers. Never mind that the move has little precedence in American business save the extraordinary circumstances of government bailouts.

“That’s certainly one of our proposals,” he said Wednesday at the UAW-General Motors Co. handshake ceremony inside GM’s Detroit-Hamtramck Assembly plant. “We think governance is really important. They should have a seat on the board because they have this long-term interest, because they want to see the company succeed, because of sacrifices they’ve made, because they can play such a big role. I think they add value.”

He’s right, governance is important and the hourly workers do add value. What they don’t add is the capital that they and their salaried counterparts need to create the value in the first place. Investors and owners do, just as they do in that workers paradise known as Deutschland AG.

The UAW’s pursuit of board-room seats, to the extent it becomes a key demand in this post-implosion bargaining season, is fraught with potential complications. Among them is the cultural misperception that what is deeply embedded in Germany’s corporate reality is easily transferrable to 21st-century industrial America.

Don’t bet on it. Thanks to federal bailouts, the union’s health care trust funds have representatives on the boards of GM — Vice Chairman Stephen Girsky — and Chrysler Group LLC in former Michigan Gov. Jim Blanchard. But neither the Wall Street veteran nor the professional politician carry the kind of labor pedigree typically found on the labor side of, say, Daimler AG or Volkswagen AG.

Yes, retired UAW President Ron Gettelfinger occupied a labor seat on the defunct DaimlerChrysler AG supervisory board, a reflection of the German concept of Mitbestimmung, or co-determination, that has governed corporate Germany since the early 1950s.

And, yes, two UAW presidents — Doug Fraser and then Owen Bieber — sat on the Chrysler Corp. board following the No. 3 automaker’s near-miss with bankruptcy, its federal loan guarantees and the concessionary contracts that followed.

But the experiences, which culminated each time in the union relinquishing its board seats, offer a valuable lesson: being inside the room confers responsibility, meaning you can’t credibly denounce decisions made there that adversely impact hourly employees or product allocations.

A board seat also means you don’t always get your way. Just ask Gettelfinger, whose fellow board members green-lighted the plan to sell Chrysler to the sharpies at Cerberus Capital Management LP, accelerating a downward spiral at Chrysler culminating in bankruptcy.

With UAW allies already sitting on the boards of bailed-out GM and Chrysler, King’s “we-want-a-board-seat” gambit clearly is aimed at Ford Motor Co., the Daddy Warbucks of this year’s talks. They’ve got the cash and they’ve got an incentive to deal in a bid to get the fattened profit-sharing agreement they seek, but it’s not clear how much leverage King is willing to spend to get inside the board room.

Ford being Ford, the path to the Blue Oval’s inner sanctum runs through the office of Executive Chairman Bill Ford Jr., who wrote his senior thesis at Princeton University on Ford’s labor relations and prides himself on close working relationships with UAW presidents.

If he sees advantage in welcoming King or a union appointee to the board — chiefly because it would help manage the evolving UAW-Ford relationship and potentially bolster the UAW’s chances to organize foreign rivals — the chances of it happening could be considerably more than zero.

But any seat carries a warning: Be careful what you wish for because you might get it.

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