Market chaos impacts car talks

August 19, 2011

Market chaos impacts car talks


This year’s contract talks between Detroit’s automakers and the United Auto Workers may be shaping up to be a battle over what they cannot control.

Fresh from the hell of two bankruptcies, brutal restructurings that eliminated tens of thousands of dues-paying hourly jobs and more than a year of impressive earnings at General Motors Co. and Ford Motor Co., the bargaining now in its final month was supposed to deliver a positive reset.

The companies would hold the line on fixed costs and union members would pocket fat signing bonuses and richer profit-sharing plans. Sales would continue a slow but steady recovery to pre-crash levels, and the pain and ignominy of late 2008 and ’09 would recede into history.

No, the biggest variables in this year’s talks aren’t new CEOs at GM and Chrysler Group LLC, or a new president at the UAW, or restive members at Ford unconstrained by the no-strike rule covering their brothers and sisters across town.

It’s what they can’t control. European bankers and politicians struggle to manage a debt crisis threatening to take on a life of its own. Equity markets are swooning — the Dow Jones industrial average plunged 420 points or 3.68 percent Thursday — on uncertainty over the exposure of U.S. financial institutions to the European mess and discomfiting signs pointing to a double-dip recession.

The August report from the Philadelphia bank of the Federal Reserve fell to its lowest level in two years. The nation’s unemployment rate is stuck at 9.1 percent, while Michigan’s ticked higher in July for the third month in a row — hardly the harbinger of recovery in a state that is still synonymous with the domestic auto industry.

Options for the Fed (lower interest rates) and the Obama administration (more stimulus spending and higher tax rates) are limited, victims of circumstance, diminished credibility and an increasingly obvious leadership vacuum in the White House.

And the European Central Bank? With each new half-measure, it looks increasingly like a slow-motion train wreck of bureaucrats with limited power trying to exert their will over disparate politicians safeguarding their national sovereignty and their political futures.

Think that doesn’t matter to contract bargaining here at home? This isn’t Detroit, circa 1995. The inability of European bankers and pols to control a metastasizing debt crisis — partly because solutions proffered by unelected bureaucrats aren’t easily foisted on a voting public — threatens more than just another Italian government.

It threatens the top-line projections of Detroit’s automakers, dealers selling their metal and potentially the people who work for them all, including UAW members understandably hungry for some semblance of stability. The past two weeks — a harrowing display of collapsing confidence, the interconnectedness of the global economy and the cost of weak leadership — show the path won’t be easy.

Because financial markets and banking connections transcend national boundaries and because consumers have up-to-the-minute access to market data and 401(k) statements, the plan to shop for a new car this weekend easily can be delayed and substituted with finally cleaning out the garage.

That ain’t good.

The uncertainty could make it harder for all sides to reach a deal unless it is shorter (less than four years long), static (both sides keep what they have) and aimed at revisiting the wide spectrum of issues after the 2012 presidential election, among other things.

A fluid economic picture also threatens to make it difficult for both the automakers and UAW President Bob King to deliver what all sides are suggesting could be the break-out move of this year’s talks — simplified yet fattened profit-sharing formulas for hourly workers tied to the performance of the companies and their products in the United States and around the world.

The prospect of leaner times ahead means payouts are likely to be smaller than they would have been in the comparatively fatter days of last year. Unless leaders on both sides are able to persuade the rank and file to bet on the promise of larger profit-sharing checks later on, the cornerstone play of the post-bailout future could be a prominent casualty of the latest market swoon.

The good news is that Detroit already has proven it has the mettle to weather a nasty economic storm and emerge intact, if not stronger. The question is whether it will have to do it again.

Seniority Lists
Bargaining Committee

Mike Herron
Tim Stannard
Zone at Large – 1st
Danny Taylor
Zone at Large – 2nd
Mark Wilkerson
Joe McClure
Chad Poynor
Steve Roberts
Derek Lewis
Bill Cundiff
Kirk Zebbs
Don Numinen
Jay Minella
Danny Bragg
Chris Hill
Rashad Thomas
Keith Oswald
Chris Brown

1853 Officers

Tim Stannard
Mike Herron
Vice President
Darrell DeJean
Financial Secretary
Mark Wunderlin
Recording Secretary
Peggy Mullins
Trustee (3)
Jay Lowe
Dave Clements
Dave Spare
Sgt. at Arms
David C Spare
Ashley Holloway
E-Board at Large (2)
David Ryder
Steve Roberts

GM Unit Chair
Mike Herron
Leadec Unit Chair
Larry Poole
Ryder Unit Chair
Patrick Linck
AFV Unit Chair
Katherine McGaw
Retiree Chair
Mike Martinez