Howes: Everyone wins in Chrysler deal
October 13, 2011 http://detnews.com/article/20111013/OPINION03/110130341
Howes: Everyone wins in Chrysler deal
In the long-running Bob & Sergio Show, both guys ended up getting what they wanted.
Chrysler Group LLC CEO Sergio Marchionne insisted his still-money-losing but on-the-mend automaker could not afford the kind of four-year contract the United Auto Workers reached with his more profitable crosstown rivals. The deal outlined Wednesday by union leaders suggests that’s exactly what he got.
UAW President Bob King repeatedly said his union, battered by twin industry bankruptcies barely two years ago, would not press demands that would reverse the automakers’ competitive advantage by swelling fixed costs. Nor would it succumb to bad habits that undercut his claim of leading a solutions-oriented union facing up to global market realities.
And all of the fear and loathing that Marchionne’s late-night Sept. 14 letter scolding King would a) scuttle an agreement or b) push both sides into a long, ugly arbitration? Didn’t happen, because the risk — economic and political at the beginnings of a presidential year in which the president of the United States engineered a federal bailout of both sides — was too great.
Skeptics will insist the UAW-Chrysler tentative agreement, the last of three to reach this stage, is only more evidence that “nothing’s changed” in Detroit’s union-management relationship, that today’s good agreement will become tomorrow’s indefensible one because that’s what Detroit always does.
Fine, tell that to Sergio and credit ratings agencies. Wouldn’t want the facts to get in the way of politicized generalizations and sweeping oversimplifications. Because this trio of post-bankruptcy contracts represents a fundamental break from core principles of a troubled and dysfunctional relationship that dates back to the 1930s.
“Our goal is to get equal pay for equal work,” King said Wednesday in a news conference called to discuss the UAW-Chrysler agreement. “We had to deviate from that to save our jobs and save the companies.”
If 2009 was the year the Old Detroit died, this fall’s bargaining represents a crucial step toward a sustainable rebirth. The financial interests of hourly and salaried employees are more closely aligned than ever before; union members would prosper more as executives and shareholders do; and the people who build the vehicles stand to reap increasing rewards as product quality improves.
That’s Old Detroit?
Hardly. The Jobs Bank, the hometown industry’s risible paying-people-not-to-work totem, is dead. Cost-of-living increases are suspended (forever?). Profit-sharing payouts and quality bonuses are tied to actual performance metrics (though the $300 “attendance bonuses” in the UAW-Chrysler agreement smells an awful lot like Old Detroit).
Fixed labor costs will rise minimally, the smallest margin in decades. Break-even points are expected to run at industry lows, close to the 10 million vehicles-a-year level in a market running north of 13 million. Buyouts at General Motors Co. and Ford Motor Co. are expected to reduce the proportion of legacy employees and replace them with less-expensive second-tier employees — if at all.
All of this comes when? When the average age of the U.S. fleet is now at 11 years, a pre-condition for pent-up demand. When record-low financing rates and declining delinquency levelsmake aggressive lending to qualified customers more attractive. When a perpetually dodgy national economy makes possible the liberal use of one-time cash payments to restrain fixed labor costs.
That’s detestable to a union built on an “equal pay for equal work” mantra. So is an “entry-level” classification, whose pay would rise to $19.28 an hour by the end of the four-year agreement. So is the prospect that the framework supporting these agreements — more variable pay and tighter control of fixed labor costs in exchange for U.S. investment — is likely to become the rule, not an exception.
The old rules don’t apply, and neither do the old expectations of entitlement. An unambiguous lesson of Detroit’s Unraveling is that these institutions are mortal, that union and management choices have consequences, that money is finite and so is the patience of lenders, investors and customers.
If nothing else, the completed agreement at GM and the tentative deals at Ford and Chrysler are evidence those harsh lessons aren’t lost on both sides. As protesters Occupy Wall Street and elsewhere with inchoate complaints about unfairness, a self-dealing financial sector and politicians from both parties who feed off it, the Detroit contracts represent a different path.
King, the union president, said as much Wednesday. In exchange for financial terms few members would independently choose, GM, Ford and Chrysler are doubling down on their American operations when, Lord knows, they could source new cars and trucks from operations elsewhere.
“They saved our jobs for us and we wanted to repay them,” said General Holiefield, vice president of the UAW’s Chrysler department, referring to U.S. taxpayers. “This is an American agenda.”