TOPICS > Economy

UAW, Big 3 Reach Agreement Amid New Economic Climate

October 12, 2011 at 12:00 AM EDT
The United Auto Workers has reached a deal for a new contract with Chrysler after working out similar deals with GM and Ford. Jeffrey Brown discusses what these new labor contracts might mean for workers and the Big Three automakers with Changing Gears' Micheline Maynard and David Shepardson of The Detroit News.
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JUDY WOODRUFF: Next, The Detroit auto industry and its unions come to terms amid a profoundly different economic climate.

Jeffrey Brown has our story.

JEFFREY BROWN: Chrysler was the last of Detroit’s Big Three automakers to reach agreement with the United Auto Workers. And its deal, like the others, reflects a new era.

These are the first contracts reached since General Motors and Chrysler emerged from bankruptcy protection two years ago. General Holiefield is a UAW Vice president.

GENERAL HOLIEFIELD, United Auto Workers: We never went out to injure either one of the companies, but to certainly help them to maintain a competitive model, that we can continue to bring work here in the United States. It’s all about putting Americans back to work. They saved our jobs for us, and we want to do everything we can to repay them.

JEFFREY BROWN: In the end, the talks produced a tentative four-year deal that will create 2,100 new jobs, give raises to entry-level workers and provide a $3,500 bonus for signing the agreement. Chrysler will also invest $4.5 billion in its U.S. plants by 2015.

The UAW already worked out similar deals with GM and Ford. But Chrysler workers are getting less generous packages, including smaller signing bonuses, because Chrysler, now owned by Fiat, isn’t as financially healthy as its rivals.

UAW President Bob King:

BOB KING, United Auto Workers: Chrysler is the least financially robust at this time. They’re on a comeback. We have real — we’re very optimistic about Chrysler, but they have more debt than the other companies. They have got more interest rate than the other companies. So they — so we structured the agreement to help them pay that off.

JEFFREY BROWN: The deal must still be approved by Chrysler’s 26,000 union employees. GM workers ratified their deal last month. Ford workers are still voting.

And for more on the new auto labor contracts, we’re joined by David Shepardson, who reports on the automotive industry for The Detroit News, and Micheline Maynard, senior editor of Changing Gears, a public media project about the Industrial Midwest.

Dave Shepardson, when we think of this as a new era and compare these contracts to what we saw before the meltdown, what’s the key thing that jumps out at you? What’s changed?

DAVID SHEPARDSON, The Detroit News: This is basically a new era in which the way the Detroit Three are going to be competitive is by hiring more of these second-tier workers that were making $14.50 an hour.

They face competition from the transplants, companies like Volkswagen, which just opened a plant in Tennessee paying $14.50 an hour. And they cannot get at the bargaining table across-the-board wage increases. And the companies really came in and said we need maintain the break-even point about the same.

In the case of GM, their labor costs are only going up by 1 percent. But it’s also about trying to give the workers more of a stake in quality improvements. In the Chrysler plant, for example, if you get perfect attendance, you will get a $300 bonus. And even that signing bonus, the $3,500, half of that bonus is contingent on meeting financial stability goals next year.

So the days of across-the-board pay raises regardless of performance are gone. And these are workers who are going to make less, significantly, than the former workers who came in at $28 an hour.

JEFFREY BROWN: Well, and Micki Maynard, in the particular case of Chrysler, the company was — they took a much harder line on holding down costs, right?

MICHELINE MAYNARD, Changing Gears: They did.

And you have to remember that when the bankruptcies and the bailouts happened two years ago, Chrysler probably would have liquidated if it hadn’t been for Fiat. The government stepped in and said, we will do a packaged bankruptcy for you. And they turned it over to management control of Fiat, which is based in Italy.

So Chrysler was the most seriously troubled Detroit automaker. It’s very interesting to look at this contract, though, because they are getting significantly less in the signing bonuses, which I think people watching the show can sort of substitute pay raise for signing bonuses. They’re getting the money in bonuses, so it isn’t baked into their wages.

JEFFREY BROWN: And, in fact, the new CEO came from Fiat, I guess. He took a pretty strong stand, didn’t he? He wrote a strong letter to the UAW president.

MICHELINE MAYNARD: He did. And the letter was written by Sergio Marchionne, who is the CEO of Fiat, to Bob King, the president of the UAW. Bob King is a relatively new president of the UAW.

And the letter was leaked. The letter was made public. And in it, he basically said: You promised me that we would work — I’m paraphrasing, of course. You promised me we would work together, that you wouldn’t treat Chrysler as the weak sister, but we didn’t get an agreement, and we both failed.

Well, I think it’s fine to say that someone to their face in a boardroom, but to publish that letter instantly does two things. First of all, it makes Mr. King — puts him on the defensive and it makes his members want to come to defend him. And, secondly, it makes Mr. Marchionne look like he doesn’t understand the way Americans do bargaining.

JEFFREY BROWN: Well, so Dave Shepardson, what did — what was the bottom line from the union perspective here? What did they get and what they did feel like they had to get to call this a successful negotiation?

DAVID SHEPARDSON: In one word, it was about jobs.

Between the three companies, the UAW won commitments to get about 20,000 jobs. In the case of Chrysler, they’re committing to bringing two new small cars to plants in Michigan and Illinois. And the UAW has seen its membership fall from 1.5 million to 377,000 over the last 30 years.

And this is really about saying, we want the companies to be successful, but we want them to bring work back. For example, President Obama is going to a GM plant on Friday that was scheduled to close as a result of bankruptcy. And instead, after winning concessions from the UAW, they decided to build that small car in the United States, rather than Korea.

And the union is very eager to see as many jobs kept in the United States. And I think that’s part of a way to sell this agreement to their members, that, yes, we’re not getting a cost — a pay increase across the board, yes, in the case of Chrysler, they’re getting a smaller signing bonus than the others, but these are companies, as Micki pointed out, in the case of GM and Chrysler, that wouldn’t have been able to go on without government bailouts in 2008.

And so I think this is part of selling the deal and basically ensuring that there’s an auto industry for the next generation of UAW workers.

JEFFREY BROWN: Well, Micki, when you think about selling the deal to — the UAW selling it now to the worker, there has been some resistance, right, some — we have seen it at Ford already. Do you sense a lot of resistance out there among workers to these contracts?

MICHELINE MAYNARD: Well, my project, Changing Gears, actually went to Delta Township, Mich., which is outside of Lansing, and talked to GM workers who had turned down the contract.

Now, the GM contract passed by about 2-1, but it should be — if it’s going to be popular with the workers, these contracts should be passing by 75 percent, 80 percent. And I think the fact that the GM contract, which was up first, passed by only 2-1 was a danger signal.

Now we’re hearing that at least one Ford local has turned down the Ford agreement. And the Ford workers, I think they feel like they deserve more. Their company didn’t take a federal bailout, and it really isn’t in bad shape at all. It’s in the most profitable position of any of the car companies.

At Chrysler, I was thinking back to 2007, I think it was, when I remember we had a spreadsheet and we were watching locals vote on the contract, and big locals turned the contract down at the very beginning of the voting, and it just barely squeaked by.

And I think, if I’m a Chrysler worker and I live next door to a GM worker and a Ford worker, and I’m hearing what they’re going to get in signing bonuses, and I’m going to only get $1,000, I’m going to wonder, do I really want to vote for this thing?  

JEFFREY BROWN: And, Micki, just briefly, these contracts, they still have a lot of influence even beyond the Big Three in the region and throughout the industry, right?

MICHELINE MAYNARD: Yes, absolutely.

And, obviously, foreign automakers like Toyota and Honda pay a certain (AUDIO GAP) of wages in places like Georgetown, Ky., Marysville, Ohio, because they have UAW members nearby. When you get deeper into places like Texas, where Toyota has a big plant, they’re only paying about $14, $15 an hour, which is what the entry-level wages are now at these new UAW — for the new UAW workers.

So the wages for UAW members up north are kind of keeping wages up north higher, but the lower wages down south have kept these entry-level wages lower.

JEFFREY BROWN: All right, Micki Maynard and David Shepardson, thank you both very much.

MICHELINE MAYNARD: Pleasure.

DAVID SHEPARDSON: Thanks, Jeff.