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Stakes High at Start of UAW-Big 3 Talks, But ‘Both Sides Want This to Go Well’

July 27, 2011 at 12:00 AM EDT
The United Auto Workers union and Detroit's Big Three automakers have opened labor negotiations for the first time since escaping a near-death experience during the recession. Jeffrey Brown discusses the negotiations and new signs of life in the auto industry with The Detroit News' David Shepardson.
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JEFFREY BROWN: Autoworkers and Detroit’s carmakers have opened labor negotiations for the first time since escaping a near-death experience during the recession. And this time, the expectations have changed.

Kicking off with a ceremonial handshake at a plant outside Detroit, representatives of the United Auto Workers and General Motors began labor contract talks today. The union’s four-year contract with the Big Three automakers expires in September. And the new round of talks comes at a critical time for the industry.

GM and Chrysler both filed for bankruptcy two years ago, and at the time, the UAW made significant concessions in wages, benefits and more to help keep the companies afloat. Now, amid some early signs of a rebound, — GM, for example, has reported five consecutive quarterly profits — the union is eager to regain some of its losses. Today, both sides talked about working together to remain competitive.

BOB KING, United Auto Workers: We’re proving that labor and management and government and community can all work together.

At the same time, GM CEO Dan Akerson insisted it was still important to hold down labor costs.

DANIEL AKERSON, General Motors: The world is really quite brutal. It doesn’t tolerate weakness in business. It doesn’t tolerate uncompetitive cost structures. We have one today, and I hope we will have one upon conclusion of these negotiations.

JEFFREY BROWN: Both GM and Chrysler received tens of billions of dollar from the federal government to stave off collapse in 2009. As of last week, the U.S. government no longer owns any Chrysler shares and retains only a minority stake in GM stock.

And for more on all this, we’re joined by David Shepardson of The Detroit News.

Welcome back.

DAVID SHEPARDSON, The Detroit News: Thanks, Jeff.

JEFFREY BROWN: Now, it’s interesting. These talks begin, at least, with a sort of sense of a common task of keeping things going, right?

DAVID SHEPARDSON: Yes. Both sides want this to go well for obvious reasons. Some of the rhetoric that you normally see in these every-four-year labor talks just isn’t there, for the simple reason that these — two of the three companies did go through near-death experiences.

They received $85 billion as an industry as a whole in bailouts, and there’s really a sense that taxpayers and the government are watching. And they don’t want to let people down by going to the mat or having arbitration or not getting a deal done on time.

JEFFREY BROWN: Well, so the UAW, as we said, they made a lot of concessions. What are they focusing on now? What do they think they might be able to get back?

DAVID SHEPARDSON: They made a lot of concessions. Since 2003, UAW workers haven’t had a pay raise. A lot of retiree health care costs have been off-loaded. They have been paid for with stock that the retiree trust has held.

Now they want two things. They want more compensation. The companies are making billions of dollars. Ford just reported $2.4 billion in profits, so they want a chunk of that, and they want more jobs. They want an assurance that maybe jobs that suppliers have or that have been outsourced to temporary workers can go back to the union.

JEFFREY BROWN: On the compensation, I mean, one important thing that they gave was this — they started — was this two-tier wage system, right?

DAVID SHEPARDSON: Right.

JEFFREY BROWN: So you have the new workers making a lot less money. Now, is that an area they’re focusing on?

DAVID SHEPARDSON: Those workers are making about $14 an hour, which translates into only around $30,000 a year, not a great wage for working a very difficult job. That’s a concern.

But they have basically accepted the fact that in order to build small cars and to be competitive with foreign plants, where workers are making far less money, they’re not going to get those jobs — or those wages back.

But they are looking at some way to give more incentives through profit-sharing. Remember that the Big Three still have net costs much higher than Hyundai of Volkswagen or Toyota in terms of overall costs, in part because they have so many retirees and they have very large pension costs, and where those other companies don’t have the type of retiree base…

JEFFREY BROWN: Now, you know, in terms of the number, the jobs you were referring to…

DAVID SHEPARDSON: Sure. Sure.

JEFFREY BROWN: … I read this today — I want to make sure I get it right here — the UAW currently has less than half the numbers of employees at the Big Three than it did five years ago.

DAVID SHEPARDSON: That’s absolutely right.

JEFFREY BROWN: That’s kind of astounding.

DAVID SHEPARDSON: Well, in 1979, there were 1.5 million UAW workers, about 600,000 at the Big Three. In 2004, it was 230,000. Today, it’s only about 111,000. So they have suffered enormous reductions and hundreds of thousands of workers have taken buyouts in the last few years.

So this is an area where the companies are building more products. They’re bringing more cars online. They can use — they can dangle more jobs and more products and more employment to the UAW as a concession, because they don’t want to increase their hourly wage rate, because they’re still paying more on average than their foreign competitors.

JEFFREY BROWN: But the — but, for the union, it’s in a sense fighting for some relevancy here, I guess, right?

DAVID SHEPARDSON: Well, survival, basically.

I mean, there’s two things the union needs to do. They need to get a contract that their members will accept. They also have to send a message to the foreign companies. They have been trying desperately to organize the transplants, Toyota, Honda, Nissan, and, frankly, they have had no success.

And they have tried this for decades. And the new UAW president, Bob King, has really made this a goal. If they don’t organize the transplants, they are forever going to be sort of sliding down the scale. They’re — it’s hard to convince the Detroit three to pay higher wages if your competitors are paying less. And the only way they think they can get parity is if they can organize the transplants.

JEFFREY BROWN: Now, they started, as we said, the talks with GM Today. Chrysler started on Monday.

DAVID SHEPARDSON: Right.

JEFFREY BROWN: With those two companies, the UAW signed a no-strike clause, right…

DAVID SHEPARDSON: Correct. Sure.

JEFFREY BROWN: … as part of the bankruptcy agreement, but not with Ford.

DAVID SHEPARDSON: Right.

JEFFREY BROWN: Now, those talks start Friday. Ford is in a slightly different situation. Could that change the negotiation or the nature of the negotiation with Ford?

DAVID SHEPARDSON: Realistically, no. They don’t want to hurt the one American company that didn’t get a bailout. I mean, they tend to treat them the same.

But I — but, frankly, workers at Ford did reject a concessionary deal two years ago that was accepted by workers at Chrysler and GM because of the bailout. So I think, realistically, you will not see a strike at Ford, even though they legally could, given the impact it could have on these companies.

They’re still very — these companies aren’t out of the woods. They are making money, but no one knows if auto sales will continue, if the debt will — people won’t be able to get credit, given all the uncertainty. So, it would be very risky for both the company and the union to go down the strike road.

JEFFREY BROWN: And, finally, we have mentioned that the tax — all that taxpayer money, right?

DAVID SHEPARDSON: Right.

JEFFREY BROWN: The government is not at the table any longer, right?

DAVID SHEPARDSON: Yes.

JEFFREY BROWN: But you’re saying that the fact of it is the politics is still in the air?

DAVID SHEPARDSON: Oh, absolutely. I mean, President Obama’s made the survival and the rebirth of the Detroit three a big part of his reelection campaign.

Were the companies to not reach a deal or somehow find a technicality to strike, it would be a disastrous move on the P.R. front for both the union and the companies. I mean, these companies have gotten lots of money, GM and Chrysler, in taxpayer money, and they have really sent the message we owe it to the taxpayers to get this right, to keep the industry on the proper footing, to get a contract that both rewards the members, but doesn’t make the companies uncompetitive.

So, you know, it’s going to probably go right down to the wire, Sept. 14, you know, not unlike the debt ceiling.

(LAUGHTER)

JEFFREY BROWN: Yes, I was thinking the same thing.

DAVID SHEPARDSON: But I think it will get done.

JEFFREY BROWN: But this one, you’re pretty sure will get done.

David Shepardson, thanks again.

DAVID SHEPARDSON: Thanks, Jeff.