Howes: UAW, Detroit automakers face new game, old rules
If they named United Auto Workers' bargaining conventions, this week's in downtown Detroit would be called "a whole new ballgame."
Because that's what the union, President Dennis Williams and Detroit's automakers face in the coming contract talks: a dramatically different competitive, financial and political landscape that will complicate efforts to reach agreement.
What shape those deals take — from possible base-pay increases and enriched bonus formulas to benefit tweaks and investment decisions — will influence how the automakers are judged by Wall Street and how the union is regarded by members and those who would be in the non-union southern plants it covets.
Times have changed, radically. Michigan, home to the UAW and most of its auto-related members, now is a right-to-work state. That political reality so far has had scant impact on the union or its dues base; but that could change should members be dissatisfied with contracts offered for ratification and bolt the union.
The global financial meltdown, the bankruptcies of General Motors Corp. and Chrysler Group LLC and the sweeping restructurings that followed fundamentally changed a U.S. industry that spent most of the past 40 years managing decline and diminishing expectations.
The companies and their union workforces are smaller; management is more aggressive; plants are more productive and increasingly more flexible; profits, particularly in the United States, are near record levels; balance sheets are stronger, as are product lines and their critical acclaim.
The net result: UAW delegates, union leadership and their counterparts at GM, Ford Motor Co. and Chrysler's successor, Fiat Chrysler Automobiles NV, now must manage comparatively rare commodities around here: prosperity and competitiveness.
Less certain is whether traditional Detroit mindsets — entitlement in the union, accommodation in company management — are truly changed. Will the collective culture prove more impervious to the realities of restructuring than the companies' rationalized product lines and plant networks?
The looming negotiations will provide an answer. All sides have something to prove; namely, can the return to prosperity a) be shared with the union workforce without b) compromising competitiveness that c) shows no sign of abating?
Critics will be watching, closely. Do bad habits of the past, repressed by the harrowing days of 2008 and 2009 and federal restrictions tied to partial public ownership, re-emerge? Do union demands betray short memories? Do executives repeat the mistakes of their predecessors?
A new report by the Ann Arbor-based Center for Automotive Research, released Monday, says that only Mercedes-Benz exceeds the average hourly blended labor costs of GM ($58 an hour) and Ford ($57) in the United States. Honda Motor Co. is $49 an hour, followed by Toyota Motor Corp. and FCA US's Chrysler at $48.
The challenge is obvious. At a time of near-record prosperity in the States, Detroit's two largest automakers are headed into this year's labor talks with an almost $10-an-hour labor gap separating them from Chrysler and two critical Japanese competitors.
GM and Ford, especially, want to contain (if not reverse) the labor-cost trend even as the union wants base-wage increases for its legacy workers. They also want to close the pay gap between them and second-tier workers making substantially less to do similar jobs.
Something's gotta' give. Officially, the companies and their top executives are in their say-nothing-meaningful and we-must-work-together phase, a sure sign talks are coming fast. Williams seeks "balance" and says "it's time for our membership to have a reward."
That may be, but the accumulated profit-sharing bonuses over the life of the current contract ain't nothing. In fact, says Art Schwartz of Labor Economics Associates, the bonuses essentially equal 3-percent base wage increases in each year of the four-year contract.
The difference, especially for "legacy" workers who haven't seen a base wage increase in roughly a decade, is that profit-sharing does not bolster base-wage rates and is not "guaranteed."
Addressing that concern, whatever the profit-sharing payouts, will not be easy, but it will be necessary. Forget pleading poverty: given the automakers' tens of billions in U.S. profits over the past four years, it's unlikely prospective deals would not include increases in base wage rates.
Besides, a not-insignificant cadre of second-tier workers inside smaller overall hourly workforces — courtesy of the bankruptcies and associated restructuring — mean labor costs now are a smaller segment of total vehicle costs.
Yes, it's a whole new ballgame. And how both sides choose to play it will say a lot about whether the "new" Detroit auto industry is really as new as it purports to be.
Daniel Howes' column runs Tuesdays, Thursdays and Fridays and can be found at http://detroitnews.com/staff/27151.