Howes: Good times promise tough bargaining for UAW, automakers
Not since the dark days of bankruptcy a decade ago are contract talks between the United Auto Workers and Detroit’s automakers likely to be as contentious as the bargaining round beginning next week.
It's not because times are bad, but because times are good — the longest run of strong North American sales and profitability since the 1960s. Yet change is coming faster than four-year contract terms arguably can manage, an ominous sign for both automakers and union members whose overarching goals every four years are to enshrine stability and certainty.
The union is set to open talks at 10 a.m. Monday with Ford Motor Co. in Dearborn. The quadrennial "handshake" is scheduled to be followed 10 a.m. Tuesday with General Motors Co. at the Renaissance Center and at 1 p.m. Tuesday with Fiat Chrysler Automobiles NV in Auburn Hills, a process that will intensify after Labor Day as a Sept. 14 deadline looms.
"The next four years are not likely to be like the past four years," Kristen Dziczek, vice president of industry, labor and economics at the Ann Arbor-based Center for Automotive Research, said Monday. "A large portion of the workforce has not been through a downturn before. We all know bad is on the horizon."
Among the burning questions: Which plants are likely secure a vehicle to sustain jobs and profit-sharing payouts through the life of the next contract? Will future product allocation decisions favor UAW-represented plants in the States and not cheaper, if politically fraught, operations in Mexico? How will union bargainers reckon with the production implications of battery-electric vehicles or the continuing rotation toward trucks and SUVs from traditional cars?
Ask the folks who manned the assembly line at GM' s Lordstown Assembly Plant. In less than the life of their current contract, their sprawling plant in northeast Ohio went from running three shifts building the Chevrolet Cruze compact to none, effectively idled now and awaiting closure.
Ask the folks at Ford's Michigan Assembly in Wayne whose Focus-building days are over, replaced by a new Ranger pickup and, soon, a revived Bronco SUV. Ask the folks who’ll be building hybrid variants of the new Jeep Grand Cherokee SUVs in Detroit, a bid by parent FCA to join the electrification push transforming the global auto industry and injecting more uncertainty into labor’s future.
Oh, the cyclical economic swings that buffet and reward UAW members are still here, if muted by the current long run of prosperity, accelerating economic growth and generally rising equity markets. What's new is the increasingly real prospect of radical change driven by regulators in China and the European Union, California and a dozen or so U.S. states determined to deep-six gas and diesel engines as we know them.
Detroit and its foreign rivals should buckle up: Electric vehicles have fewer parts. They need fewer workers to assemble. And they last longer than the internal-combustion engine models that have defined the industry’s first 100 years — all of which could have profound implications for union members and the communities where they live and work.
"EV powertrains are mechanically simple compared to ICE powertrains," the UAW's research department wrote in a white paper last year touting what it called Strategies for a Fair EV Future. "This simplicity could erode employment in ICE engines, transmissions, exhaust systems and fuel systems, but could create employment in batteries, electric motors, electronics, thermal systems, braking systems and semiconductors."
The paper continued: Even if automakers "choose to produce EV powertrains in-house, which remains an open question, there could still be a reduction in employment at automakers. Ford has acknowledged this, telling its investors that the product simplification that comes from EVs can lead to a 50% reduction in capital investment and a 30% reduction in labor hours per unit compared to ICE production."
Who knows where we’ll be less than four years out? The answer is not very many people, including those who make the big decisions. Ford CEO JIm Hackett probably put it most honestly when he recently paraphrased Einstein: people tend to overestimate how soon a seismic technological change will arrive and underestimate just how transformative that change will be.
That's proving true for both battery-electric trucks and SUVs as well as self-driving vehicles. But it doesn't mean they won't arrive, altering the way we move, what products are built where by whom and who the auto industry's competitors will be. Here's a safe bet: they won't just be the usual suspects from Germany, Japan and South Korea.
Into this milieu steps an 80-year UAW bargaining tradition built around incremental change and the occasional crisis-induced concession, expectation that members will get their fair share of the tens of billions in pre-tax profits GM, Ford and FCA have reaped since their climb back from the Great Recession.
The hard reality is union members will get their fair share, because if there's one thing the Detroit Three cannot claim this time around, it's poverty. Which is what promises to make this year's bargaining so dicey: it needs to address the recent past with dollars and cents even as it accounts for a future whose arrival is difficult to predict.
Equally challenging are persistent trade tensions driven by President Donald Trump and no assurance they will recede before they deliver more cost increases and undermine further sales for Detroit brands in China, the world's largest market. Yes, that's a long way from the UAW's Solidarity House, but deteriorating business conditions over there — the No. 1 market for GM and the No.2 market for Ford — don't help.
With each passing contract, the biggest constant facing labor and management is change. And none more than this year, where the challenge isn't so much ensuring survival; it's building a mechanism to survive transformation, negotiate lean years ahead and deliver a prosperous future. It won't be easy.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.