Collective bargaining 'victory' redefined

In 46 hours over the last two months, labor relations in the U.S. automobile industry underwent more change than they have since Henry Ford swore in 1936 that the new United Automobile Workers union “would organize Ford over my dead body.”

The first 40 hours of the transformation were devoted to the strike last month by the UAW against General Motors. The second six hours were all it took to settle a UAW strike against Chrysler on Wednesday. Next on the target list: Ford’s badly ailing company, which needs a quick settlement even more than GM and Chrysler did.

In the old days (i.e., pre-1990s), just the threat of a strike could cause the Big Three automakers to lavish UAW members with salary increases and added benefits. The price of cars would go up, but the Big Three so dominated the American market that the companies absorbed the increases without much problem. Then came globalization and the loss of market share to foreign cars that were, at the time, better designed, better built and more reliable.

Then came rising gasoline prices, which reduced the demand for larger vehicles such as trucks and sport utility vehicles and the greater profit margins they represented to their manufacturers. On top of that came the enormous rise in health care costs for workers and especially for retirees, who no longer were dying, politely, in their 60s, but living well into their 70s and 80s.

Suddenly, the price of an average American-made car came with $1,500 worth of health care costs built in, making it less competitive with cars made in countries in which taxes, not insurance, pay for health care coverage. Even when a foreign carmaker opens a plant in the United States, it comes without the “legacy” of UAW retirees and their families’ health care costs. Chrysler says its wage-plus-benefits costs in the U.S. amount to $75.86 an hour per worker, compared with $47.60 an hour per worker at Toyota’s U.S. plants.

Given more than a decade’s worth of turmoil, plant closings and layoffs, “victory” came to be redefined. In settling their 40-hour strike against GM, the 74,000 union workers got nothing in the way of a raise, and they still called it victory.

The union also agreed to a two-tiered wage schedule: Maintenance workers and the like will make less than guys on the production line. They got a two-tiered benefit system, too: New workers will get a 401-k contribution instead of a guaranteed company-paid pension. They union still called the new contract a victory.

Significantly, the union received job guarantees, a promise that GM would continue to make cars in American plants, instead of shipping even more of the work overseas. And, perhaps most significantly of all, the company shed $50 billion in long-term health insurance obligations by promising to pay $35 billion into a health care trust fund that the union will administer. The union called that victory, too, even though now it’s the union that has to figure out how to control health care costs and still deliver coverage.

Chrysler’s 45,000 UAW members, including the 4,000 here in St. Louis, are expected to approve a similar deal, although the precise terms of the tentative agreement have not been made public yet. That’s another significant change: In the old days, the union conducted what was called “pattern bargaining.” It would select one of the Big Three as the target for a strike if negotiations were to break down. The other two companies would be expected to abide by the terms of a settlement. Now the Big Three have different sets of problems, and they may get different solutions.

The problems at Ford are particularly critical. Ford lost $12.7 billion in 2006, an average of $770 on every car it sold that year, and it doesn’t expect to make a profit until 2009 at the earliest. It has closed 16 plants and cut 45,000 UAW jobs. It has mortgaged its entire U.S. industrial plant to raise the cash for a turnaround.

Ford’s survival may depend on the realization by the company and the union that they can’t live without one another. The survival of the U.S. industrial base may depend on Congress realizing that it’s unfair to ask companies and their employees to compete in a global economy while still carrying the burden of private health costs.


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