UAW President Bob King has a tough round of negotiations coming up.
After granting billions of dollars in concessions to help Detroit makers survive the U.S. auto industry’s worst downturn in decades, union workers are looking for some givebacks when they return to the bargaining table this year. But they may have to share the risks, rather than simply get the enhanced pay and benefits workers could have traditionally expected, observers caution.
The United Auto Workers Union’s senior leaders are gathered in Detroit, this week, to lay out their demands – and work out strategy to go up against makers who are now pushing back into the black while still professing serious financial problems.
The challenge for the UAW’s new President Bob King will be to navigate a narrow path that would make workers happy, keep Detroit’s Big Three healthy – and head off a potential confrontation that could sour what has become the most positive working relationship between labor and management since the union gained a seat at the table, following the angry confrontations of the 1920s and ‘30s.
“It’s not going to be easy for Bob,” said a well-placed union source asking for anonymity prior to the start of the UAW convention. “He clearly understands that the auto companies are not out of the woods. But he also knows he can’t go back to workers and expect them to approve contracts that don’t make up some of their losses.”
Industry officials acknowledge the same challenge. As a senior General Motors source stressed, Detroit still pays a premium for its labor, and makers simply can’t give up on the gains they’ve won.
So, barring a serious setback in bargaining, both sides are likely to look for some creative alternatives.
One possibility is to enhance the profit-sharing programs that paid out significant cash to hourly workers for 2010. Ford, which posted $6.6 billion in earnings for last year, handed workers $5,000 checks – notably well above the figure required by its UAW contract. GM, meanwhile, came up with $4,400 in profit-sharing cash. Even Chrysler tossed some money to its hourly employees, even though it ended the year in the red.
Those checks only softened the blow of the givebacks workers have made since the last round of bargaining in 2007. Depending on a variety of factors, UAW members have made anywhere from $7,000 to $30,000 in concessions, notably including the creation of a two-tier wage structure – long anathema to the union. Many new hires at Detroit plants are earning half what veteran employees collect.
Also frustrating many union members, the big payouts received by Ford’s senior management – a total of $100 million in stock alone for Chairman Bill Ford Jr. and CEO Alan Mulally. (Top GM and Chrysler executives have their pay capped as part of the federal bailouts of the two companies.)
But even though workers may want to see pay and benefits increased, cautioned UAW Vice President Jimmy Settles, “We’re going to negotiate smart. We’re not going to cut our nose off and spite our faces,” during a speech at a Ford plant earlier this month.
Among the most likely targets for the union will be an enhanced profit-sharing program, one that would closely tie payouts to the performance of the individual automakers. Such an approach would reflect the approach taken in Japan, in particular.
Mark Reuss, GM’s President of the Americas, has said on several occasions that he believes pay should be “more closely linked to performance,” for both hourly and salaried employees.
The idea of profit-sharing first took hold during the early 1980s, when Detroit went through a similar, if only slightly less devastating crisis. At the time, workers even got representation on several of the Big Three boards of directors.
But UAW officials, such as former President Doug Fraser – who helped win a 1981 Congressional bailout for Chrysler — positioned the idea of profit-sharing more as gravy than as a central part of worker compensation.
Stability, “and long-term security” are essential to hourly workers, asserts Settles, who will be overseeing negotiations with Ford.
So, the two sides may agree on the need to enhance profit-sharing yet still comes to blows if the carmakers position the added money as the answer to worker demands but the union sees profit-sharing as only part of the corporate giveback.