NEWS ANALYSIS : UAW Contract Talks Off to Friendly Start : Autos: Relations between the union and the Big Three have seldom been better. But thorny issues lie beneath surface.
A funny thing happened on the way to the bargaining table. The United Auto Workers and General Motors Corp. are walking hand in hand like two lovesick teen-agers.
As talks begin today on a new, three-year contract covering 420,000 workers, the usually charged atmosphere--typically a tableau of posturing and strike threats--is likely to be conciliatory instead.
The question is whether this newfound friendliness is more than a facade.
Many labor experts wonder whether it can last when the two sides get down to the nitty-gritty of working out agreements on knotty problems such as job and income security, medical coverage, pension benefits and the jobbing out of parts production to non-union shops. Wages will also be debated, but pay is considered a minor issue in these talks.
“There are more unresolved mega-issues than I ever recall,” said one top Big Three negotiator.
The negotiations are widely watched because of the auto industry’s influence on the overall economy. This year, the talks take on added importance because the Big Three are making gains against imports. A strike could stall Detroit’s new momentum--as well as the nationwide economy’s already-slow recovery.
The talks have a ritual quality. UAW and company negotiators start with ceremonial handshakes. GM goes first today. Ford Motor Co. follows on Thursday and Chrysler Corp. on Friday.
The negotiations can be expected to continue all summer. About two weeks before Sept. 14, the current contract’s expiration date, the union will pick one company and intensively negotiate with its representatives until an agreement is hammered out. That pact will determine all but the details of the contracts with the other companies.
The union’s choice of a target is complicated by differences among the Big Three. GM, which lost $23 billion last year, is struggling to downsize its operations and cut costs to regain profitability. Both Ford and Chrysler are recovering strongly and have gained market share.
Regardless of which auto maker becomes the object of the most intense negotiations, there promises to be major sticking points.
The job security issue is particularly troublesome at GM, which is in the midst of closing 23 plants and paring 74,000 workers from its ranks--among them 54,000 union members.
While the union is demanding that jobs be saved, industry analysts say GM has far too much capacity to be profitable and must shrink its operations to become competitive.
To combat the loss of jobs, the union is likely to push for replenishment of a fund that assures laid-off workers 95% of their pay. GM exhausted a $4-billion fund for that purpose under the last contract and will argue that it cannot afford that kind of outlay again.
One solution may be to sweeten early-retirement programs, but GM and Chrysler are already worried about mounting pension obligations. At the end of this year, GM says, its pension plan will be underfunded by $19 billion.
While job and income security are complex problems, GM and the UAW are working closely to resolve them, in part through Chief Executive Jack Smith’s efforts to court union officials since his appointment in November.
The result: agreements for changing inefficient operations at several GM plants.
On Monday, for instance, GM announced it will shift production of some Chevrolet Cavaliers from a plant in Mexico to Lansing, Mich. The transfer, which will create 800 to 1,000 jobs, came out of union-management efforts to loosen work rules and make the Lansing plant more competitive.
UAW Vice President Stephen Yokich heaped unprecedented praise on Smith over the deal. “Since he took over as CEO at GM, we’ve had more talk and more working together than we’ve had in the history of GM and UAW,” Yokich said.
That’s a far cry from a year ago, when the UAW struck several GM plants, in one case over the company’s unilateral decision to farm out some tool-and-die-making operations to non-union companies.
Despite the friendly talk, this “outsourcing” issue is still very much alive.
From the company’s perspective, the issue is one of economics. GM says it cannot afford to pay $17-an-hour union wages to parts workers if outside suppliers can do the work for substantially less. The union argues that GM’s parts operations can be made more competitive, even with high pay scales.
One possible solution is a two-tier pay structure, with parts employees or new employees paid less than current workers. The union opposes such a plan.
The toughest negotiating issue is likely to be health insurance. Ford says that 20% of its labor costs are due to health benefits; GM says medical coverage of employees adds about $1,500 to the cost of each car it builds--more than twice the burden carried by Japanese-owned car plants in the United States.
The auto makers and UAW have been working closely with the Clinton Administration for nationwide reform of health coverage, but no plan will be in place before the contract talks end, complicating the negotiations.
The auto makers insist that employees and retirees must pick up a portion of their own medical costs. The UAW is adamant that its members will not do so.
“Unless you are looking for a strike, I advise you not to even mess with retiree health benefits,” UAW President Owen Bieber warned the auto makers at the union’s annual bargaining conference in April.
Issues Driving Auto Talks
Negotiations for a new three-year contract begin today between the Big Three and the United Auto Workers. Here’s a look at the major issues:
Issue UAW position Auto makers’ position Health care No reduction in Workers and retirees medical benefits pay premiums and co-payments Job security No layoffs. Recall Freedom to cut jobs. one worker for each Recall one worker for retiree every two retirees Income Retain funds to pay Reduce wages paid security laid-off workers’ to laid-off workers wages Outsourcing Restrict use of Reduce reliance on non-union suppliers inefficient in-house parts production Wages 18% increase Increases no higher than over three years inflation; lower wages for new workers and suppliers’ employees
Source: Auto makers, UAW
