June 14, 2011

IT’S BEEN ABOUT 45 years since the United Auto Workers’ last extended nationwide strike against a U.S. automaker. Yet that epoch of relative labor peace has also been a time of industrial decline for the Detroit-based car industry. Even without walkouts, the UAW and the Detroit Three sustained a fundamentally adversarial relationship in which each side tended to begrudge the other’s gains. Too often, contract talks were an exercise in buying one another off — with the costs to be paid by consumers — rather than an effort to address the industry’s multiple dysfunctions.

One need not blame either party to acknowledge that zero-sum labor relations have been a disadvantage for General Motors, Ford and Chrysler in their competition with international automakers — including those that have set up nonunion plants in the United States. That is part of the reason that GM and Chrysler went bankrupt — and that the UAW itself has shrunk from 1.5 million active members in the late 1970s to 390,000 today.

The question is, can the UAW and the automakers finally put this history behind them? It is hardly an academic issue for the vast majority of Americans who neither manage an auto company nor work on an auto assembly line. Given the billions of dollars in taxpayer money that the Obama administration has invested in reviving the industry, we all have an interest in its success — whether we like it or not.

And so it is a good and hopeful sign for the country that United Auto Workers President Bob King has signaled his interest in reforming the union-company relationship. We’re not referring to Mr. King’s quixotic bid to eliminate the international plants’ labor cost edge over the Detroit Three by organizing the former. Rather, what gives cause for optimism is Mr. King’s more realistic statement, in a recent Wall Street Journal interview, that he would consider expanding profit-sharing in this year’s contract talks, as opposed to guaranteed wage increases.

Linking worker compensation to the company’s success can turn an adversarial relationship into a cooperative one; economists call this aligning incentives. Yet profit-sharing has historically been disfavored by the UAW, for the obvious reason that the workers don’t get any when the company doesn’t turn a profit, and the less obvious one that the union never quite trusted the company to report its profits honestly.

With GM and Chrysler having emerged from government-orchestrated bankruptcy as tentatively profitable companies, the union can no longer afford that mind-set. Mr. King and other union leaders face tremendous pressure to demand the return of the concessions they have already made. That’s the traditional union approach, to be sure. But in a world where Volkswagen has just announced plans for a new factory in Tennessee that pays almost half what UAW workers make, such a course would be suicidal.

Rather, the union must accept more of the enterprises’ overall risk, along with more responsibility for making sure that they succeed.

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