The Union Gap
Thursday, July 20, 2006
Back in 2001, a United Auto Workers effort to organize Nissan Motor Co.'s North America flagship factory in Smyrna, Tenn., went down to crushing defeat. Nissan workers' two-to-one vote against the UAW dashed its hopes of penetrating the flourishing foreign-owned auto manufacturing sector in the United States. And it came with Nissan chief executive Carlos Ghosn's distinctive signature.
"It is without reservation to say that bringing a union into Smyrna could result to making Smyrna not competitive, which is not in your best interest or Nissan's," Ghosn said in a videotaped message played in the plant shortly before the election. The UAW released a transcript of the talk at the time.
Today, UAW President Ron Gettelfinger is making clear that he has "very serious concerns" about a proposed global alliance between General Motors Corp. and automakers Nissan and Renault SA -- both headed by Ghosn. The flamboyant Ghosn's five-year-old stance against the UAW is hardly the only reason.
The much larger issue, according to auto industry experts, is the precarious position of organized labor in the United States in an increasingly global auto industry.
While no one knows whether the three companies will ultimately opt for an alliance -- or, if they do, what shape it would take -- the idea alone dramatizes how much the already struggling union could have to lose.
"In Rick Wagoner [GM's chief executive] the UAW has a man who sees the union as a fact of life, now and in the future," said Clark University professor of labor relations Gary Chaison. "In Ghosn, they have a man who sees the union as a burden."
In his much celebrated turnaround of Nissan, Ghosn became known in Japan as the Ice Breaker for shattering long-established relationships with unions and suppliers and for laying off 21,000 people in a culture that once prized lifetime employment. Earlier, as an executive of the French company Michelin in Brazil, he was known by the nickname "le cost killer."
In trying to accomplish an equally difficult turnaround at GM, Wagoner has been noticeably accommodating of the UAW, and Gettelfinger of Wagoner, reflecting a sense of dependence on each other's survival.
When Wagoner determined that GM needed to eliminate 30,000 union jobs in the United States, he championed generous buyouts and early retirement packages that made it possible for workers to leave with some security, while squashing any threat that mass job reductions would provoke a crippling strike.
Gettelfinger, for his part, has led the union to make uncomfortable pay and benefit concessions in the middle of a contract, a step not taken since the Chrysler bailout more than 20 years ago, and has signaled there could be more givebacks in the 2007 contract, in recognition of GM's precarious financial condition. The automaker lost $10.6 billion last year and has suffered continuing erosion of its market share.
Foreign automakers Honda and Toyota pay wages roughly comparable to those of unionized workers at GM, Chrysler and Ford, a strategy that has helped prevent the UAW from gaining a foothold in the foreign manufacturing sector. The UAW said at the time it targeted Nissan in 2001 that its U.S. wages were the lowest of the Japanese automakers.
Nissan production workers at its newest plant, in Canton, Miss., start at $14.15 per hour and reach maximum pay of $24.47 in five years, according to Michael Steck, the company's senior director of human resources. GM workers start at $19.60 per hour, and reach the maximum of $28 an hour in three years, according to GM spokesman Dan Flores. The difference between the maximums is about $7,300 a year, but the best-paid autoworkers in foreign plants in the South can make up to $70,000 a year, including overtime and bonuses, compared with median household incomes of less than $50,000. According to an article in the Detroit Free Press, Nissan workers said they felt "blessed" to work for those wages.
Moreover, wages are not the top concern of foreign automakers in the United States. The much bigger worry, according to Chaison and others, is the spiraling cost of pensions and health care for retirees. GM says that these "legacy costs" add $1,500 to the prices of their automobiles.
"It's not really an anti-labor issue, it's an anti-cost issue," said Steven Szakaly, an economist for the Center for Automotive Research. "The foreign manufacturers looked at Ford and GM with enormous legacy costs and said we will nip the problem in the bud and avoid it."
Nissan recently announced that beginning next year it would no longer finance a secondary insurance policy for retirees aged 65 and older, and instead would give them a $2,500 annual stipend with which to buy their own Medigap insurance. Also, beginning Jan. 1, 2006, Nissan replaced its defined benefit pension plan with a defined contribution plan for new hires.
The UAW is already under pressure to make major concessions in retiree benefits when the contracts of the Big Three automakers come up for renegotiation in 2007. If GM becomes only one part of a global company, and if Wagoner's attitude toward the union no longer prevails, the pressure on health and retiree benefits could become even greater, Chaison said. "General Motors sees legacy costs as a commitment made to retired workers, in return for wages deferred many years ago," he said. "A new player entering the arena will not see it that way. Legacy costs to them could mean paying people who are not productive."
While the union has many concerns, an alliance among GM, Nissan and Renault could have some benefits for the UAW, depending on how it is structured. One auto industry expert suggested that Nissan may need more production capacity if its new American cars prove to be hits in the marketplace. Since GM has excess capacity, UAW workers might even end up making Nissan cars in GM factories.
GM also has had narrowly focused alliances with other foreign automakers that posed no threat to the union, including a joint venture with Toyota in California where UAW workers make the Pontiac Vibe and Toyota Matrix.
Staff writer Dina ElBoghdady and staff researcher Richard Drezen contributed to this report.