Talks Aimed at Automakers' Survival
Tuesday, September 4, 2007
The United Auto Workers union appears to be simultaneously crafting new labor contracts with each of the three Detroit automakers, a break from traditional tactics but one motivated by a desire to keep the financially strapped American companies alive.
Detroit automakers in the past have competed for the position of lead company in the contract talks, viewing it as an opportunity to fashion an agreement that put crosstown rivals on the defensive. With this year's contract talks heading into a final two-week stretch, sources close to the talks say the UAW is being careful to complete a deal that doesn't worsen the problems of any one company, especially Ford.
In Michigan, Ford is viewed as the most endangered of the Detroit automakers. Ford borrowed $23 billion last year, and it is now in the process of breaking up its European luxury division, taking bids for its Jaguar and Land Rover brands. It sold Aston Martin this year and is studying options for Volvo.
"The foundation might be based upon what Ford can live with," said one source, who spoke on the condition of anonymity because of the secrecy of the talks. "There is probably a need that whatever is agreed upon has to be financially feasible for Ford."
UAW President Ronald A. Gettelfinger once worked in a Ford factory, and the source said Gettelfinger would be unlikely to shape a deal that puts Ford out of business.
Alan R. Mulally, Ford's chief executive, said last month that negotiators for both sides were working together closely. "We all know the seriousness of these discussions," Mulally said.
The UAW's traditional tactic of choosing to draft a master contract with the healthiest automaker was intended to boost the union's chances of extracting major concessions. The sources said negotiations were proceeding with all three companies, although UAW leaders at any time could declare a lead company.
UAW officials declined to comment on the status of the talks. Workers are worried that the companies are taking aim at health-care and retirement benefits. Analysts expect the companies to also continue to push for lower wage and benefit scales for new workers.
"Our biggest worry is our benefits: Just leave our benefits alone," said Chris Kimmons, president of UAW Local 919, which represents workers at Ford's Norfolk pickup-truck plant. The factory is being closed in the company's latest round of downsizing.
Others familiar with the talks who also spoke on condition of anonymity because of secrecy concerns say negotiators are likely to work longer hours or on weekends until the Sept. 14 deadline. They also say talks have so far advanced without major problems.
Company executives and industry analysts have played down the prospect for a prolonged strike, which they say could severely cripple or even kill one of the three U.S. automakers.
The companies, hit hard by the slump in sales of trucks and sport-utility vehicles, collectively lost $16 billion last year, and each is undergoing restructuring that includes eliminating tens of thousands of jobs and closing dozens of plants. Auto executives have repeatedly said they must find ways to lower the cost of unionized labor in North America to return to profitability.
The executives complain that foreign competitors such as Toyota, Honda and Hyundai are gaining ground in the U.S. auto market partly because they operate lower-cost, nonunion factories in this country. Auto officials have made closing that competitive gap a major priority in this year's contract negotiations.
But while the Detroit auto companies are all confronted with the same general issues, each has unique aims.
General Motors has been at the forefront of a push to get the UAW to assume responsibility for tens of billions of dollars that the automakers owe for health care and other benefits for retirees. The automakers want to make lump-sum payments to a trust fund and leave to the union decisions related to investing assets and paying benefits. GM has 332,000 union retirees and $50 billion in retiree health-care obligations.
Collectively, the Detroit automakers have more than $90 billion in unfunded retiree health-care obligations, covering about 1.5 million working and retired employees.
Chrysler, under new private ownership, is seen as more concerned with generating cash and making the company much more profitable.
The Wall Street Journal reported last week that Chrysler was looking to shed non-core assets, such as parts-distribution warehouses, affecting about 1,000 jobs. People familiar with the negotiations say the private-equity group that owns Chrysler has not taken take a hard line in the talks, as some observers had expected.