As Hearings Resume, UAW Offers Concessions

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Ford's Mulally Discusses the Auto Bailout

Ford chief executive Alan Mulally met with Post editors and reporters as part of his visit to town to present Ford's case for federal aid. He discussed Ford's business plan, its relationship with the UAW and how the economy is affecting the automotive industry.

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During an interview at The Washington Post, Ford chief executive Alan R. Mulally said he was pressing Congress for money even though his company currently does not need federal help because if any of Ford's rivals collapsed, the pain would spread to suppliers and Ford itself.

Mulally, who said he drove from Detroit in a hybrid Ford Escape, said he saw no sign of improvement in the economy. He acknowledged that the automakers' public pleas for help are likely scaring off buyers.

"This conversation is hurting us," Mulally said.

The president of Chrysler, Jim Press, stopped at an auto dealership in New Carrollton where dealers and local officials said the collapse of the automakers would spread pain far beyond Detroit. "If we don't get these loans, and for some reason we have to stop producing cars," Press said, "the dealers would have no business. It's catastrophic."

"It's not just the dealer," said Tammy Darvish, vice president of the chain of Darcars dealerships. "I have 233 local vendors that I do business with, and I pay them combined over $83 million a year. You have oil guys, messenger services who would be affected."

But lawmakers and analysts were still asking whether the three major U.S. automakers had plans to become viable or whether they would end up asking for even more money from taxpayers. A Goldman Sachs report issued yesterday took a more pessimistic view of GM's international sales than the company and said that GM might need even more than the $18 billion it allowed for in its worst-case scenario.

With cash shortages running so big, it was hard to see what could save the companies other than federal aid. Gregg Lemos-Stein, an auto expert at Standard & Poor's, noted that GM's total annual interest payments on its debt came to less than half the cash the company went through during the third quarter of this year alone.

"The cash losses are so severe that debt reduction alone can't be the entire solution," Lemos-Stein said.

Gettelfinger asserted that labor made up only 10 percent of the cost of a car. "To be honest with you right now, if a UAW membership went into these facilities and worked for nothing, according to our research department, it would not help the companies that much," he said.

UAW members number fewer than 150,000 at GM, Ford and Chrysler, down from about 300,000 five years ago, the union said.

Many critics of the auto industry have cited high labor costs. However, cutting those costs were at the heart of the past two contracts. Yesterday, Ford's Mulally called the 2007 UAW contract "transformational" because of the savings it generates.

"The word concessions, I used to cringe at that word," Gettelfinger said in his news conference yesterday. "But now, why hide from it? That's what we did."

According to Ford, by the time the contract expires in September 2011, hourly labor costs, including wages and benefits, would be $58, just $4 an hour more than foreign-owned companies with nonunion plants in the United States.

But that calculation assumed that the companies would be able to hire new workers at lower wages and that these new hires would make up about 20 percent of the companies' workforce. Because of the economic downturn, however, Ford said it hasn't hired any new workers and that the differential was currently about $9 an hour.

The 2007 contract also transferred the cost of retirees' health-care plans from the auto companies to an independent trust known as a voluntary employee beneficiary association, or VEBA.

The changes reduced the companies' liabilities for retiree health care by 50 percent, according to the UAW. In return, the companies promised to make huge lump-sum payments into the trusts to cover much of the retirees' plans. Ford, for instance, paid $2.7 billion into the VEBA in January. GM is due to make about a payment of about $7 billion in 2010. The companies want to defer future payments, and there might be enough money in the trusts to allow them to do so without affecting retiree benefits for some time.

While the UAW can delay VEBA payments and eliminate the Jobs Bank without a vote of the membership, further concessions would require a vote.

"We recognize that going forward there's going to be a restructuring of the companies and all the stakeholders are going to have to make sacrifices, and we're prepared to do our part," said Alan Reuther, the union's Washington legislative director. "But that path forward, as painful as it may be, is preferable to bankruptcy, not only for our workers but also for the economy and whole country."

Robert L. Shanks, a Ford vice president and controller, said that UAW concessions on the program aiding laid off workers, known as the Jobs Bank, would be helpful, but that Ford has only about 1,200 workers in the program, which costs the company about $120 million. While that number is substantial, it pales next to the $9 billion to $13 billion Ford said it might need if the economy weakens.

For now, Mulally said, "We don't want to borrow any more money." He added that if Ford were to need the full $13 billion, it would be because the company faced a worst-case scenario that assumed "depression-level economics."

Gettelfinger in Detroit said that neither the companies nor the unions were to blame. "I want to stress that this issue is not brought on by the companies. It certainly wasn't brought on by our union," he said. "We're just in a major economic downturn that's rapidly spreading around the world."

Staff writers Kendra Marr and Thomas Heath contributed to this report.