Correction to This Article
An earlier version of this article contained quotes from a previous draft of loan terms issued by the Treasury. This version has been corrected.
UAW's Sacrifices Look to Some Like Surrender

By Peter Whoriskey
Washington Post Staff Writer
Saturday, December 20, 2008

For decades after its founding in 1935, the United Auto Workers stood as a powerful model for the American labor movement, an influential organization that historians credit with uplifting living standards for all working Americans.

But with the announcement of the federal loan deal yesterday, the union found itself being forced into concessions that some described as tantamount to surrender.

The $17.4 billion federal loan agreement does keep the domestic auto industry alive. But the terms of that loan also insist that the wages and benefits for union workers be lowered to "competitive" the average of nonunion workers, specifically, those at the U.S. plants of Nissan, Toyota and Honda.

Those and other concessions would essentially erase the significant distinctions between union and nonunion auto workers, and the lack of such union worker advantages would render moot the union's fundamental purpose, some industry analysts and labor experts said.

It was the financial crisis, as well as the domestic industry's slippage against foreign automakers in the United States, that forced the union to acquiesce, albeit reluctantly, union leaders said yesterday.

In a statement, UAW president Ron Gettelfinger said the loan "will keep the doors of America's factories open, keep Americans working and prevent the devastating economic consequences for millions of Americans."

But, he noted, the union was disappointed that Bush "added unfair conditions singling out workers."

Exactly how tough the agreement ultimately will be on union workers is far from certain.

The language of the loan agreement sets specific "restructuring targets" that General Motors and Chrysler must use their "best efforts" to meet. Compensation must be made "competitive" to that of nonunion workers, and work rules must be "competitive" with those at nonunion plants. The companies also must reduce compensation to workers who have been laid off -- the jobs bank -- and at least half of the company's payments into retiree health care must be made in stock, not cash. If the companies fall short of those targets, they are required to explain why.

The payment in stock makes the health fund more risky. The wage concessions could force average wages down to $24 an hour from $28 an hour, analysts said.

But it is far from clear whether the Obama administration will hold the companies and the unions to those requirements. Democrats immediately signaled some opposition to the toughest provisions.

At a news conference in Chicago yesterday, President-elect Barack Obama said that workers should not be the ones "taking all the hits" and that all stakeholders "are going to have to play a part in this process."

Rep. Barney Frank (D-Mass.), chairman of the committee overseeing much of the government financial rescue efforts, was far tougher.

"The president has added an unfair assault on working men and women, which could require them to accept a disproportionately large reduction in what is currently legally owed to them," he said in a statement. "I am particularly opposed to the notion . . . that could give foreign auto companies in effect the ability to dictate wages for all American auto workers."

Frank said that because those requirements were "unilaterally inserted" by Bush, the Obama administration "should take whatever steps are necessary to remove them."

Whatever happens, however, the financial crisis has made clear the profound weaknesses in the union's position.

Circumstances had once been so different for the union, which was founded on the idea of protecting worker dignity and promoted innovations such as pensions and health care for all workers.

"The auto workers were for many years the model for the American standard of living," said David Montgomery, emeritus professor of labor history at Yale University.

Their power stemmed in part from the stunning success of the U.S. auto industry.

In 1950, for example, General Motors reported record profits, declared the largest stockholder dividend in U.S. corporate history and couldn't build cars fast enough. So when the United Auto Workers threatened to strike, the company agreed to a landmark deal with pensions, a cost-of-living formula and cut-rate health insurance. Fortune magazine hailed it as "the treaty of Detroit."

Twenty years later, the union seemed to have become, if anything, even more powerful. When legendary UAW President Walter Reuther addressed the union convention in 1970, he was bullish on the organization's prospects.

"We are, without question, the strongest and most effective industrial union in the world," he said. "We have taken on the most powerful corporations in the world, and, despite their power and their great wealth, we have always prevailed."

Now, those who have followed Reuther face a far different landscape.

"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 representative and Reuther's nephew. "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."

Historians date many of the union's problems to the arrival in the United States of foreign auto plants -- the ones they are now being leveled with -- in the early '80s.

Workers at those plants received less in wages, benefits and jobs protection. But when the United Auto Workers tried to organize there, they failed.

Some of that has been blamed on the cultural differences. Most of the new foreign-maker plants emerged in the South.

But even in Marysville, Ohio, where Honda built a plant, the United Auto Workers were unsuccessful.

"That was in their own back yard," said Jonathan Cutler, a professor at Wesleyan University and the author of "Labor's Time: Shorter Hours, the UAW and the Struggle for American Unionism." "If you can't organize Ohio, you can't organize your way out of a brown paper bag."

The growth of the foreign-car plants in the United States placed increasing pressure on the domestic automakers and, in turn, the United Auto Workers. The foreign competitors, using nonunion labor, saved money in wages and used that advantage to gain ground on the U.S. automakers.

"When the UAW exposed the Big Three to insurmountable competitive disadvantages, it cut its own throat," Cutler said.

Now, with the bailout loan requiring at least rough parity with the nonunion plants, the union essentially has been forced to capitulate to the nonunion movement.

Getting "down to the level of foreign companies undermines the meaning of having a union in the first place," Montgomery said.

"This is another stage in the defeat of the UAW," said Dan Luria, a former UAW economist and now research director of Michigan Manufacturing Technology Center. "On the other hand, it could have been a lot worse."

Staff writer Steven Mufson contributed to this report.

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