By all accounts, contract negotiations in the auto industry are going well. So well, in fact, that former United Auto Worker president Doug Fraser predicts the new contracts with his old union will be "the richest settlement you've ever seen."
Current UAW President Stephen Yokich has done nothing to discourage such speculation. Earlier this week he called the first contract proposals from DaimlerChrysler AG and General Motors Corp. the most generous he'd ever seen in his career with the union.
These are good times financially for the auto industry, and all signs indicate the Big Three automakers--DaimlerChrysler, GM and Ford Motor Co.--are more than willing to pay for labor peace to keep their plants operating.
But, despite the union's potentially strong negotiating position, it may have to strike a devil's bargain. Any short-term gains in this year's contract negotiations may cost future employment for union members. In other words, will the gains of the current work force be paid for by the unborn as the auto industry seeks future cutbacks in its work force?
GM has reportedly gone so far as to offer every UAW member with more than 10 years seniority a lifetime employment guarantee. But that guarantee may not cost GM as much as it seems on the surface--and there also may be a catch. Under the current contract, GM is required to hire one person for every two workers who leave, a ratio that allows it to continue reducing its work force. But GM may insist on eliminating or reducing that ratio even further in exchange for the job guarantees.
DaimlerChrysler has taken steps to help the union sign up the workers at its Mercedes-Benz assembly plant in Alabama, which could give the UAW its first major toehold in the South where non-union automakers such as BMW AG, Toyota Motor Corp. and Nissan Motor Co. have begun to cluster.
The negotiations may be tougher at Ford. The company says it needs to spin off its Visteon parts manufacturing operations over the strong objections of the union.
Few familiar with the negotiations believe the union can keep Ford from spinning off its parts unit. But the union may be able to convince Ford to separate Visteon under the same rules negotiated for union workers at Delphi Automotive Systems, the parts manufacturing operation sold by GM last year. Under that deal, the new GM contract terms will be essentially extended to the new company.
If there is a consensus on the outcome of the negotiations when contracts expire at 12:01 a.m. on Wednesday, it would be something like this: a four year contract, with 4 percent-a-year base wage increases for at least the first three years, a large increase in pension benefits, and a $3,000 signing bonus.
Beyond the basic economic pattern, each contract will have its own variation tailored to the needs of the individual companies. And none is more intriguing than reports GM has offered lifetime employment guarantees. Although both GM and the union have refused to confirm the reports, sources familiar with negotiations said the offer is on the bargaining table.
"It's there if the union wants it," said a source. But he predicted any lifetime guarantee would have to apply to all current UAW members, or else it would be too divisive. Some labor experts yesterday said that anything short of lifetime guarantees to all workers would amount to a two-tier employment system similar to the highly contentious two-tier wage systems that developed in the 1980s and have largely been abandoned since.
But even if the lifetime guarantee were to be extended to all current employees, the impact of such a move would be eased considerably by the fact that the UAW work force at GM has an average age of 48 with 23 years of service. UAW members can retire with full pension benefits after 30 years of service.
GM said there currently are 32,000 UAW workers with 30 or more years of service and that the average retirement age is 57. The work force attrition rate at GM last year was 6.8 percent.
All of this adds up to a fairly rapid dilution of the lifetime guarantees over the next few years.
In the past, the UAW has been highly successful in providing income security for its members, even when it couldn't provide job guarantees. Under the current contract, for example, even laid off workers were guaranteed 95 percent of their pay for the life of the union contract. The lifetime job guarantees reportedly being offered by GM would not significantly alter that pattern. UAW members would be guaranteed employment, but there would be no guarantee of the number of jobs in the work force.
At stake in these talks is how many of those with lifetime guarantees will be replaced when they decide to retire. That will be the key to the success of these negotiations.
Unlike Ford and DaimlerChrysler, which were forced to trim their work forces by 50 percent in the face of financial troubles 20 years ago, GM has been slowly trimming its work force by attrition or the sale of various operations. At the start of the 1990s, GM had 228,065 hourly employees in the United States, compared with 148,025 today.
CAPTION: UAW's Stephen Yokich termed contract proposals generous.