Because the automobile industry is so emblematic of America, and because its future is so problematic, the most intriguing domestic event of 1982 may be the negotiations between the companies and the United Auto Workers.
The UAW, perhaps even more than the Democratic Party, is emblematic of modern liberalism. Walter Reuther is third only to Franklin Roosevelt and Lyndon Johnson as an achiever of the liberal agenda, and the UAW has an unmatched record of imagination and tenacity in promoting welfare guarantees and redistribution of wealth on behalf of its constituents. But in the automobile industry, as in the nation as a whole, the costs of such things are becoming painful.
The industry's basic labor agreement is the direct descendant of one signed in 1948, when the economies of Japan and Germany were shattered and America's market was exploding with demand pent up during the Depression and war years. Today foreign competitors are robust: the world market is, for now, a replacement market; and Americans, confronted with five- digit sticker prices, are buying more carefully and less frequently.
Three years ago, auto workers got a contract that increased pay 15 percent in each of the last two years. But the UAW's active membership is down 300,000 to 1.2 million since 1979, and 345,000 members have been laid off. It may have to negotiate "give backs" (reduced benefits) in exchange for job security provisions.
Today sales are dismally steady-- steadily slow: about 6.3 million units in 1981, the lowest since 1961. The running tally is flashed on a giant digital scoreboard seen by drivers entering the city from the airport. It is enough to ruin a day. Sales are slow relative to the past, but not, perhaps, relative to the foreseeable future.
The industry is short of working capital, and the "Big Three" lost nearly $1 billion in the third quarter of 1981. And the phrase "Big Three" is now a misnomer. Today's automobile market is a world market, and the big three are General Motors, Ford (the largest producer outside the United States) and Toyota. Volkswagen is fourth.
In the automobile industry, the Reagan administration's capital-raising measures of accelerated depreciation and tax credits will get one of their crucial tests. But tests take time, and meanwhile Michigan's unemployment is at depression levels statewide (12 percent) and is, of course, worse in this city. Furthermore, the automobile industry is the engine that made an entire region run. As recently as 1980, its products and services involved 8.5 percent of the gross national product, 25 percent of retail sales; it used 21 percent of America's steel, 60 percent of synthetic rubber, 25 percent of glass, 20 percent of machine tools. And 90 percent of all vehicles and parts are made in six states: New York, Pennsylvania, Ohio, Indiana, Illinois and Michigan.
The auto workers cannot be blamed for all, or even most of, the industry's problems. Management's job is to manage--planning, investments, designs, marketing--and it has failed the test that matters: the market's.
But labor is the principal cost in automobiles, and relative price is the principal determinant of demand. The wage difference separating auto workers from the average American worker is large, and the difference separating UAW workers from their Japanese counterparts is even larger.
A Japanese auto executive, noting that in 1978 American auto workers' average hourly pay was $12.66 and the average American production worker's pay was $6.17, says: "I think it is very difficult for people who make $6.17 an hour to buy a car which is being made by a worker who earns $12.66 per hour." One reason many auto workers are now without pay is that a 20-year worker has almost 10 weeks off with pay annually.
To Douglas Fraser, head of the UAW, falls a task that goes against the grain of American history and expectations: negotiating less, and getting members to ratify it. His most forceful argument with his members may be: "Look South" --to Houston, where so many ex-members have had to migrate in search of new careers, and to Mexico, where GM and Ford are building factories capable of producing 800,000 engines a year, 80 percent of them for the United States. Of course, American consumers already have, in effect, shifted overseas a large portion of the production of automobiles sold here.
Fraser understands, from two experiences, the industry's potential for smashups. He serves on the board of Chrysler. And in 1934, at age 18, he went to work in a Chrysler plant-- making De Sotos.