"Driving a Deal" -Part 1: The Bargaining Table
Tuesday, July 17, 2007SUSIE GHARIB: What could be the most crucial labor negotiations in the U.S. auto industry's history start later this week. The United Auto Workers current contracts with General Motors, Ford and Chrysler expire this summer. The new contracts come at a time when the U.S. manufacturers are shedding jobs and losing market share to foreign competitors. Over the next three nights, Diane Eastabrook explores what is at stake in this year's negotiations. Part one of her series "Driving a Deal" looks at what is likely to be on the bargaining table.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Much has changed in the four years since General Motors, Ford and Chrysler sat down to negotiate their current contracts with the United Auto Workers Union. More than 70,000 U.S. auto workers have accepted buyouts and left their jobs. Thousands more have been laid off due to plant closings. Profits have tanked at all three companies along with their U.S. market shares. And one auto maker, Chrysler, will soon be a privately held firm. James Schrager, management professor at the University of Chicago's graduate school of business, likens this year's labor talks to a life and death struggle.
JAMES SCHRAGER, MANAGEMENT PROF., U. OF CHICAGO: It reminds me of two guys holding guns to each other's heads, saying I won't shoot if you don't shoot. Everyone has a lot to lose because of the success of non union foreign makes in the United States. That is what has changed the balance.
EASTABROOK: Analysts agree three issues will dominate the talks: First, the jobs bank. A plan that pays laid-off hourly employees until they get called back to work or find jobs elsewhere; second, work rules that apply to job flexibility; and third, healthcare benefits. Experts say that issue will be the most contentious. The auto makers say they must dramatically reduce health care costs which currently add up to $2,000 to the cost of each vehicle. The target of those reductions will probably be the industry's roughly 700,000 retirees. Industry watchers think the auto makers may try to move retiree health care benefits into a voluntary employee beneficiary association or VEBA. Under a VEBA, the employer contributes money to a fund that is then managed by the union. Andrew Kramer, a partner in the law firm Jones Day was the architect for a VEBA at Goodyear. Kramer thinks a similar plan could work for the auto companies.
ANDREW KRAMER, PARTNER, JONES DAY: There is clearly an option that would be available potentially to have the three companies have a VEBA. It seems to me that you could have a general overall agreement, but you would have individual VEBAs at each company.
EASTABROOK: But labor experts say the UAW will aggressively guard health care benefits. University of Illinois labor professor Robert Bruno describes healthcare as a defining issue for the union.
ROBERT BRUNO, LABOR PROFESSOR, U. OF ILLINOIS: It defines them in the important way of making themselves attractive to nonunion autoworkers. So, if this is a union that wants to remain relevant, it wants to grow in the auto industry, being able to offer a comprehensive substantive health care package is a very, very strong selling point.
EASTABROOK: But Morningstar auto analyst John Novak argues the union may be more willing to bargain than in previous years.
JOHN NOVAK, AUTO ANALYST: The leadership of the UAW clearly recognizes what's at stake here. The number of job losses through the buyouts, through the parts supplier bankruptcies have been massive. They recognize the threat - the UAW recognizes the threat to the auto makers.
EASTABROOK: Industry watchers say whatever deal is worked out between the U.S. auto industry and the United Auto Workers union, the impact is likely to reverberate through the auto parts industry and the Midwest rust belt as well. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.
KANGAS: Tomorrow we'll look at how one of the biggest rust belt states, Michigan, is dealing with losses from the auto industry.
