Share this story
Close X
Switch to Desktop Site

The stage is set for dramatic auto talks.

Car buyers have money. Cars are selling like hotcakes. American auto profits are at record levels, and executives are being rewarded with huge bonuses. As might be expected, the United Automobile Workers, which begins contract negotiations with General Motors and Ford this week, wants a share of the prosperity.

It seems simple enough. But corporate officials contend that the current luster of the auto industry should not be so distracting that workers forget the woes of the recent past - or problems on the horizon.

About these ads

Profits could easily shrink, they say, with another recession. A stiffer imported-car challenge to an industry which is still not cost competitive with the Japanese could take its toll also. Thus, labor and management see one of the toughest negotiating sessions ever.

Flush with cash, management is going to the bargaining table seeking to ease its relatively high labor cost and thus narrow the cost gap with Japan. In labor's eyes, that's like walking the streets with a tin cup when you've got thousands at home stuffed under the mattress.

What's on the mind of workers is jobs - and how to keep them. The UAW sees a slew of American auto jobs being eliminated as Detroit turns more and more to cheaper, foreign labor for the manufacture of its small cars.

Yet management maintains that it must look overseas if it hopes to gain competitive ground. And if American automakers are not competitive, company leaders say, those jobs will be lost anyway. ''One has to recognize that job security is ultimately derived only from being competitive in the marketplace.... If you don't have that, you lose sales, and if you don't have sales, you lose jobs,'' says GM spokesman John Mueller.

If Japanese import quotas are lifted, GM will be marketing 570,000 cars a year that are imported or made in its California joint venture with Toyota. Ford is trying to gear up a new factory in Mexico so it can import 130,000 subcompacts a year by 1987. A memo on GM labor negotiations which the UAW obtained last spring called for the reduction of as many as 100,000 union jobs by late 1986, mostly through automation and switching overseas for parts and car manufacture. The outcome of the contract talks may influence US policy on quotas.

''If the import plans of the US automakers are allowed to proceed,'' says UAW president Owen Bieber, ''it will mean the loss of roughly 200,000 US jobs within the next two years and the death of the small car industry.'' It's not surprising, then, that the union has made job security its top bargaining priority.

According to analysts, it's small-car production that hurts Detroit most. American automakers manufacture most small cars either at a loss or a slim profit. Small cars make up about 45 percent of the domestic market, according to John Hammond, an auto analyst at Data Resources Inc., an economic research firm. He believes the industry needs to cut small-car production costs by about 28 percent if it hopes to be able to produce those cars here and still be competitive.

About these ads

Of course, he says, ''It can't all come from labor.'' The industry has already made significant productivity gains. For instance, each Chrysler worker now builds an average of 19 cars a year, up from 10 cars a year in 1980. Improvements like these have come from layoffs, automation, tighter inventory control, and more cooperation between labor and management. There are still improvements to come: GM is undergoing a reorganization that will further slim its work force; it is creating a more-efficient production complex called Buick City; and the industry as a whole is outfitting itself with more robots.

Yet labor still accounts for about 55 percent of US auto manufacturing costs, and American auto workers average $22.40 an hour (including wages and benefits); other US industrial workers average $9. According to the union, health-care benefits and cost-of-living adjustments are untouchable. But ''profitability and productivity of the companies justify increases and improvements in profit sharing, and we intend to get the economic equity our members deserve,'' Mr. Bieber declares.

As of this writing, the union has not been specific in terms of wage increases. Under the last contract, the union was included in a profit-sharing plan but gave up the ''annual-improvement factor,'' which provided for automatic 3 percent annual wage increases.

A number of analysts believe the companies will try to score cost-cutting points through work-rule changes and job flexibility. These, however, are settled at the local factory level and don't come up for bargaining on the national level. Company and labor leaders are squaring off on the issue of job security.

''All of this is uncharted territory,'' said one New York auto analyst, who asked not to be named. But this analyst believes there are compromises that could work. For instance, they ''could make the decision to move offshore a matter of negotiation, (and have management) say, 'We're going to open this job to the lowest bidder. If you can make this car cheaper here, fine.' ''

The union would like to approach job security through a shorter workweek. Bieber argues that the companies could hire more permanent workers if they did not rely so heavily on overtime. Right now, the industry is running almost at capacity trying to meet demand.

This could mean trouble for the industry should the union stage a strike this fall, after the contract runs out Sept. 14. Dealers seem to be selling cars almost as fast as they get them, leaving inventories low.

''They have about a 50-day supply, which isn't very much. They would like to have a lot more going into a strike,'' says Lawrence Harbeck, with the Office for the Study of Automotive Transportation at the University of Michigan.

Meanwhile, the union could last for a while on its hefty strike fund of $558 million.

Averting a strike depends on cooperation between labor and management - but also between union leaders and the rank and file. Leaders need rank-and-file approval of new labor contracts.

''The folks at the[union's] top are more understanding to some of the arguments[of cost-cutting needs] than the rank and file,'' Mr. Harbeck says. Len Wozny, acting president of Detroit Local 160, an outspoken local office that touts the slogan ''Restore and More in '84,'' says disagreement between union leadership and the rank and file during this set of negotiations ''is a distinct possibility.''

The contract that emerges in the end will have an impact that spreads beyond these two industry giants. Chrysler negotiations will be coming up in a year, and other recession-battered unions across the country will be watching to see how much the UAW can regain from concessions made in 1982.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.