UAW Contract Talks Begin: Will Union Get Previous Concessions Back?

Pundits have argued for years now that the UAW had to change to keep both its organization and Detroit's Big Three automakers alive. In recent years, the UAW has done just that, making concessions during the financial crisis to help keep assembly lines running.

Now, however, the UAW wants some of those concessions back as the automakers are profitable again. That's what UAW leaders are pushing for in contract talks that begin Monday in Detroit, starting initially with Chrysler.

Everything began cordially Monday, as talks kicked off at Chrysler with traditional pledges of mutual benefit and handshakes. Both sides wore maroon jackets to signal unity, but the differences to be hashed with talks underway are clear.

The UAW wants two things:

1) An increase in guaranteed wages and benefits in line with current profitability of the companies;

2) More union jobs created since so many UAW union jobs have been lost in recent years.

Management from Detroit's Big Three want one thing: To further reduce labor costs.

Union jobs have been declining in recent decades and two of Detroit's Big Three automakers, General Motors and Chrysler, required government bailout and bankruptcy and UAW concessions to keep on going. That reality has cast a decided flavor over these labor talks.

Labor and management are negotiating to set new wages and benefits for the UAW's 110,000 members with the Big Three for four more years, as the current contract is set to expire on Sept. 14.

Pundits have said in the weeks leading up to the start of negotiations that management pay -- particularly the salary and bonuses collected by Ford's Alan Mulally -- might be an issue. In the spring, UAW president Bob King called stock bonuses worth about $54.5 million Mulally received for engineering a turnaround at America's second-largest automaker "morally wrong."

King said he liked Mulally, but felt the pay was "outrageous" nonetheless.

Yet the UAW chose Chrysler, not Ford, to begin contract talks, and as negotiations kicked off management pay was not the issue at the forefront.

"Management is not the enemy at this point," says Jim Graham, a longtime local union president in Lordstown, Ohio, where workers make the Chevrolet Cruze car, in an interview with the Associated Press. "The enemy is the competition."

Even King, whose style is more cooperative than confrontational, wants to focus on making sure UAW members "get their fair share of the upside" while keeping the companies competitive. More than Mulally's salary, Ford's profits the past two years, which have totalled more than $9 billion, will be the issue. That money, and profits by GM and Chrysler, is what the UAW plans to attack.

Workers got profit-sharing checks in January, but they want a bigger share when the companies do well, like now. Also, they want some benefits back, and they want guaranteed raises they previously gave up restored.

Four years ago autoworkers made sacrifices in pay and benefits as all of Detroit's Big Three struggled, losing money and angling toward bankruptcy. Ford managed to avoid bankruptcy or government bailout, one reason Mulally has been paid so handsomely. But GM and Chrysler both went bankrupt and took government bailout.

Because the UAW was involved in the plans for keeping both Chrysler and GM afloat, the organization cannot strike against those automakers. Ford's success, oddly, gives the UAW its greatest strength in these talks. A strike isn't likely if talks don't go well, but it at least remains a bargaining possibility in regard to Ford.

At stake is how much the UAW can get back from previous concessions now that the automakers are profitable again. Management won't be too giving, since even though company profitability and industry sales have improved, on pace to reach almost 13 million units sold in the U.S. this year from 10 million units sold in 2009, there's no evidence of great things in the industry near-term.

Most observers agree the U.S. auto industry has much better prospects than during the height of the recession, but that the future holds only modest growth prospects for the next four years. Also weighing against the UAW's case is the slowing of the U.S. economy and dropping consumer sentiment indicators.

Typically, consumers buy more vehicles when sentiment is high. When it drops as it has the past two months, auto sales also weaken in accord. Therefore, management will argue they have to guard against costly contract increases based upon future uncertainty. They are not likely to easily give in to guaranteed raises and benefits increases for that reason.

Chrysler is run by Italian automaker Fiat, and that company wants to hold tightly on labor wages and benefits. Al Iacobelli, Chrysler's chief negotiator, says the company won't go back to its old formula of pay raises. Iacobelli pledged, however, to find common ground as talks kicked off.

"We have gone through a lot together and we are going to continue to forge ahead," he said.

Still, Chrysler has managed to reduce its hourly labor costs in the past four years from $76 per hour to $49 per hour through buyouts. More than 10 percent of Chrysler's 23,000 U.S. hourly workers were hired at a lower wage that's half the amount of traditional union workers. Iacobelli said Chrysler's top priority in negotiations is to avoid agreeing upon a contract that allows costs to escalate from this point into the future.

"It wasn't too long ago that we emerged from a very painful restructuring," Iacobelli said. "Unfortunately, we have a history in this industry of not getting it right...as a result, it has cost us thousands and thousands of jobs."

Also, GM and Ford want to cut labor costs more than they did the last go-round and during the financial crisis, ensuring that new-found profitability becomes sustainable. The automakers continue to have higher personnel costs than foreign automakers building and selling vehicles on American soil in plants that aren't unionized.

But the UAW doesn't see it that way. The union has lost more than 200,000 jobs in recent decades in and recent years benefits were cut along with guaranteed pay raises. That was necessary when the automakers were losing money, says King, but now that they are profitable again UAW members should not have to make more sacrifices, he says.

"The circumstances today in no way would justify further financial sacrifices from our membership," said King, according to the Detroit Free Press. "We believe...that there are innovative ways of looking at it that doesn't take a penny out of our members' pockets."