UAW Talks with Auto Industry Begin

Negotiators from the United Auto Workers and Chrysler formally begin contract talks in Detroit Friday. The talks continue on Monday with GM and Ford. Much is at stake for both sides.

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DEBORAH AMOS, host:

This is DAY TO DAY. I'm Deborah Amos.

NOAH ADAMS, host:

And I'm Noah Adams.

In a few minutes the District Attorney for New Orleans faces a lot of criticism. We'll explain that and give him a chance to defend his record.

AMOS: But first, we go to Detroit. Union negotiations began this morning with a ceremonial handshake between Chrysler CEO Tom LaSorda and the president of the United Auto Workers, Ron Gettelfinger. All week long on this program we've been exploring how crucial these talks will be for the future of the car business. Front and center is the question of health care, particularly for retirees.

NPR's Frank Langfitt is in Detroit for the first day of the negotiations, and he joins us now. Hi, Frank.

FRANK LANGFITT: Hi, Deb.

AMOS: So the main issue is health care. Please remind us what's wrong with the plan that's in place now.

LANGFITT: Well, the problem is the companies owe billions to their retirees. And this health care system was set up back when, you know, the Detroit Three completely dominated the market, so they could afford this. But now you have Toyota, Nissan and these other companies that have transplants down in the South, companies that are building cars here in the United States, they hardly have any retirees, and they also have government systems to keep the health care really affordable. So from the perspective of the companies here, you know, paying this health care costs of retirees is just unsustainable and really uncompetitive.

AMOS: And what are the automakers then proposing?

LANGFITT: Well, they're not saying right now. There's a blackout in terms of what they want to say to us, the reporters who are here in Detroit. But it looks like they're going to try to pitch some sort of trust fund. And the idea would be that the companies would pay a certain amount of money into a trust fund and then the union would take it over. And it would be their responsibility to look after the health care of their workers.

AMOS: And that takes union agreement. Will they go for that?

LANGFITT: Well, a lot of it may come down to money, you know. The companies don't want to pay everything they owe on heath care because that's going to end up costing them a lot. So it all depends on how many cents on the dollar that the UAW can get on this. They recently did a deal that went pretty well with Dana; it's a bankrupt auto-parts maker.

But you know, there are also some risks here. You know, if costs keep going up, the union could end up without enough money to really take care of their retirees and they may have to cut benefits. On the other hand, if any of these companies go into bankruptcy, creditors couldn't get that money, so the union would be able to keep it and protect it for the retirees.

AMOS: Is there any sense of how much money that we're talking about?

LANGFITT: Right now the Detroit companies pay about $11 billion a year for their retirees, and the total obligations are in the tens of billions.

AMOS: Let's talk about a hypothetical and see if we can personalize this. If, say, a young autoworker was sitting in a bar next to a retired autoworker, how would that conversation go?

LANGFITT: The conversation would probably get pretty honest. The younger worker - one of the issues here also is a two-tier wage system. And younger workers, some of them are temps, and they make about a third less pay than the older workers. The older workers, production, can make about 28 bucks an hour, which is very good for industrial wages right now in the United States.

So the younger worker might say, you know, why did you allow the auto companies to hire me at such a lower rate? And the older worker might say, would you cut my pension after I retire? The companies may try to expand this two-tier wage system. It's kind of a divide in conquer strategy, and of course it runs completely antithetical for the idea of a union, which is, you know, equal pay for equal work. There's a UAW activist I talked to - Greg Shotwell - and he describes what a two-tier system does to workers.

Mr. GREG SHOTWELL (United Auto Workers): This severs the solidarity between the two workers. It also severs the solidarity between generations. So these new hires, who are making less, would feel free to negotiate takeaways from retirees in order to benefit themselves. We couldn't blame them.

AMOS: And how long then would the negotiations go on?

LANGFITT: Well, the contract is up on September 14th. And really much of the summer is going to be pretty quiet. Each side will be staking out of position and talking about what their needs are. But usually like everybody else it takes a deadline to really motivate these folks. And so it's probably going to be in the final week or 10 days that you're going to see a lot of action and a lot of the tough decisions will come then.

And we'll see whether what we get is what the companies had been talking about, which is kind of a - what they call a transformational agreement that will change the complete structure of their cost and businesses, or maybe a more incremental one, which is what many people think the UAW wants to get.

AMOS: And does this agreement, if we get there, does it have ripple effects outside the car industry?

LANGFITT: Well, the car industry has helped set the industrial wage in this country, and it's going to be tough news for other manufacturing workers if they see the UAW having to lower wages, having to lower benefits, because, you know, they've been the standard setter for so many years.

AMOS: Thank you very much. NPR's Frank Langfitt reporting from Detroit.

LANGFITT: Thank you, Deb.

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Auto Workers Union Preps for Detroit Showdown

In Depth: The Man Leading the UAW

Right now, Ron Gettelfinger may have the hardest job in American labor. He runs the United Auto Workers. And on Friday, he kicks off the toughest contract talks in the union's history.
Read a profile of the man who leads the union as it tries to play a weak hand in dangerous times.

Chart: Car Makers Profit and Loss Per Vehicle i i

hide captionAccording to the 2007 Harbour Report, which surveys automaker productivity, Japanese automakers continued to outpace their American counterparts in efficiency in 2006. One telling statistic: pre-tax profits per vehicle. While Nissan, Honda and Toyota all earned more than $1,00 on average per vehicle produced in North America, Ford lost an average of $5,234, while GM lost $1,436 and Chrysler lost $1,072. The Detroit Three's higher costs per vehicle are due in large part to their unionized workforce, and the associated health care and pension costs.

Lindsay Mangum, NPR
Chart: Car Makers Profit and Loss Per Vehicle

According to the 2007 Harbour Report, which surveys automaker productivity, Japanese automakers continued to outpace their American counterparts in efficiency in 2006. One telling statistic: pre-tax profits per vehicle. While Nissan, Honda and Toyota all earned more than $1,00 on average per vehicle produced in North America, Ford lost an average of $5,234, while GM lost $1,436 and Chrysler lost $1,072. The Detroit Three's higher costs per vehicle are due in large part to their unionized workforce, and the associated health care and pension costs.

Lindsay Mangum, NPR

On Friday, the United Auto Workers begins some of the toughest contract talks in the union's seven-decade history. UAW president Ron Gettelfinger will meet with Chrysler on Friday, and with Ford and General Motors on Monday.

The Detroit companies have bled billions of dollars in recent years, and they continue to lose market share to foreign competitors. Fighting for survival, they will be pressing the union for major concessions.

In the past, the UAW would go to the bargaining table with a list of demands and they would usually come out ahead. But these days, instead of demanding more for its members, the union just hopes to protect what it has.

The union has lost more than 60,000 members to company buyouts in the last two years. In May, Daimler-Chrysler actually paid a private equity firm to take struggling Chrysler off its hands.

Things are so bad, nobody calls them the Big Three anymore.

"They're the Detroit Three," says Sean McAlinden, an economist with an auto industry think tank. "Let's face it, Toyota is the No. 2 seller of cars in the United States."

Waning Union Strength

When Detroit dominated the market in earlier decades, the United Auto Workers got great benefits for their members and built a virtual welfare state. Now, the Detroit companies are trying to dismantle it.

At the bargaining table, the companies are expected to try to reduce some retiree obligations. Last year, they spent $11 billion on health care for more than a million retirees and dependents.

McAlinden says those costs are a huge competitive disadvantage.

"Last we checked, Toyota had less than 300 retirees in the United States," McAlinden says.

One plan under consideration is to put the money in a trust fund and let the union run it. Another way the companies might propose to cut costs is to hire more new workers at much lower wages.

Many UAW members are scared.

Brian Henry works at GM's Cadillac plant, where rumors are swirling.

"Everybody's a little shaky," he says, his face still covered in sweat from the hot plant.

Like other workers, Henry is resigned to concessions.

"We've been getting, getting and getting, and we may need to give a little back," he says. "It's as simple as that."

But he also thinks that if the UAW president makes too many concessions, workers will reject the contract.

"There are a lot of old timers here who don't want to give up what they've got," Henry says. "We don't mind giving up some, but if [Gettelfinger] gives up too much, I don't think anything could get ratified."

Tense Talks Ahead

Yet the consequences of that could be even worse, according to McAlinden. He says the companies will just ship jobs to low-cost countries.

"They will have to offshore U.S. production as rapidly as possible. So, I see a massive investment immediately in Mexico, Brazil and China — and very few UAW jobs left by 2011," McAlinden says.

Although the talks begin Friday, the tough decisions won't come until September, when the contract is set to expire. In the final days, bargaining will go round the clock. During breaks, people will rest in their cars, nap on air mattresses or just sleep on the floor.

Tempers will be short.

"There's a great deal of profanity," says Douglas Fraser, who ran the auto workers in the early 1980s and remains in touch with the leadership.

"There are all sorts of blowups, pounding on the table," Fraser says. "One thing I remember is, you pick up all your notes and everything, stuff them in your briefcase as though you're going to walk out. Then, when nothing happens, you have to take them out of your briefcase again."

No one is predicting how talks will turn out this time around, but nearly everyone agrees there won't be a strike. With the union's ranks shrinking, and the companies wounded, a strike could destroy both.

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