High Stakes for Both Sides in Auto Talks

Contract talks between United Auto Workers and Chrysler formally began Friday. Much is at stake for both sides: The company is burdened by huge health care costs, and the union is struggling with a shrinking membership.

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Tough contract talks began today in Detroit. The city's three big carmakers are facing off against the United Auto Workers and the stakes may be higher than ever. The automakers are taking a beating from lower cost foreign rival such as Toyota. Observers say if they can't slash what they spend on labor and health care, the future is bleak.

NPR's Frank Langfitt reports.

FRANK LANGFITT: It started as it always does, with a ceremonial handshake for the cameras.

Ron Gettelfinger, the union president, and Tom LaSorda, Chrysler's chief, were all smiles. But at a news conference afterward, the body language suggested what everybody in the room knew - the autoworkers were on the defensive. Behind Gettelfinger stood his team of negotiators shoulder to shoulder, like the frontline of a football team. Framing them was a UAW banner that read "Fighting for America's Future."

Mr. RON GETTELFINGER (UAW President): We're going in to these negotiations looking after the very best interest of our active and retired members.

LANGFITT: The companies, on the other hand, will be looking at things like high health care costs for retirees. The automakers spend billions on it every year. One solution the companies are considering: put money in a health care trust fund and let the union manage it. LaSorda wouldn't say exactly what he wants out of these talks, but the status quo is not an option.

Mr. TOM LASORDA (CEO, Chrysler): Today, the domestic auto industry faces unprecedented challenges and we can no longer afford to conduct business as usual. Our circumstances demand that we rethink our approach to our business and achieve true change.

LANGFITT: Much of the conversation in Detroit revolves around the union's famously rich benefits and how much less companies like Toyota have to spend on their workers. But after the news conference, John Franciosi, Chrysler's chief bargainer, said the real problem is America's broken health care system.

JOHN FRANCIOSI (Chief Negotiator, Chrysler): Look, the, the fact is is that we're competing against Asian automakers who had these subsidies in their, in their policies back home. And that puts us, you know, at a significant, competitive disadvantage.

LANGFITT: On the factory floors here in Detroit, union members are confused and anxious about negotiations. With everything on the table, some worry they could have to pay more out of pocket for healthcare or won't have enough for retirement. Helen Sheppard(ph) works with UAW Local 22. She spoke during a lunch break outside a pizza parlor near GM's Cadillac plant.

Ms. HELEN SHEPPARD (UAW Local 22 worker): My biggest concern is pension, because I wouldn't be young after 30 years, and I would be nearly like 52-years-old, and I don't want to have a pension that's just dwindling away while I have to turn around and look for another job.

LANGFITT: Many workers are coming around to the idea that they will have to give some things up. John Guset(ph) works as an electrician in a Chrysler plant that makes the Sebring. Originally from Romania, he has worked at the company for more than two decades. He spoke at a coffee shop after work.

Mr. JOHN GUSET (Chrysler electrician): There will be some concessions. I believe this is how I see it right now. But I hope they will be reasonable. That's - this is how I feel, and Mr. Gettelfinger will see it the same way.

LANGFITT: Do you think he will?

Mr. GUSET: I got to wait and see.

LANGFITT: The union's negotiations with Ford and General Motors open Monday. The talks will run for the next two months. The current contract expires September 14th. It's around then that people expect both the company and the union to make some wrenching decisions about their future.

Frank Langfitt, NPR News, Detroit.

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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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