The Free Press, Mankato, MN

Editorials

June 16, 2007

Our View -- Big 3, UAW at a crossroads

What may be the most important showdown for the future of labor and U.S. automakers is developing.

The Big Three — GM, Ford and Chrysler — are approaching the coming contract talks with their sights set on deep concessions from the United Auto Workers. If they don’t get them, there are less-than-veiled threats to move operations overseas.

Labor, through UAW President Ron Gettelfinger, has said his members shouldn’t bear all the sacrifice as Detroit restructures.

From management’s side, the sticking point is the high cost of labor. They say there is a $30-an-hour disadvantage against Toyota and Honda.

While salaries are about the same, management says the added cost is due to generous health-care and pension plans for hundreds of thousands of union retirees and their dependents.

In the past, this sort of saber rattling before negotiations was to be expected. But after years of concessions and cuts, the gulf is still wide and the most difficult fix has yet to be accomplished.

The union so far has approved cuts for retirees and the Big Three have cut about 70,000 UAW jobs. But the costs of wages with benefits, management argues, still puts them at a competitive disadvantage with Japanese automakers and Detroit cannot rebound unless that gap can be closed — one auto executive told The Wall Street Journal by “80 percent.”

Labor, on the other hand, has said automakers need to concentrate on putting out vehicles that meet consumer demands quicker. A task that would require widespread retooling of auto manufacturing that exists today.

If analysts are to be believed, it would appear the UAW would be open to trimming more, such as outsourcing some work and limiting the time unemployed UAW workers can stay in the “job bank” — where idled workers await recall while still receiving close to full salary. That may not be enough.

The forecast for health-care costs makes this a make-or-break item. Reports are surfacing that rising health costs could add another $15 to the wage-and-benefit gap. But for the union, they are worried about their numbers. Twenty years ago, there were about 1 million UAW members. Now with buyouts and early retirements they could dip to fewer than 500,000. They are not as likely to agree to more job cuts to narrow the cost gap.

There are two possible options being discussed to reducing the health-care costs. One is for the government to take over some of the burden. This isn’t likely since the White House has already rebuffed automaker requests for tax and other economic concessions.

The other — and what some analysts are saying is more likely — is the Big Three combining their retiree health-care obligation into a trust that would be partially funded by them but managed by the UAW. Such a deal was struck with Goodyear and its retirees. That deal, however, did not have large obligations to absorb as do the auto workers.

There would still need to be some big concessions to pull this off, both from automakers that would have to pour in billions of dollars and the union that would have to provide caps and limited liabilities. But clearly something very creative needs to emerge from these negotiations to prevent even more job losses in the U.S. and possibly even fewer — if any — cars made in America.

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