One of the most tumultuous periods in automotive industry history may spell the end of labor union pattern bargaining, at least temporarily, industry experts conclude.
The suddenly slumping economy already has forced contracts to be reopened before the ink has dried, and withCorp. and LLC struggling for their very survival, the union practice of one-size fits all no longer may make sense in the short term.
Still, look for the unions to cling to the practice when possible, on analyst says.
“I think (pattern bargaining) weakens, and I think it creates different paths,” Harley Shaiken, a labor expert at the University of California-Berkeley, says of the days ahead. “But there’s still a core (set of agreements) the union aims at. Pattern bargaining was never a cookie-cutter imposed at three sites. It was always a set of principles adapted to local circumstances.”
A prime example is the formation of the Voluntary Employee Beneficiary Assn., or VEBA, Shaiken says.
Established in 2007, the VEBA is a trust fund that transfers control of retiree health-care benefits from the Detroit Three auto makers to the United Auto Workers union.
Just prior to agreeing to the VEBAs, the union veered away from pattern bargaining, grantingMotor Co. and GM, but not the more financially fit , wage and health-care concessions.
“You had a deviation from the pattern in 2005, when the union in effect reopened negotiations and established the beginnings of a VEBA at GM and,” Shaiken says. “Chrysler then asked for the same. The union said, ‘No, your circumstances are different.’”
But that was more of an aberration than a harbinger of profound changes to pattern bargaining, he says, noting during normal circumstances the UAW, and its Canadian Auto Workers union counterpart, try to adhere to the long-held practice.
“The history of pattern bargaining is quite remarkable in that it has been in existence the whole post-World War II period,” Shaiken says. “Has there been deviations? Absolutely, but always with the goal of returning to the pattern as conditions permit. For the union, pattern bargaining has increased their leverage.”
Brian Fredline, president of UAW Local 602, representing GM’s Delta Twp., MI, assembly plant, agrees pattern bargaining is not always possible, especially in uncertain times.
“(It) has a place when the industry is in a steady state, but we’re anything but steady, so we’re going to have to evolve,” he tells Ward’s. “And if that takes specialized bargaining, I think the UAW is aware enough to do that.”
Indeed, the UAW and CAW in recent days have offered numerous concessions to Chrysler and GM, both of which are teetering on the brink of bankruptcy and relying on government loans.
Last week, the CAW and Chrysler inked a deal resulting in the elimination of Christmas bonuses, a shorter Easter vacation, the elimination of a tuition-assistance plan and reduced compensation for laid-off workers.
The UAW reportedly has agreed to similar concessions with Chrysler, with rank-and-file members expected to vote on the pact today in a last-ditch effort to keep the auto maker out of bankruptcy. Should the agreement be ratified, the UAW would have a 55% controlling stake in Chrysler.
Meanwhile, GM continues to negotiate with the UAW over the terms of its VEBA funding. The auto maker’s recently announced bond offer to exchange 225 shares of common stock for every $1,000 of outstanding debt is contingent on converting to equity at least 50% of GM’s outstanding U.S. Treasury debt by June 1 and at least 50% of its VEBA obligations.
If the UAW agrees to accept stock in lieu of cash to fund the VEBA, it effectively would control 39% of GM.
Such moves create pressure on the unions to offer similar concessions to Ford, which is on slightly better financial footing.
Although such concessions require a sacrifice by members, they must be offered, says Mike Vince, president of CAW Local 200, which represents 5,400 Ford workers and 2,600 retirees in Windsor, ON.
“Our philosophy in Canada has always been pattern bargaining, both in good and bad times,” he says. “We really don’t have any choice, and the reason for that is we have to make sure we don’t have a cost advantage or disadvantage within the GM-Ford-Chrysler chain.”
Vince says he’s unsure whether CAW leadership currently is negotiating with Ford regarding contract concessions, but he “suspects” dialogue is under way.
“Any time you give up hard-fought gains, it’s difficult to get your head around (it),” Vince says. “But our members are very much in tune with what’s going on in the auto industry.”
Some don’t share such a rosy view of the future of pattern bargaining. Given the vastly different financial conditions of each of the Detroit Three auto makers, the era of pattern bargaining has come and gone, says Dennis DesRosiers, president of Toronto-based DesRosiers Automotive Consultants Inc.
“It hasn’t made sense in a decade,” he says. “We suspect the CAW is going to try every arrow in their quiver to try and extract the best deal for members.
“GM, Ford and Chrysler are fundamentally different companies, so pattern bargaining is really just a way to hold a gun to their heads, it has nothing to do other than leverage,” DesRosiers adds. “It was effective when the Detroit Three had 90% of the market, but it’s totally ineffective when they have 40%.”
Ultimately, pattern bargaining may reemerge, but most likely not until the business environment stabilizes, says David Cole, chairman of the Center for Automotive Research in Ann Arbor, MI, noting, currently, “it’s everyone for themselves.”
There was “a value in (pattern bargaining) at one point, but it doesn’t mean anything right now,” Cole says. “Survival is the issue, and the union will do whatever it takes.”