The sky is falling.


For real this time.

Ever since the United Auto Workers union negotiated its first collective agreement 70 years ago (with General Motors Corp.), Luddites have been forecasting the demise of the U.S. auto industry. Or the UAW. Sometimes both.

Yet Detroit survives, albeit weakened. And the union also hangs on, having etched the yardstick by which all other labor-management relationships are measured.

The UAW’s contracts helped institutionalize annual wage increases, paid vacations and employer-financed pension plans and health-care benefits.

Many of these achievements were realized when the notoriously cyclical auto industry was on the rise. Still, they all were hard won.

That’s because even during the halcyon days when GM, Ford and Chrysler owned the U.S. market, UAW negotiators routinely were met by mournful tales of woe.

“Every time we’ve ever been to the bargaining table, you’d have thought the company was going out of business – every time,” says Bruce Baumhower, president of UAW Local 12, which represents workers at Chrysler’s assembly complex in Toledo.

This month, as the UAW officially begins contract talks with Detroit’s Big 3, it is no different. Or is it?

Faced with unyielding competition from overseas-based auto makers, the threat of annihilation is “more real this time,” Baumhower observes.

As real as a rabbit punch when one considers the crippling effects of foreign currency manipulation, volatile material prices and the staggering weight of providing benefits for a retiree contingent more than twice the size of the UAW’s 178,000-member active list at GM, Ford and Chrysler.

Legacy costs are a prime contributor to the $25-per-hour total labor cost advantage enjoyed at U.S. plants run by Toyota, Honda and Nissan, because their retiree rolls are virtually blank.

So expect a contract like none other. Wage hikes will be modest and prescription co-pays could increase, while job classifications fall by the wayside as Detroit seeks greater shop-floor efficiency.

Ultimately, however, the union rank and file must bang the gavel on any deal. And here is where another legacy cost comes in to play: After decades of dire warnings, how much grassroots goodwill remains?

Last month’s landmark deal to lower the wage structure at supplier Delphi Corp. is as likely to foment backlash as empathy.

Consider also GM’s assembly plant in Lordstown, OH, where push came to shove in May. Despite outdated work rules that contribute to an estimated shortfall of $2,000 for every Chevrolet Cobalt GM builds there, workers are resisting change.

Why? In a move with savings implications of $15 billion annually, all GM workers voted in 2005 to accept a higher co-pay rate, in addition to deferring a scheduled $1-per-hour wage hike to stoke a fund that would benefit retirees affected by cuts to their health-care coverage.

Such opposition chills executives at GM, Ford and Chrysler.

And they “have every right to be nervous – especially this year – about the way the membership is going to go,” says a UAW insider close to the talks.

Looks like Chicken Little could come home to roost.