Special Report

UAW logo2007 UAW
Labor Talks

Contract talks between the United Auto Workers union and Detroit’s Big Three are months away, yet industry pundits already are asking whether a diminished UAW will be able to hold its own as the struggling auto makers seek more concessions in an effort to curb their losses.

Ford Motor Co. and General Motors Corp. recently parted ways with an unprecedented number of hourly workers as part of their North American restructuring strategies. GM saw 34,410 union members leave as of last June, while Ford says good-bye to 38,000 this year.

Chrysler Group will announce its own restructuring plan next month, which likely will impact UAW membership even more.

Also hitting the union hard is supplier Delphi Corp.’s decline into bankruptcy. Combined, the Delphi/GM workforce will shrink to 80,000 by 2009, from 129,000 today, says Sean MacAlinden, chief economist for the Center for Automotive Research (CAR). That’s down from total employment of 266,000 in 1994 and 475,000 two decades ago.

The decimation of its ranks clearly is reflected in the UAW’s recently released “2005 Financial Report” that suggests retirees already may have overtaken active members.

The report posted on the union’s website and published in its bi-monthly magazine, Solidarity, shows the gap between its active-member list and the total number of retirees was less than 39,000 before the start of 2006.

The biggest blow is yet to come when this year’s planned job cuts further gut the UAW’s membership roster.

While GM’s and Ford’s planned attrition is scheduled to occur gradually over the next 23 months, a sizable number of workers already have accepted early retirement offers. And more are expected to leave this year as the companies fight to remain profitable despite skyrocketing employee health-care costs and declining market share.

Although early retirement incentives contributed to Ford’s embarrassing $12.7 billion shortfall in 2006 – its largest loss ever, the auto maker says it still believes all sides will weather the coming Big Three/union contract talks when they open later this year.

“The union negotiations will be tough, but I’m confident, very confident, we can all work together, Ford CEO Alan Mulally says. “The union understands we are all in this together.”

But the numbers are stacked against the storied union, which for more than seven decades has championed workplace safety, civil rights and other social causes, are sobering.

Despite 71 successful organizing drives that brought in nearly 12,000 new members in 2005, the number of active UAW members totaled 598,648 by year’s end compared with 622,603 in 2004.

Meanwhile, the ranks of retired UAW members – who continue to collect benefits from GM, Ford and Chrysler – stood at 560,278. In 2004, that total was 563,354.

Because the rate of decline among active members was greater than it was among retirees, the gap between the two groups was just 38,370 as 2006 dawned on the industry, and it’s expected to continue to narrow.

This discrepancy already has been a flashpoint between the UAW and Detroit auto makers. Chastened by the declining fortunes at GM and Ford, the union has agreed to benefit-package changes that call for employees to pay a greater share of their health-care costs.

However, auto makers say that’s not enough.

“There’s a spirit of cooperation, but we’re still at a disadvantage in post-retirement health care,” GM CEO Rick Wagoner says “Japan still doesn’t have to write a multibillion-dollar check like we do each year to cover retirees. The government covers health care in Japan.”

Meanwhile, the union continues to fight Chrysler’s attempts to even the score with its competitors despite a sudden third-quarter decline that saw the auto maker lose $1.5 billion, followed by a $1.3 billion loss in the fourth quarter. But the company remains hopeful.

“We didn’t get concessions like GM and Ford, but (UAW President Ron) Gettelfinger came back to us in December and asked for more financial information to review,” Chrysler President and CEO Tom LaSorda says.

“We gave it all to them by Dec. 22, and they have said they want more dialogue with us. Ron understands where we are at now.”

Ironically, one of the UAW’s most significant achievements since the union’s founding was negotiating the first employer-financed health-insurance plan for industrial workers. But that win now is proving its undoing.

Health-care costs for active employees and retirees and their families accounted for more than $1,000 of the cost of every GM, Ford or Chrysler vehicle in 2006. And CAR suggests the figure will hit $1,700 by 2009, based on company 10Ks or annual reports.

Echoing sentiments held by Gettelfinger, UAW Secretary-Treasurer Elizabeth Bunn blames Washington for the industry’s woes.

“Our nation’s failed health-care system and flawed trade policies have an especially severe impact on the domestic auto makers,” she says in a preamble to the union’s recent report. “These problems adversely affect their suppliers, as well.

“Although the UAW is now a smaller union, our financial structure is solid and we remain steadfast in our commitment to workers,” she hastens to add.

Despite the membership decline, the UAW’s assets grew 4.2% to $1.23 billion in 2005, from $1.18 billion in 2004. More than $10.6 million was paid to support strike actions that affected 4,000 workers, leaving the strike fund at $914.1 million at the end of 2005.

In a recent online question-and-answer session that included rank-and-file members, Gettelfinger revealed the strike fund currently is about $900 million.

Ironically, the pending turnaround facing the UAW membership flies in the face of a resolution that was defeated at its June convention in Las Vegas. Delegates – mostly active members – voted down a push to give retirees a say before their benefits could be compromised during future negotiations with their former employers.

The loss of those voices may come back to haunt the union. While UAW membership in 1979 measured about 1.5 million workers, some analysts now are predicting the numbers will drop to less than 500,000 workers in the near future.

Jim Hendricks, a partner with the national labor and employment law firm Fisher & Phillips, firmly believes the UAW is in a weakened position. “They’re hemorrhaging members,” he tells Ward’s.

With membership in decline and little prospect of meaningful recruits, dues needed to fill the UAW’s coffers and pay leadership salaries are starting to dry up.

“The jobs of the union leaders are nice jobs; they’re highly compensated,” Hendricks says. “They don’t want to lose those jobs. They have to fight to keep that flow of money coming in, and (right now) the numbers don’t show anything positive.”

While many industry watchers agree the mass exodus of auto workers will prove costly for the UAW by diminishing its influence, there is disagreement over the importance of the union’s ongoing role in North America’s rapidly shrinking industry.

Experts, such as Hal Stack, director-Master of Arts and Industrial Relations at Wayne State University in Detroit, argue sheer numbers do not accurately reflect the UAW’s power and influence.

“At some level, (union workers) are still critical players and partners for the Big Three, so they’re going to be important in negotiations for both sides,” Stack says.

“I don’t see a weakened position for (the UAW) at the Big Three bargaining table. Both sides have the capacity for mutual destruction, and both are capable negotiators. I don’t see a dramatic shift in balance of power or strategy changes between the parties.”

Harley Shaiken, noted labor expert from the University of California-Berkeley, agrees.

Yes, the UAW is down to 500,000 jobs today from 1.5 million in 1979, “but it hasn’t lessened its influence in the industry,” Shaiken says. Management now senses that the UAW’s power “isn’t just in its ability to disrupt, but in its potential to help rebuild the Big Three,” he adds.

Nor is the UAW ready to throw in the towel, as it continues to try to attract new members.

The leadership has seen some recent success by branching out beyond its traditional sectors, adding workers from auto dealerships, the American Red Cross and even service and maintenance workers at Cornell University.

It doesn’t hurt that the union was successful in winning attractive buyout packages for departing hourly employees, says Ross Eisenbrey, vice president of the Economic Policy Institute and former chief counsel to the U.S. House Labor Committee.

“If it had been left to GM and Ford, the buyouts would have been half as (lucrative), or less,” he says. “The union managed to get (members) tremendous buyout packages and protect their wages and benefits. The union was able to do that because it still has some clout.”

Others say such achievements do not balance the union’s losses, nor help its bargaining power. As membership erodes, so does the influence the UAW once wielded, particularly when it comes to recruiting workers at foreign transplants’ production facilities.

“Foreign plants came into the U.S. very prepared,” Hendricks says of management. “Most of their employees are in their 30s and 40s and have excellent pay and benefits. So what are you going to sell these people on? If they joined (the union), they would have to pay dues for things they already have.”

Eisenbrey says there still may be opportunity, as the notion of comparable wages in non-union shops is starting to change. “The transplants are experimenting with lower wages than in the past,” he says. “If that spreads, it will make it easier for the UAW to organize those plants.

Honda (of America Mfg. Inc.) is paying essentially the same as the Big Three, so workers don’t see much incentive to join,” he adds. “But if they’re paid $12 (per hour) instead of $25, which is happening at some transplants, people will be more interested in the union.”

Hyundai Motor Mfg. Alabama LLC could be making itself an inviting target for the UAW, Shaiken notes, because unlike the other transplants that are matching UAW-type wages, Hyundai is paying hourly workers “significantly less.”

Meanwhile, the UAW has come up with a member-recruitment tactic referred to as “card checks.” Unlike the traditional secret ballot method, card checks only require employees to sign cards authorizing the union to represent them. If enough employees sign the cards, the company automatically is unionized, effectively bypassing an official election.

The UAW declines to comment, but an online article posted by the union defends the card-checking method, saying secret-ballot elections no longer are effective.

“U.S. employers, encouraged by union-busting consultants, have increasingly resorted to both legal and illegal tactics to keep workers from forming unions,” the UAW says on its website, referring to a study conducted by Cornell University that claims 36% of workers who vote “no” in union-representation elections justify their vote as a response to employer pressure.

In fact, the UAW claims 92% of employers make their employees attend “captive audience” meetings, where they must sit through “anti-union presentations during company time.”

The union also claims 78% of employers have supervisors that hold repeated “one-on-one” closed-door meetings with workers, with the threat to close or move the workplace if employees vote to unionize.

The card-check process is part of a legislative package currently awaiting approval by Congress, says Eisenbrey, who agrees with the UAW that the strategy is needed to curtail anti-union initiatives by companies wishing to keep the union out.

“Before, companies engaged in long, hostile campaigns (against the union) because there was basically no penalty,” Eisenbrey says. “This new act would impose financial penalties (for anti-union initiatives) that never were there before and give the law some teeth.”

Hendricks disagrees with the card-check process, calling it a way for the union to avoid presenting employees with facts usually outlined during a traditional election.

“There’s been a big push by unions to not have secret ballot elections,” he says. “They don’t want elections because they have trouble winning (non-union workers).”

Shaiken says the card-check legislation could get a push from the new Democrat-controlled Congress, where the bill has 218 sponsors in the House and 49 in the Senate. But he cautions the legislation could face a veto even if it does make it through Congress.

Some pundits claim the real problem is the UAW has outlived its usefulness because it no longer can stop high-paying U.S. manufacturing jobs from being shipped overseas.

While Detroit’s Big Three have done their fair share of outsourcing jobs, for the most part, the auto makers say they are sticking by the UAW.

When asked Ford’s take on the UAW outliving its usefulness, Marty Mulloy, vice president-labor relations, tells Ward’s, “We do not agree with that assessment. The UAW understands the challenges that the company and the industry are facing, and they are working with us to improve our overall business.”

Gary Cowger, GM executive vice president-manufacturing and labor relations, echoes the sentiment.

“We have open communication with the union,” he says. “The union recognizes the business model needs to change. We’ve gotten health-care and attrition changes the last two years. The union is willing to listen to what needs to be done.”

But as that partnership continues to call on workers to make deeper sacrifices, the union’s strength only will be viable for so long, Hendricks maintains. To secure its future, the UAW must merge with other unions, he says.

“In the first six months of 2006, (the UAW) organized just under 1,500 workers, compared to 2,650 (in like-2005),” he says. “In the first half of 2006, they won 37% of elections; in 2005 they won 66% of elections. Just look at that trend. The numbers tell you people don’t see advantages (of joining the UAW).

“I think they need a merger or to focus on a different industry,” he adds. “The Teamsters will sign anyone that is warm blooded and pays dues – they used to (include) just truck drivers. The UAW has to open their horizon, while unionized auto workers have to look at something else.”

Not so, counters Eisenbrey. “The UAW has not outlived its purpose,” he says. “Unions are needed more than any time in the last 20-30 years. Look at what’s happening nationwide. Corporate profits are at all time highs; the share of income going to profits is higher than ever; and the share going to workers is lower than ever.

“Workers have provided tremendous productivity,” he adds. Yet, “there’s no growth in compensation for the average worker because they don’t have an agent working for them to get a better deal.”

Shaiken also cautions about counting the UAW out too early. “Things change,” he says. “People thought in the 1930s unions were going to go away because of the rise of the manufacturing sector.

“With the internationals, what happens when their workforces age? The industry remains a (physically) tough place to work. So it doesn’t rule out the possibility for the union at the internationals.”

– with Dave Zoia and Jim Mateja

bpope@wardsauto.com

emayne@wardsauto.com