Contract Talks 1999Deals define auto industry's future

Quick and peaceful. That pretty much sums up this year's contract talks between the United Auto Workers union and the U.S. Big Three. They're words not normally associated with negotiations, but then again the industry has never seen a sales pace like this year's.

Although things got surprisingly tense at Ford Motor Co. over the company's desire to spin off Visteon Automotive Systems, its parts unit, in the end it came down to neither side having the stomach to cut short the torrid sales run.

So the UAW walked away from the table with better wages and job security; the automakers with some room to trim workforces and costs. And as a bonus: workers, even General Motors Corp. hourlies still fuming about not getting a change in the profit-sharing formula, likely will end the year with larger profit sharing checks, so long as there are no production disruptions.

The wage hikes should temper some of that anger at GM, as the new contract guarantees a 3% wage hike for each year of the four-year deal, a signing bonus of $1,350 and decent boosts in pensions and cost-of-living adjustments.

It's generous, but not so much so that it will hurt DaimlerChrysler Corp., Ford or even GM. That said, if the industry goes into a slump or productivity doesn't increase, all bets would be off. The automakers likely would beg the UAW back to the bargaining table to reopen the contract, as has happened in the past.

The wage terms for labor peace, no doubt, will add to the hourly payroll at the Big Three, as much as 5% a year with wages and health benefits, analysts estimate, but automakers should be able to gain that back and more through attrition-related cuts. About half of the more than 360,000 UAW workers are expected to be eligible for retirement in five years.

GM should be able to trim its workforce by about 15% over the life of the contract, or about 5,200 workers in the first year. Although that's not as fast as the automaker would like - and isn't likely to change as the UAW tightened its job replacement formula in this contract. If employment drops below 80% of a set level in a bargaining unit, automakers will replace each job lost. That changes to one of every two vacated positions if the percentage is between 80% and 90% and one of every three lost jobs between 90% and 100%.

The contracts with DCC, Ford and GM's former Delphi Automotive Systems parts unit also include clauses that prohibit the companies from selling off or closing factories or parts of their businesses. This means that DCC workers at McGraw Glass will have at least four more years of work at that factory; same goes for workers at Ford's glass operations, which the automaker has longed to sell.

Unlike DCC, Ford and Visteon also agreed to allow card checks for union representation at any non-union factories it owns or buys after a majority of workers sign union cards, rather than requiring secret-ballot elections.

While details of the Ford deal haven't been formerly released, people familiar with the pact say it also guarantees Visteon's 23,500 hourly employees will remain Ford employees for life, keeping their current Ford wages and benefits should the partsmaking unit be spun off from Ford or sold.

Ford hasn't officially said it plans to spin off Visteon to its shareholders, but that likely will change once Ford's 101,000 U.S. workers ratify the contract.

But even with a Visteon spin-off, the UAW secured an agreement that guarantees anyone hired into Visteon will enjoy the same benefits and wage increases as Ford employees for the tentative deal just reached and the two after that, as well.

The same applies if another company buys Visteon itself. That's a better deal than the one GM cut for Delphi hourlies, which covers workers for only the next contract.

However, if Visteon is spun off, workers there will receive profit-sharing payments based only on Visteon operations. That's different than today where, as Ford workers, their profit-sharing checks are based on Ford's overall operations. Like Delphi workers, Visteon employees also retain the right to return to their former parent company if a position is available. But that can be done only once.

The deal removes a major hurdle for Visteon in its quest for independence, allowing it to more directly compete with rival Delphi, which was spun off from GM earlier this year.

Both companies, however, will be paying hourly workers at a much higher premium than independent suppliers. This could make winning business from automakers, other than their parent companies, a bit more difficult. Industry observers, however, say if Delphi and Visteon concentrate on specific component systems with technology that other suppliers can't match, hourly wages will take a backseat.

It's not exactly clear where the idea to offer Visteon workers the chance to remain Ford employees for life came from, but it had the full backing of Ford Chairman Bill Ford Jr., who has regularly stated that he regards Ford employees as part of his extended family. Mr. Ford was at the company's world headquarters during the tense part of negotiations, right up until the tentative agreement was reached, and is said to have played a key roll in keeping the union at the table well past the strike deadline.

It's a sweet deal for Visteon's unionized workforce, but perhaps not so comforting for white collar workers. This is because Visteon's salaried workforce didn't score Ford-for-life job guarantees, and should Visteon stumble after its ties to the mothership are severed, many could be looking for new work.

That isn't likely to happen, but that unknown quickly can hurt morale and force many to look for jobs elsewhere. Quickly placating its salaried workforce with stock options and other incentives to keep them on the job appears a likely strategy for Visteon.