One Down, Two to Go--UAW may have upper hand in Ford negotiations

As the pattern-setter in this year's contract talks, DaimlerChrysler Corp.'s deal with the United Auto Workers union may give UAW President Steve Yokich and his team the upper hand in its negotiations with Ford Motor Co.

That's not to say a nasty standoff is imminent, times are still too good for either side to play that tough, but Ford's top executives likely won't get through talks this year without some sleepless nights.

Beyond DCC's agreement for 3% annual raises for the next four years is the automaker's deal with the UAW not to close, spin off, or dispose of any plant organized by the union. This will have little, if any, impact on DCC, but the wording gives the UAW considerable leverage in its negotiations with Ford, which wants to sell or spin off its Visteon Automotive Systems parts operations. Ford insiders say some at the company would have liked to spin off its parts operations long before negotiations began. Ford's slowness in deciding to do a spinoff is believed to be one of the factors that led former Visteon President Charles Szuluk to retire, despite pleas from Ford brass to stay put, sources say.

In the end, the UAW likely won't be able to prevent Ford from jettisoning Visteon - but the union will get the company to acquiesce to some type of side agreement that is acceptable to its membership. Any deal probably will mirror what the UAW is expected to get for Delphi Automotive Systems workers, which likely will be identical to GM's agreement.

Such an agreement could put Delphi and Visteon at a serious competitive disadvantage because they must now live with wage increases for the next four years. Certainly some of the pain for Delphi should be offset by the inside track it has with GM on contracts between now and 2002, but the bottom line is that Delphi will have a more difficult time competing with other suppliers on cost.

Providing things go smoothly at GM, Gary Cowger, GM's chief negotiator, could emerge as the miracle man for penning a settlement without having to shed a drop of blood. It appears GM executives finally understand that the real issues must be addressed on the local level. That means using new programs as a bargaining chip as a way to help solve contentious issues at certain plants.

Those worried the wage hikes could prompt the Federal Reserve to again hike interest rates like to point to a similar lucrative contract the UAW scored in 1978: it proved to be disastrous. That deal, done as a way to keep labor peace, unexpectedly turned costly when oil prices shot up, pulling inflation and interest rates along with it. Car sales went the opposite direction in a hurry and Chrysler Corp. nearly went bankrupt, wiping out thousands of jobs in the process.

But this isn't 1978 and both sides have learned much in 21 years. In exchange for the better wages, DCC autoworkers have agreed to boost productivity. This means workers are consenting to use technology more efficiently and are doing away with some of the old work rules that hurt productivity and manufacturing flexibility. In exchange, DCC will thin the workforce through attrition, not outsourcing. It's the start of what could be a model for the future.

The four-year agreement, rather than the traditional three-year pact, also helps auto companies better chart future business plans. The UAW gains too. It won't have to negotiate a contract in the same year it holds national elections. The longer pact also means the UAW and Canadian Auto Workers won't be negotiating contracts in the same year.

The CAW negotiated a three-year agreement with Ford that guarantees 3% annual wage hikes, an improved cost of living allowance that will add roughly another 1.5% a year, a $1,000 signing bonus and gains in pensions for past and future retirees. The deal, in many respects, is similar to the contract the UAW won with DCC, sans the profit sharing.

While not exactly a lovefest, this year's negotiations may indeed shape up to be the least contentious in recent history.