Payback Due for Sacrifices, UAW Tells Detroit Three

Along with a raise, the United Auto Workers is looking for a larger voice in investment decisions by General Motors, Ford and FCA U.S.

President Dennis Williams uses this week’s UAW bargaining convention in Detroit to lay out, in broad strokes, the union's position on a host of key issues. However, he declines to talk about specifics, telling reporters the union’s strategy and priorities will unfold during the negotiations. With sales and profits rising, tensions between the UAW and domestic automakers also are rising as union members push to regain some of the power they lost during the industry’s financial crisis that began even before the Great Recession of 2008-2009.

“This is our time,” Williams tells the union delegates. “UAW members from all sectors accepted concessions as many companies were threatened with bankruptcy and profits evaporated.”

Six years later, the outlook is far different and it’s time for union members to share in the prosperity their sacrifices have brought, just as executives already have done, he says.

This week’s clash at the GM assembly plant in Wentzville, MO, however, could presage potentially thorny negotiations for Williams and his leadership team as they try to push Ford, Chrysler and GM for pay increases for both first- and second-tier workers, more say in directing new investment and to reclaim other territory lost during the concession era.

GM moved to dismiss 41 employees at Wentzville over what was described as a web page maintained by union members as a protest over a job-rotation system where workers move from assignment to assignment. The rotation negates the seniority privileges that have been the cornerstone of local union contracts over the years.

GM spokesman William Grotz declines to confirm the firings. “GM Wentzville is working to resolve a local issue with employees. Since it is a personnel matter, our policy does not allow us to disclose specifics at this time,” he says in an e-mail.

Cindy Estrada, the UAW vice president in charge of the union’s GM department, also declines to comment. “We have some issues we have to work out there,” she says.

Wages are the overriding issue in the negotiations for a 4-year contract for more than 137,000 Detroit Three workers represented by the UAW.

Bridging the Gap

The theme of the bargaining convention, which the union has held every four years since 1958, was “Bridging the Gap,” a reference to the 2-tier wage system approved by UAW members in 2007 at the behest of domestic automakers in financial straits even before the global financial crisis struck the following year. The union believes the time has come to scrap the system.

“We have too many damn tiers,” Williams says in his address to the convention. Delegate after delegate rose to speak out against what they called a violation of the UAW’s basic principle of equal pay for equal work.

Under the 2-tier wage structure, a newly hired GM, Ford or FCA worker is paid $15.78 an hour and receives $19.28 an hour after four years. Workers hired before 2008 earn on average $28 an hour.

A new study by the Center for Automotive Research in Ann Arbor, MI, estimates FCA, formerly Chrysler, has used the 2-tier system to dramatically reduce labor costs. With more than 40% of FCA’s hourly workers coming on board since the last contract was negotiated in 2011, the automaker’s labor costs total about $48 per hour, according to the CAR estimate.

Meanwhile, Ford has been forced under its agreement with the UAW to begin promoting some workers from the second to the first tier with its $28-per-hour wage. GM also may have to start promoting workers from second to first tier.

The CAR study estimates per-worker hourly labor costs at GM are $58, followed by Ford ($57), Honda ($49), FCA and Toyota ($48), Nissan ($42), Hyundai ($41) and BMW ($39). The per-hour cost at Volkswagen is $38, ranking it last in pay despite the union’s intervention at the automaker’s Chattanooga, TN, plant.

The wage gap with Toyota and Honda adds about $250 to the cost of car built in a factory operated by GM or Ford, according to the study.

The CAR analysis re-ignites the controversy over whether excessive union contracts or mismanagement are at the root of the U.S. auto industry’s troubles over the past decade.

Some commentators rushed to say the study shows the UAW again will have to accept concessions, but Williams tells convention delegates inept management damaged the industry, which is why the union wants more say not only in where cars are assembled but where parts are sourced and where they are engineered.

“We need a greater voice in these decisions,” Estrada says. “We can't leave it to management.”

At the same time, the union is facing more pressure from the rising tide of imported auto components, which is lowering wages throughout the parts sector, according to the UAW’s book of bargaining resolutions.

The union also is facing other subtle and not-so-subtle pressure from the automakers.

GM disclosed this week it will build the compact Chevrolet Cruze in Mexico. The numbers are small but Williams acknowledges the growth of Mexican-made imports represents a serious challenge to the union’s ability to improve wages and benefits.

Some union delegates also privately express concern FCA CEO Sergio Marchionne is preparing to use plans for expanding Jeep production in the U.S. as a lever to extract concessions from the UAW. “He wants to push us into poverty, while he gets richer,” says one.

In one of the most impassioned speeches during the 2-day meeting, Kathy Smith, a delegate from the FCA engine plant in Trenton, MI, rips into the automaker’s alternative work schedule, which she says is detrimental to workers’ health and welfare and leaves them little time to meet family obligations.

Rank-and-File Riled

The delegates’ speeches were more militant than they were four years ago, notes longtime union activist Martha Gravatt, who served as an alternate delegate from UAW Local 869 in Warren, MI. Yet, the delegate-selection system serves to mute the sentiment from the shop floor, which if anything is even more militant and more frustrated by the 2-tier pay system and the growing pay gap between workers and top executives cashing in on increasingly larger compensation packages.

Williams and the rest of the union leadership must pay close attention to rank-and-file sentiment.  Margins of approval in ratification voting dropped in 2011 from 2007 levels and the contract barely was approved at then-Chrysler in 2011 only at the urging of the late General Holifield, then the head of the UAW’s Chrysler Dept.

In his eulogy at Holifield’s recent funeral, Marchionne praised the former union chief for his “vision” and “leadership.”

Williams has moved to improve communication with the rank-and-file, meeting with members on a more regular basis than his predecessors. The UAW president also makes greater use of social media.

“Negotiations are the art of the possible,” says Williams, who also wants companies to share more financial information with the union. At the same time, the union has to remain open to new possibilities, he says.

Third-tier contracts are not something the UAW wants to contemplate, but if an extra tier means bringing in more work from the outside, the union is prepared to listen, he says.

“There is a global economy,” Williams says. “Companies, regardless of who they are, cannot afford to make bad decisions. Nor can we not afford to listen to the facts and the reality.”