By Nick Zieminski - Analysis
DETROIT (Reuters) - Here in the Motor City, both automakers and their unions are singing the blues, and they are largely carrying the same tune.
Unions, traditionally a thorn in the industry’s side, are now doing whatever they can to help automakers weather an unprecedented storm of falling sales, shrinking market share, soaring raw material prices, and a rapid shift in customer
tastes toward smaller and more fuel-efficient vehicles.
Their support -- which includes vocal backing for U.S. government loan guarantees the automakers see as crucial -- suggests organized labor is one problem Ford, GM and Chrysler do not need to worry about right now, executives and union leaders told the Reuters Autos Summit in Detroit this week.
“We made a lot of concessions,” said Ron Gettelfinger, who heads the United Auto Workers union, which represents the bulk of Detroit’s hourly workers. “We’ve had our teeth kicked out over the years.”
Automakers cannot get out of their current predicament by squeezing labor any further, he said, after the UAW last year agreed to landmark benefit cuts and a two-tier wage system that reduced costs by billions for Detroit’s Big Three.
“They have been critical of us. But here lately you haven’t heard a lot of that I don’t think,” Gettelfinger said, citing the tone at an industry conference last month. “Management people called me and said, ”My God, you wouldn’t believe it. This is the first year they never criticized the UAW.“ So I think we have done our part.”
Many industry CEOs agree. Ford Motor Co (F.N). chief Alan Mulally said the company did not need to ask the UAW for further concessions.
“We are very pleased with our last contract negotiations,” Mulally said. “It was a transformational agreement on wages and benefits, and really is an enabler for us operating profitably here in the United States.”
Dick Dauch of American Axle & Manufacturing Holdings Inc (AXL.N). -- which this year was able to cut union wages to about $33 an hour from $73, after a prolonged strike -- said the parts supplier is on track to cut its workforce and close plants, saving some $350 million a year.
“We have no more labor issues -- 2008 to 2012. Labor is no longer a restrictor for us,” Dauch said.
The shift comes amid broad declines in union membership. Last year, about 12 percent of Americans were part of a union, according to government data, compared with more than 20 percent a generation ago. UAW membership, at about 465,000, is the lowest since World War II. It has fallen by a third from 2001 and is down by two-thirds from its 1979 peak.
Those losses could reverse if a Barack Obama Democratic administration next year signed the Employee Free Choice Act, legislation blocked for years by Republicans, that would make it much easier for workers to form unions.
With its 2007 agreement and its subsequent flexibility, the UAW has shown willingness to adapt to tough economic times.
“There’s a lot more rational understanding at the unions, that it’s not one size fits all,” said Thomas Stallkamp, an industrial partner at New York private equity firm Ripplewood Holdings and a former president of Chrysler.
“I‘m more encouraged that the union will see they need to be more flexible at a given plant,” he said.
Last year, besides agreeing to wage concessions, the Detroit Three signed a landmark health-care deal with the union, under which responsibility for retiree health care would shift to a new UAW-aligned trust fund known as a voluntary employee beneficiary association (VEBA).
Within the framework of that agreement, UAW was willing to give General Motors Corp (GM.N) a break and delay some payments to fund VEBA until the 2010 start of the plan.
“It was a win-win,” GM President and COO Fritz Henderson said. “We have done those things, and I would say at this point we are on track to implement the agreement.”
Once the U.S. economic picture improves, any new hiring by the Big Three also will likely be at much lower pay scales. So-called second-tier workers could make the automakers much more competitive with foreign, non-union carmakers.
“For the new folks who would be added, they’re reasonably close to parity,” said Pete Hastings, credit analyst with Morgan Keegan.
Government loan guarantees of $25 billion are crucial to the industry’s turnaround, executives and union leaders say.
That money, approved by Congress in last year’s mammoth energy bill, will be available for development of alternative energy technologies for greener, more fuel-efficient vehicles.
The money could include a boost for the union, if job guarantees are included as a condition for the loans, said industry consultant Erich Merkle of Crowe Chizek.
“Job security is always very high on the part of the UAW and that is probably going to be the trade-off,” Merkle said.
Ultimately, even cutting labor costs further would not solve the issue of U.S. automakers’ inability to compete with Asian rivals, said Buzz Hargrove, who retired this month after 16 years as president of the Canadian Auto workers.
“You can work for nothing and you won’t solve the problem if people are not buying the vehicles,” Hargrove told the Summit on Wednesday.
(For summit blog: summitnotebook.reuters.com/)
Editing by Carol Bishopric