Is Bailout Possible Without UAW Concessions?

The UAW and automakers want a loan, but union doesn't want to give up too much.

ByRussell Goldman
November 17, 2008, 6:36 PM

Nov. 18, 2008— -- The Union of Automobile Workers and Detroit's Big Three want the same thing -- speedy congressional action to bail out the U.S. auto industry.

UAW President Ron Gettelfinger appears before Congress today, along with the leaders of GM, Ford, and Chrysler to ask for $25 billion in new loans.

But before Congress hands over billions of dollars to prop up a failing industry that some members believe should be left to die, lawmakers are going to want to know they're making an investment in companies that will use taxpayer funds prudently.

As the union joins GM, Ford and Chrysler in seeking emergency funds, it is also fighting to preserve jobs, wages and benefits for its members -- a position some observers say is untenable, given the industry's dire situation.

"Whatever they say, the union already knows everything is going to have to be different," said Aaron Bragman, an auto industry analyst at Global Insight in Detroit. "The big question is: What are job cuts going to look like? Everything is going to have to shrink."

It is imperative for the union that the automakers are propped up rather than allowed to declare bankruptcy, a move that would abrogate their contract, putting them in an even worse situation than having to make concessions.

"We're not just talking about GM going bankrupt," said a UAW official not authorized to speak on the record. "We're talking about the implosion of one of the largest industries in America, on which much of the economy is based. These companies can't simply be left to fail."

Union membership has been cut in half, to 140,000 over the past three years. Gettelfinger sold his members on a new contract in 2007, in which the union says they already made many concessions.

Impact on Auto Workers

"We already made huge concessions in 2005 and 2007," said Alan Reuther, director of the UAW's Washington, D.C. office. "Workers have already made significant sacrifices and we've seen nothing of the sort from management. We've stepped forward already, but the companies haven't."

In the last contract the union took over paying pensions to retired workers and agreed to reduced health care benefits and lower wages beginning in 2010.

Gettelfinger and others in the union blame the slumping economy, not the cost of labor for the companies' decline. Under the current contract, workers earn $27 an hour, not including benefits.

"GM has already done what companies do when they're in bankruptcy," said the UAW source. "Their income has been cut in half and it nothing to do with the cost of labor. Arrested car sales have nothing to do with the problems in the industry people have been talking about for years –- quality, fuel efficiency. They have to do with a sluggish economy."

Bankruptcy would only make a bad situation worse, this person said. "No one is in the market to buy a car right now and they're not going to change their mind if the companies actually declare bankruptcy. Who would buy a car from a company in bankruptcy? People would say, 'Will I be able to get parts? Will I be able to get service?'"

But that argument is gaining little traction, especially among Republicans.

Sunday, on ABC's "This Week," Gov. Arnold Schwarzenegger, R-Calif., told George Stephanopoulos that workers pay and benefits were "maybe too high."

"I think it's very important to not just put money in, but let's go and see if they have been fiscally responsible, and if they're really operating the right way. Because right now ... the auto workers ... the benefits and all of those things, are maybe too high. Right now, if you compare it to Germany and to Japan and to other countries, they can build cars cheaper, and they don't have that overhead with the amount of what they pay to the workers, the benefits they provide," he said.

"In America, you sell a car, and $2,000 of each car just goes to benefits," he said.

Union officials say the 2007 contract put workers pay and benefits in line with Japanese and European employees, but American manufacturers have been criticized for not using their workers as productively as foreign firms.

As the economy craters and car sales decline, workers at plants owned by the Big Three are sent home when work slows. Facing similar conditions, American workers at Toyota plants in the U.S., however, use that time to learn new ways to maximize efficiency.

Future of the Auto Industry

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