Contract Negotiations Overwhelm UAW, Big Three

Contract negotiations between Detroit automakers and the United Auto Workers (UAW) union formally began Friday with a ceremonial handshake between Chrysler CEO Tom LaSorda and UAW President Ron Gettelfinger at Chrysler headquarters, reported Detroit News.

Amid the escalating difficulties surrounding the auto industry, the Big Three and UAW has to start talks and finally settle on a worthy pact that would alleviate the condition of both the workers and the auto companies in the United States. Apparently, the future of the industry is at stake here hence a timely resolution is needed.

The News said that automakers want to eliminate a $30 gap in hourly labor costs that puts them at a competitive disadvantage with their Japanese rivals. On the other hand, the UAW union is equally committed to protecting hard-won wages and benefits, especially after agreeing to unprecedented concessions in recent years on health care, factory work rules and job cuts.

"The talks for decades have all been critical," said Harley Shaiken, a labor expert at the University of California, Berkeley. "These talks are more important, possibly defining for the industry, for the union and also for the economy. The key issue is can we have competitive firms and middle-class jobs?"

The negotiations are inspired by the workers desire to win positive change in the auto industry. The Delphi Corp., the Troy-based parts supplier, along with other manufacturers, is reorganizing under Chapter 11. DaimlerChrysler AG is selling the Chrysler Group to Cerberus Capital Management LP, a private equity firm. Furthermore, the Big Three are restructuring to cope with its previous losses and to compete tightly with foreign automakers.

"Today, the domestic auto industry faces unprecedented challenges," LaSorda said in a statement. "We can no longer afford to conduct business as usual."

Meanwhile, UAW is entertaining bargaining in an effort to save jobs and protect its membership from grave erosion. Domestic automakers experiencing detrimental sales doldrums have slashed jobs and closed plants to dramatically cut costs. To note, since 2003, domestic automakers have slashed tens of thousands of jobs.

"We're going into these negotiations as we do every set of negotiations and look out for the best interest of our active and retired members," Gettelfinger said in a news conference.

Negotiations at GM and Ford will open Monday, said The News. The Big Three is expected to push hard for cuts in health care costs, particularly for retirees, which represent the biggest chunk of the gap in labor costs with foreign rivals. The matter is not as easy as installing a GMC Yukon Cap & Rotor kit – it is as complex as overhauling an entire lineup.

Chrysler executives say its health care costs are expected to reach $2.27 billion this year, up from $2.18 billion in 2006. "Could we use some help in that regard?" John Franciosi, Chrysler's vice president of employee relations, said last Friday. "Yes, we could use some help." But the biggest help will come from government health care reform that could alleviate a bulk of the cost pressures, he said.

"Our competitors, the Japanese transplants, have government policies that take care of their active and retiree health care, and pensions, for that matter," Franciosi said. "So they've got government policy that gives them a competitive advantage."

Gettelfinger said that agreeing to the concessions at GM and Ford was "one of the most painful things" he has had to do because of the impact those terms had on retired workers. "We've been working with the companies to get them where they need to be," he said. "And they're going to be strong, vital companies in the final analysis." A number of UAW officials added that sacrifices will be necessary.