U.A.W. Makes Concessions in Bid to Help Automakers

By BILL VLASIC and NICK BUNKLEY?? Published: December 3, 2008?? From www.nytimes.com

WASHINGTON — The United Automobile Workers union said Wednesday that it would make major concessions in its contracts with the three Detroit auto companies to help them lobby Congress for $34 billion in federal aid.
The surprising move by the U.A.W. could be a critical factor in the automakers’ bid not only to get government assistance, but also to become competitive with the cost structure of nonunion plants operated by foreign automakers in the United States.

At a news conference in Detroit, the U.A.W.’s president, Ron Gettelfinger, said that his members were willing to sacrifice job security provisions and financing for retiree health care to keep the two most troubled car companies of the Big Three, General Motors and Chrysler, out of bankruptcy.

“Concessions, I used to cringe at that word,” Mr. Gettelfinger said. “But now, why hide it? That’s what we did.”

Labor experts said the ground given by the union underscored the precarious condition of the Detroit companies, as the U.A.W.’s own prospects for survival are also in doubt. “It is an historic and awfully difficult moment for the U.A.W.,” said Harley Shaiken, professor of labor studies at the University of California, Berkeley.

The union’s willingness to modify its 2007 contract came a day after G.M., Chrysler and the Ford Motor Company submitted business plans to Congress in support of their loan requests.

Those efforts won praise from President-elect Barack Obama, who said the automakers had offered “a more serious set of plans” to save the industry.

G.M. and Chrysler have both said they are dangerously close to running out of cash to run their operations by the end of the year. Ford is somewhat healthier, but is also seeking government loans.

The chief executives of the Big Three, along with Mr. Gettelfinger, are to appear before Congress on Thursday and Friday in hopes of building support for emergency assistance.

Democratic Congressional leaders have said that they want to help the automakers and that they were heartened by the gesture of contrition that the executives made by driving to Washington — rather than flying on corporate jets, as they did two weeks ago — and by the more comprehensive plans submitted by the companies.

But the political climate on Capitol Hill is still doubtful for the automakers, and only seemed to worsen on Wednesday with a new CNN poll showing a majority of Americans opposing a taxpayer rescue.

As a result, there is growing concern among the Democratic leadership that they will simply not be able to drum up enough votes to pass an aid package next week, and that to do so will require a major lobbying effort by President Bush and Mr. Obama.

“We don’t have a good sense from our members that this is something they want to do,” a senior House Democratic aide said. “It’s going to take Bush and Obama calling people.”

Many conservative Republicans remain staunchly opposed to any further corporate bailouts by the government, and some are openly calling for Congress to let one or more of the automakers go into bankruptcy.

“Not only should bankruptcy be an option for domestic automakers, but it is considered by most experts to be the best option,” Representative Jeff Flake, Republican of Arizona, said in a statement on Wednesday.

Many lawmakers are reluctant to approve another large expenditure of taxpayer money to prop up private corporations, especially given the mounting criticism of the Treasury’s $700 billion stabilization program for the financial system.

On Wednesday, the Senate majority leader, Harry Reid, said there did not seem to be enough support in Congress to use that fund to help the auto companies. “I just don’t think we have the votes to do that now,” he told The Associated Press.

Two weeks ago, the Detroit executives left Washington empty-handed after skeptical lawmakers refused to approve federal aid until they heard detailed plans on how the companies could be viable in the long term.

Other lawmakers were withholding judgment on the plans until after hearings by the Senate Banking Committee on Thursday and the House Financial Services Committee on Friday.

But the automakers’ hopes for aid were buoyed by the positive comments on Wednesday from Mr. Obama. At a news conference on his latest cabinet appointment, Mr. Obama said the new plans were an indication that the Detroit companies were responsive to earlier concerns raised by lawmakers.

“I’m glad that they recognize the expectations of Congress, certainly my expectations, that we should maintain a viable auto industry,” Mr. Obama said. “But that we should also make sure that any government assistance that’s provided is designed for and is based on realistic assessments of what the auto market is going to be and a realistic plan for how we’re going to make these companies viable over the long term.”

The new plans were also being studied by officials in the Bush administration, which has yet to come to an agreement with lawmakers on how to finance a loan package for Detroit.

In its plan to Congress, G.M. said it would significantly reduce jobs, factories, brands and executive compensation in a broad effort to become more competitive with American plants operated by Toyota, Honda and other foreign auto companies.

But G.M.’s president, Frederick Henderson, said it was also important for the company to get help from the U.A.W. to close the gap with its foreign competition.

Currently, the average U.A.W. member costs G.M. about $74 an hour in a combination of wages, health care and the value of future benefits, like pensions. Toyota, by comparison, spends the equivalent of about $45 an hour for each of its employees in the United States.

Base wages between the Big Three and the foreign companies are roughly comparable, with a veteran U.A.W. member earning $28 an hour at the Big Three compared to about $25 an hour at Toyota’s plant in Georgetown, Ky. (Toyota pays less at its other American factories.)

But the gap in labor costs becomes larger when health care, particularly for thousands of retirees and surviving spouses, and job security provisions are considered.

Mr. Gettelfinger said Wednesday that the union would suspend the much-criticized “jobs bank” program, which allows laid-off workers to continue drawing nearly full wages.

He also said the union would agree to delay the multibillion-dollar payments to a new retiree health care fund that the automakers were scheduled to start making next year.

Beyond those two concessions, Mr. Gettelfinger said the U.A.W. would be open to modifying other terms of its contracts. Changes could include reductions in wages, health care or other benefits, and would require approval from union members.

Suspending the jobs bank program, which supports about 3,600 workers, removes one of the most politically sensitive union perks from the discussions in Washington.

“The jobs bank has become a sound bite that people use to beat us up,” said Mr. Gettelfinger. In the last five years, the U.A.W.’s membership at G.M., Ford and Chrysler has declined to 139,000 workers, from 305,000, because of plant closings and a series of buyout and early-retirement programs.

Both G.M. and Chrysler have said they are not considering bankruptcy as an option to restructure their businesses because of the damage a Chapter 11 filing would do to their reputations with consumers.

Mr. Henderson said that G.M.’s restructuring plan included cutting up to 30,000 more jobs in the next few years, as well as closing another nine factories in North America. He stressed that cooperation from the union would be crucial in the company’s overall efforts to match Toyota in labor costs by 2012.

A G.M. spokesman, Tony Cervone, said Wednesday that the U.A.W.’s offer to make modifications in its contract would help the automaker survive its current financial crisis.

“Clearly the U.A.W. and Ron Gettelfinger have shown a willingness to work with the industry to restructure and make it fully competitive going forward,” Mr. Cervone said.

Ford’s chief executive, Alan R. Mulally, said in an interview Wednesday that Detroit needed the union’s help to speed its transformation, particularly in replacing current workers with entry-level employees who will be making $14 an hour in wages under the terms of the 2007 labor agreement.

He said that suspending the jobs bank program was also important for cutting costs. “That would contribute to us closing the gap,” Mr. Mulally said.

The Detroit companies will remove billions of dollars in financial obligations from their books when the U.A.W. health care trust takes over responsibility for the medical bills of retirees in 2010. But delaying payments to the trust by the companies is a more pressing concern for the automakers.

G.M., for example, is scheduled to make a payment of $7 billion to the health care trust before the end of next year. The U.A.W.’s offer to delay that payment will significantly help G.M.’s cash flow as it tries to recover.

“Taking retiree health care off the books will save the companies billions and billions of dollars,” said Mr. Shaiken. “By not paying into the trust next year, it won’t postpone the trust, but it will save G.M. and the others a lot of money for now.” At the U.A.W. meeting in Detroit, union officials described their members as extremely anxious about the prospect of more concessions but at the same time afraid of what would happen if the union did not aid the automakers.

“We’ve helped them before, but it seems like they always come back to us,” said Shane Colvard, chairman of Local 2164 in Bowling Green, Ky., where G.M. builds the Chevrolet Corvette sports car.

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