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COMMENT: All eyes on Chrysler HQ as UAW talks start

By Graeme Roberts | 25 July 2011

The doors go on a Dodge Avenger at Chryslers Sterling Heights factory

The doors go on a Dodge Avenger at Chrysler's Sterling Heights factory

The United Auto Workers union and Chrysler have begun formal negotiations in a very different world from four years ago when the contract between the workers and the automakers was last renewed.

Chrysler as we knew it. Gone. Now controlled by Fiat after Chapter 11 bankruptcy and a period of US government control and ownership after a pre-bankruptcy spell in the hands of private equity investors. General Motors. Today it's 'new GM', run by new brooms, two CEOs and a substantial chunk of the company now, called 'old GM' and being unravelled by bankruptcy specialist accountants, having been given the heave-ho in recent memory.

Lots of plants have closed and some of those that remain have two-tier pay scales on which new hires earn far less than old UAW hands. The transplants - relatively new, foreign-owned car plants, mostly in the south, far from Detroit and its entrenched views on management v labour - remain largely 'unorganised', non-union workplaces.

Plus there's a new man at the top of the UAW. Bob King has made it clear he wants some return for the numerous 'give-backs' his union conceded to the Detroit Three when times were tougher. Such as that aforementioned two-tier pay scale. There have been recent reports of renewed attempts to get the transplants organised.

Historically, the UAW targets one automaker for the first round of talks and, once agreement is hammered out, the same deal is agreed, with minor variations, with the other two. This year Chrysler gets first go.

On Monday morning (25 July), EST, it was all smiles for the cameras as UAW leaders King and General Holiefield prepared for talks with Chrysler's manufacturing chief Scott Garberding and employee relations head Al Iacobelli. Oh to be a fly on the wall about now.

"It’s been four years since our last round of negotiations with the UAW, and since then, a lot has changed for our industry, and for Chrysler," the automaker said ahead of the talks. 

"We appreciate that the UAW has been engaged and supportive of the changes that have been made in order to ensure the long-term stability and profitability of the company. 

"This year… with these negotiations, we have the unique opportunity to protect and secure Chrysler Group’s future competitiveness. This includes growing jobs intelligently by keeping labour costs competitive. While the industry and Chrysler have demonstrated some improvements to date, those gains have been modest and it is imperative that we not return to an uncompetitive state.

"Negotiations are all difficult, and this one is no exception. We are committed to continue to work together with the UAW to do what’s necessary to build a strong and secure Chrysler Group."

King told the Detroit News his union and the company understood they owed it to the American people — who bailed the automaker out in 2009 — to work together constructively and prove that they have learned the lessons of their past mistakes.

"We collectively feel we have a huge responsibility to the American public," he said. A competitive agreement with Chrysler would lead to more job creation.

Iacobelli  said:"We have a responsibility to ensure that we do not go back to the old formulas."

The paper noted a new spirit of cooperation was demonstrated by representatives from both sides wearing identical maroon jackets with the logos of both Chrysler and the UAW.

"We've gone through a lot together," Holiefield, the UAW's VP and head of the union's national Chrysler department said. "We're going to continue to forge ahead."

Gaberding said the company was focused on deploying Fiat's 'World Class Manufacturing' system.

Some previous UAW-automaker pacts have been agreed only after unrest. In 2007, Chrysler workers walked out for few hours before a deal was clinched.

"We know that if we continue to talk and continue to negotiate, we can work through anything," Holiefield said. "I'm very certain we will."

The UAW cannot strike Chrysler this time around, the Detroit News noted, under the terms of the government's bailout. If the two sides reach impasse on any issue, their only recourse will be binding arbitration. Both sides have said they want to avoid that.

The union cannot strike General Motors though it could hit Ford. But King said he does not intend to disadvantage any company.

"We're not thinking about strikes. We're not thinking about a strike target," he said. "That's old thinking."

Such attitudes have been reflected overseas. This year's rounds of wage talks in South Korea passed without the lengthy stoppages and violent confrontations that have occurred in previous years.

Nonetheless, US automakers want to reduce labour costs further. According to the Wall Street Journal, they remain at a significant competitive disadvantage to southern transplants even after restructurings put Detroit Three costs on a par with some US Toyota and Honda plants.

Ford costs an hour of UAW labour at US$58, GM about the same and Chrysler $49. That, the WSJ noted, citing labour experts, compares to about $27 at Volkswagen's new Chattanooga, Tennessee factory and Hyundai's in Montgomery, Alabama.

Marty Mulloy, Ford's vice president of labour affairs, was optimistic the negotiations wouldn't be contentious. "We have a history of working collaboratively together to find solutions to critical issues."

The UAW has vowed not to give further concessions, but one key factor in this year's talks is that the three Detroit companies are expanding and adding union jobs as US car sales recover.

Some company executives hope they will be able to trade promises of jobs for further cost reductions, people familiar with the automakers' thinking told the WSJ.

It's going to be an interesting week.