The UAW and Chrysler: Slouching Toward the Inevitable

The UAW and Chrysler: Slouching Toward the Inevitable

Despite the pressure of Chrysler’s April 30 deadline to pull off a rescue
package — or face potential bankruptcy — the United Autoworkers has
been in no rush to make concessions. “As I see it, the United Auto Workers union has a choice. They can [shed] some jobs or they can take a pay cut,” says a financial consultant based in Detroit. “Naturally when you’re faced with two bad choices, there is a natural tendency to procrastinate.”

The carmaker’s management is struggling to assemble a rescue package that in addition to any UAW givebacks will have to include closing more plants and getting big help from Italian carmaker Fiat, which would contribute its own small-car designs and technology. Failure would saddle major banks with $7 billion in new losses, leave Chrysler’s former owner, Daimler AG on the hook for more than $1 billion in additional pension costs and wipe out the health care for thousands of Chrysler retirees.

The foot dragging on Chrysler is affecting GM, too. In a Friday
conference call with the media, GM chairman Fritz Henderson lamented that GM’s own union negotiations are being slowed because the UAW won’t move forward until the Chrysler/Fiat negotiations are resolved. That makes sense: Whatever terms Chrysler gets will be a precedent for GM, too. GM faces a June 1 deadline from the U.S. government to produce sufficient cuts to ensure viability.

It’s understandable why the UAW isn’t rushing to embrace a new agreement. According to Harley Shaiken, a labor expert at the University of California at Berkley and occasional consultant to the UAW, the union and its Canadian counterpart are grappling with demands for big cuts in their wages and benefits — on the order of 25% to 30% — by Chrysler and Fiat. The
demanded rollbacks could reduce wages and benefits, presently pegged at $29 per hour, by $6 to $8 per hour. “There is no doubt these are very serious cuts and they’re being made under very tight deadlines and under very serious pressure,” Shaiken says. “That will be a bitter pill on either side of the
border,” he says. Neither Chrysler nor Fiat has made its demands public.

Many of the current negotiations trace back to the terms of the original
government loans. As a condition of Chrysler’s loan agreement, the UAW must accept a 50% reduction in payments to its retiree health care trust and
match the Japanese transplants’ hourly labor costs, says Chrysler
spokeswoman Dianna Gutierrez. “The Canadian government has taken a similar position as it relates to the CAW,” she notes.

Union representatives in the U.S., however, complain the current demands go beyond those spelled out in the December loan agreement. The union has already committed to eliminating productivity bonuses due this year and next, to changes in the way overtime pay is computed, and to the elimination of the traditional cost-of-living allowances as well as to cuts in the
special supplemental unemployment benefits for employees with less than 20
years seniority. Sources close to the negotiations tell TIME that the union
has not yet agreed to the changes in funding Chrysler’s health-care trust,
which was established in 2007.

With the negotiations in a crucial phase, UAW President Ron Gettelfinger
declined to discuss Chrysler. “He’s not talking to anyone,” a UAW
spokeswoman said.

Yet the UAW knows where things are headed. “I don’t think this is going
to have a very happy ending,” says one UAW official, who asked not to be identified. But he noted it was inevitable the union will have to accept
additional cuts. One of the union’s fears, though, is that the negotiations
turn into a sort of arbitrage that sets active Chrysler workers against
retirees — a split the UAW has always sought to avoid. “People are
angry. Where do you draw the line and say to hell with it and just let them
go into bankruptcy” says one disgruntled UAW member.

Some creditors seem to think the company’s assets could be worth more if they were divided up in bankruptcy court — an option opposed by
Michigan’s Democratic governor and congressional representatives, who are putting pressure on the Obama administration to keep the company from being broken up in bankruptcy.

In the meantime, Chrysler is melting away. In response to pressure from
Obama administration, Chrysler has proposed more plant shutdowns. Set to be closed, according to sources familiar with the discussions inside the company, are assembly plants in St. Louis, Mo., and Brampton, Ontario; engine plants in Detroit, Trenton, Mich., and Kenosha, Wis.; and another plant in Mexico that builds big engines. Chrysler’s assembly plant in Sterling Heights, Mich., also has been identified by some analysts as a possible candidate for closure. If executed, the shutdowns would further downsize a company that is already far smaller than it was only two years ago. Since the beginning of 2007, Chrysler’s employment in the U.S. has dropped from 68,000 to around 38,000 today.

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