The UAW Fights Its Image as the Villain of Detroit’s Woes

The UAW Fights Its Image as the Villain of Detroits Woes

It is particularly galling to the United Autoworkers that, in addition to
 numerous rounds of layoffs and givebacks dating back two decades, the union
 is being cast as the enemy in the U.S. auto industry’s fight to survive. 
”Our contracts with Chrysler, Ford and GM represent only 10% of the cost of
 assembling of a vehicle. But most days, it seems like we get 110% of the 
attention,” said UAW president Ron Gettelfinger in a recent speech. In the 
wake of GM’s most recent quarter, in which the company lost $9.6 billion — 
$30.9 billion on the year — the fight is getting more desperate. So the
 union is back at the table again, negotiating more relief for the Detroit 

The UAW’s image problem stems from the fact that it has been arguably much better at doing its job than the Big Three managements have been at theirs. Over the last 60 years, many of the benefits that both blue and white collar workers hold dear were won, or expanded, by the UAW. That includes pensions, early retirement, overtime, total healthcare coverage and paid holidays. At Congressional hearings in November over a proposed bailout bill, there was palpable contempt for the UAW from Alabama Senator Richard Shelby, whose state is home to several transplant automakers. To him, the UAW seemed to consist of a bunch of overpaid featherbedders who couldn’t match hubcaps with workers at transplants like Toyota and Mercedes Benz, who did not enjoy the Big Three’s gold-plated benefits.

That criticism has lost its bite with autoworkers, considering that Toyota and other foreign makers are taking it on the chin just as much as Detroit. “This 
attitude, targeting the UAW as the bad guy here or the reason the auto industry 
is in rough shape — they think that’s unjustified, not warranted,” says David Lipsky, Professor of Dispute Resolution at Cornell’s School of Industrial and Labor Relations. And with some reason, says Lipsky, “They were innovative and creative: they built a comfortable lifestyle for middle class Americans. And now it’s turned out to be a house of cards.”

Faced with giving up benefits, the UAW will conciliate but not placate management, which strikes some Americans as uncooperative. But those so-called legacy costs, won fairly at the bargaining table, have big emotional value for the UAW. It’s what behavioral economists call the endowment effect, says Litsky: The UAW values what it fought for — even much maligned work rules — much more so than workers who have never had them. So they are not going to give up anything without a fight. In mid-February, the union actually stormed out of negotiations with GM over reducing the company’s retiree health care costs, as GM seeks to restructure costs with bondholders, suppliers, and, of course, labor.

The union has already made big concessions: the 2007 labor contract with GM transferred health care costs from the company to a union-run plan, and set 
up a lower wage structure for new hires. The company is asking for more 
because it has no other choice given the devastating drop in sales.

As Roger Lowenstein describes in his book, While America Aged, it was the
 remarkable UAW president Walter Reuther who won womb-to-tomb healthcare coverage and retirement benefits for the rank and file. Reuther was an early advocate of universal healthcare coverage, which was not going to fly in Washington. So he willingly traded small pay raises for deferred 
compensation in the form of pensions and retirement healthcare. The Big
 Three gladly signed on because the tradeoff held down cash wages — and because they were lushly profitable companies, controlling 90% of the U.S. car
 market. Executives never conceived of a day they might run out of money. One 
result, though, is that GM, has paid out more than $100 billion in retiree
 and health care costs in the last 15 years, and is now facing $47 billion in 
future retiree healthcare payments.

Reuther, who was worried about rising healthcare costs as far back as the 
1950s, feared that the auto companies would one day not be able to meet 
their obligations. That that day is here is one reason the UAW made yet
 another concession. It reached an agreement with Ford to change the way the
 company contributes to the retiree health care fund administered by the UAW. 
Instead of cash, Ford now has the option of issuing stock to fund up to 50%
 of the Voluntary Employee Beneficiary Association, or VEBA. It means that 
the health of UAW members is tied directly to the health of Ford. “Our 
bargaining team stepped up to confront numerous challenges,” said UAW Vice 
President Bob King, who heads the union’s National Ford Department, in a 
statement. “They’re to be commended for their hard work under difficult 
circumstances.” Circumstances that only seem to get more difficult by the 

Read more about the CEOs behind Detroit’s Big Three

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