7/1/2007 | 3 MINUTE READ

Insider: Let Cooler Heads Prevail

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This month, leaders from the United Auto Workers union and the U.S.


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This month, leaders from the United Auto Workers union and the U.S. Big Three will gather around tables at their respective companies to hammer out national bargaining agreements. The talks will start with the proverbial handshakes over the bargaining table, but it’s more likely we’re going to see fists flying once the cameras are turned off and everyone gets down to business.

To call this round of contract talks critical would be a major understatement. We have seen Chrysler get sold off to a group of investors who have one goal in mind: make money. Ford doesn’t seem to know where it wants to go, and has major gaps in its future product plans. While GM may be on the road to curing some of its ills, it’s still not out of the woods when it comes to cost competitiveness, especially because of retiree healthcare and pension costs. Yes, the union has agreed to givebacks for both GM and Ford to reduce their legacy and future healthcare costs, but even GM Chairman Rick Wagoner admits that more has to be done to control the more than $4 billion GM will spend on healthcare this year alone.

Cool heads will have to prevail here, with the union agreeing to more cutbacks in terms of healthcare coverage. Co-pay increases and deductibles for certain procedures will have to be put in place to keep costs down, while the union and the auto companies will have to work together to encourage workers to live healthier lifestyles. Why not charge smokers more for their healthcare tab? What about providing a discount to those workers who sign up for a health club membership or use personal training services? Forcing a change in an individual’s behavior by hitting them in the pocket book is the only way to effect real change.

It’s not just healthcare, however, as automakers have begun to demand work rule changes out of the union, with threats of moving production of certain products to other plants where workers would be amenable to accepting flexible work schedules and rules. The Big Three have discovered it may be beneficial to pit plant against plant in this dire age of layoffs and cutbacks. In some cases, particularly for GM and Chrysler, it may be working. Just ask workers at GM’s Fairfax Kansas City, KS, and Lordstown, OH, plants as they watched installation of new tools and equipment come to a halt after the union and GM could not agree on outsourcing and flexibility issues. Workers at Chrysler’s Sterling Heights, MI, assembly plant are keenly aware that they remain on the job as a result of work rule changes. Chrysler said it studied moving production of its Dodge Avenger, Chrysler Sebring and Sebring convertible to Mexico to save money, but that plan was averted thanks to the union membership’s decision to change work rules.

It will be imperative for the union to give some ground here, too, if they want to have a future. Making plants more flexible means job security in the long run and could send a message to foreign automakers that the union is not the roadblock to progress it has been labeled. The union has been willing to show some movement on these issues and it should continue to foster flexibility within its ranks. After all, the more skills and knowledge an employee gains, the more critical they are to the organization. And in line with this, perhaps the union should have a seat on the powerful committees that decide on future products.

The jobs bank—where idled workers make up to 80% of their wages without having to work—is going to be another thorny issue for both sides. This has to go, no questions asked.

Finally, the auto companies will have to provide the union with some rewards, as well. As the workers have forgone wage increases in recent years, it will be vital for automakers to provide moderate wage increases for the length of the contract, while providing more financial incentives for specific performance improvements—i.e., results in the annual Harbour Report and J.D. Power surveys. Creativity will also have to prevail on the financial-incentive discussions. One idea could be to increase tuition payments for the children of hourly workers, which could provide the auto industry with desperately needed engineering talent in the future and a sustained customer base.

The one thing the industry does not need right now is for either side to dig in their heels and refuse to budge. A walkout will result in lost jobs and maybe even lost enterprises. That would be detrimental to everyone and benefit no one. Working together is the only way the industry will survive for another 100-plus years. Without shared sacrifice, everyone might as well pack up their desks and turn the lights out.