Detroit's new opportunity
The decision by the United Automobile Workers union to consider reopening current labor contracts with General Motors and Ford represents an historic moment for the beleaguered US car industry. The UAW leadership would presumably not have scheduled a meeting for next Jan. 8 even to consider such a course of action unless it felt there was solid support for renegotiation within the rank and file. Both management and labor deserve support in their endeavor to make Detroit once again competitive.
Cost differential is one of the primary reasons for the popularity of Japanese cars vis-a-vis US products. Because of modern manufacturing methods plus a wage scale that is something like $8 an hour below US rates, Japanese firms are able to turn out a quality car at roughly $1,500 below the price of a comparable US car. If the US is ever to recapture its competitive edge it will have to step up its belated drive for plant modernization as well as get control over the high management and labor costs that have been built into the production system.
Concessions must be balanced and not one-sided. That, in fact, appears to be already happening. Just last week General Motors announced significant reductions in wages and benefits for its 138,000 management (salaried) employees. Ford, meanwhile, had made similar reductions a few weeks previous.
Auto workers might well emulate the attitude of one UAW official who said that GM's action adds up to ''an important signal to us.'' If management is willing to consider such drastic steps, production workers should consider similar cuts.
One sticking point will likely involve dividend payments, which some union members would like to see cut or even temporarily suspended as a sign of ''equity.'' While such a step warrants consideration the union should consider any changes regarding dividends cautiously.
Take the case of GM. Its dividend was slashed from $1.15 to 60 cents in the second quarter of 1980 and has remained at that rate since. For 1979 the total dividend payout was $5.30, dropping to $2.95 in 1980, and $2.40 for 1981. But, given inflation, a constant payout has in effect meant a cut in the actual value of each payment. Moreover, so far as suspending dividends is concerned, GM notes that it has never failed to make a payment, even in the worst years of the depression. Confronted with such a suspension, stockholders might put their investment dollars elsewhere. That would only hurt the company and, in the long run, work to the disadvantage of those employees still on the production lines.
What is beyond dispute, however, is that management and labor must find additional ways of slashing costs. Corporate officials should be called upon to take even further reductions in their still sizable benefits. Labor must be willing to make its share of sacrifices. Detroit now has a remarkable opportunity. If it takes advantage of the moment, the result could translate into lower costs - and the possibility of rising profits down the road for everyone.