After Ford Deal Is Done, Chrysler, GM Up Next
GM needs to negotiate a more flexible contract with the UAW
DEARBORN, MICH. — THE Ford Motor Company's tentative contract with the United Autoworkers Union (UAW) will face its first challenge early this week when the UAW's 200-member Ford National Bargaining Council decides whether or not to endorse it.
Council approval would almost certainly lead to ratification by Ford's 96,000 union workers when they cast their own votes later this month.
But union bargainers will not have time to celebrate; they still have to negotiate contracts with the other members of the Big Three. Talks with General Motors Corporation and Chrysler Corporation were put on hold early this month when the union focused its attention on Ford. Contract unchanged
Industry observers say that the union will next set its sights on Chrysler. If the past is prologue, the UAW will demand that Chrysler - and then GM - accept the Ford contract essentially unchanged. ``We [have] no desire to change from negotiating a pattern agreement'' this time, said a haggard-looking UAW President Owen Bieber, as he wrapped up the final 40-hour bargaining marathon at Ford.
That prospect troubles GM executives. The giant automaker has been losing billions of dollars in recent years, most of it in North America. In the depths of the 1990-91 recession, GM's core United States operations were running up losses as high as $700 million a month.
GM's assembly lines are the least productive in the country, according to the Harbour Report, which studies manufacturing efficiency. There are several reasons why:
* GM's plants are operating well below capacity because its market share has fallen from 46 percent in the late 1970s, to just 35 percent today;
* The automaker's cars are not engineered to minimize assembly complexity;
* GM simply has more employees than it needs. Some of its plants have nearly twice as many workers as comparable facilities operated by Ford or Toyota.
When bargaining began last July, GM officials spelled out these problems to the UAW, giving union bargainers unprecedented access to company books. But the new Ford settlement does not appear to offer any language which will help GM trim costs. The only real breakthrough affects new workers, who will receive starting pay equal to 70 percent of what long-term employees receive. New workers will be phased up to full wages over a three-year period.
That is good news for Ford, which will have to replace about one-third of its aging work force over the next five years. But it does not do much for GM, which has to trim back its union ranks.
Making matters worse, the new contract increases pension benefits by $300 a month, and it renews a job security program guaranteeing laid-off workers 95 percent of their pay. That provision alone cost GM more than $3 billion during the life of the last three-year contract. GM needs flexibility
``GM finds itself in a very weak position, so it needs a contract that's much more flexible than Ford's,'' cautions James Womack of the Massachusetts Institute of Technology and author of the auto industry reference book, ``The Machine That Changed The World.''
GM could, of course, try to break the pattern, but that strategy has not worked well in the past, and GM knows that if it forced a strike, it would most likely lose even more market share as a result.
But some industry observers suggest that things may not be as bad as they look. They point out that the 1990 contract was also intended to preserve jobs. But with union acquiescence, GM has been able to cut its headcount from 329,000 to just 265,000 during the last three years alone.
It also has been able to sell off some of its weaker component subsidiaries, where union wages were making it difficult to compete against outside, non-union suppliers. Last week, GM agreed to sell five plants in Michigan and New York to a newly-formed company called American Axle and Manufacturing.
``Practically speaking, the contract will be enforced differently at each of the Big Three,'' says John Casesa, an auto analyst with Wortheim Schroeder & Co., New York. ``The union will continue to allow GM to downsize at a faster rate than the contract says, so long as the company gives the union a sweet deal.'' That means that GM can downsize faster as long as workers are protected, either with higher pensions or through income security programs like the one created as part of the 1990 contract.
Why would the UAW bend the contract? GM is losing so much money it is having trouble developing the future products it needs to hold onto its current market share. Union leaders know that unless they help the automaker become more competitive, GM will have to trim its work force even more drastically in the future.