UAW On The Spot
These are interesting times for Ron Gettlefinger and the United Auto Workers. What at first blush appears to be a golden opportunity for the union, is a double edged sword.
Last Thursday, Kirk Kerkorian's Tracinda Corp made a public bid to buy Chrysler that includes an offer to have the UAW take an equity stake in the company. Once the word got out, people in the industry at the New York Auto Show started speculating the UAW will jump at the chance to own part of the big 3. After all, the union has complained for years the problem with the big 3 isn't the inefficiencies and high labor costs in the American auto plant, it's the product management is pumping out. In essence, the union has been saying, "Design and build better cars and trucks and do some better planning, then the big 3 will bounce back." What better way to ensure the company is on the right path than a seat on the board and partial ownership of the company.
Well, since Tracinda first brought up the idea of the union stake, the UAW's reaction has been tepid at best. Partially because that's how the UAW operates under Gettlefinger- keep thoughts about possibilities out of the press. But there's another reason why you may not hear the union jump on the idea of owning part of Chrysler: taking a stake is not a guarantee of better times, and it may complicate negotiations with Ford and General Motors.
First, let's address this idea of UAW ownership ensuring Chrysler is a better run company. Employee ownership did not stop United Airlines from sliding into bankruptcy a few years ago. The unions there knew labor costs and inefficient work rules were draining the airline, but they still fought with management over concessions. Think it would be different in Detroit? And even if the UAW has a seat on the Chrysler board, the union won't be making the strategic decisions about Chrysler's future. In other words, if there is a bad CEO with poor performing executives, there's not much the union's ownership stake could do to prevent those leaders from leading the company down the wrong path.
Second, if the UAW takes a stake in Chrysler, it would presumably give Chrysler the best deal possible when the next contract comes up. A deal that might include some painful concessions. That could be a problem when the Ford and General motors UAW contracts come up. After all, those automakers will want a labor deal similar in structure. Would the union want to give breaks to Ford and GM the union would consider "too generous".
Make no mistake, Ron Gettlefinger is on the spot. He wants to give his members the best deal possible, while also working with the big three to keep them competitive. That may not happen is the UAW owns part of Chrysler.
Questions? Comments? BehindTheWheel@cnbc.com