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Disruption, corruption loom over UAW union talks with Big Three Detroit automakers

Key Points
  • Negotiations between the United Auto Workers union and Big Three Detroit automakers started last week. 
  • Outside factors expected to impact the talks include technological changes putting union jobs at risk and an ongoing federal corruption probe.
  • The U.S. DOJ investigation involving conspiracy and bribery of union officials by Fiat Chrysler executives was made public two years ago.
United Auto Workers President Gary Jones and General Motors CEO and Chairman Mary Barra shake hands during an event on Sept. 3 to officially open contract negotiations in Detroit.
Source: General Motors

DETROIT — This year's labor negotiations between the United Auto Workers and Big Three Detroit manufacturers, which kicked off last week, will be marked by two thorny issues hanging over the industry right now: disruption and corruption.

New technology in the shift to autonomous and electric vehicles is disrupting the industry and threatening traditional union jobs while volatile U.S. trade talks have set the stage for an uncertain political future. Then there's an ongoing federal corruption probe that has eight former Fiat Chrysler and union officials facing jail time and bred mistrust among members.

The talks between the UAW and General Motors, Ford and Fiat Chrysler were already expected to be difficult. Union members, who've had few raises since the financial crisis, expect to be compensated for their patience. But their timing couldn't be worse. The negotiations fall amid a slowdown in U.S. auto sales and job cuts executives say are necessary to get ahead of an expected economic downturn.

"There's a whole lot that isn't certain right now," said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor, Mich. "They're negotiating after a period of real good times in the auto industry … and I'm sure everyone involved would like that to happen, but if you've been involved in the industry for more than decade, you know the good times will not continue to roll on."

As company executives met with union leaders to open talks last week, industry disruption was a common discussion. The U.S. Department of Justice's ongoing corruption case loomed large even as officials avoided any discussion of it.

'Fat, dumb and happy'

It's been two years since the union and Fiat Chrysler publicly became entangled in a federal criminal investigation involving bribery and violations of U.S. labor relations laws.

The investigation includes an alleged conspiracy to use funds earmarked for training of union members to keep UAW officials "fat, dumb and happy." Benefits, according to public documents, included a $262,000 payment of a union leader's mortgage and the use of company-paid credit cards for lavish dinners and trips, among other personal purchases unrelated to training.

Gary Jones, the newly-elected President of the United Auto Workers (UAW), addresses the 37th UAW Constitutional Convention June14, 2018 at Cobo Center in Detroit, Michigan. 
Bill Pugliano | Getty Images News | Getty Images

U.S. prosecutors have contended company executives allowed, even encouraged, the elaborate spending in an attempt to influence union decisions and collective bargaining agreements, which were ratified in 2011 and 2015.

The UAW has adamantly denied such behavior could have impacted negotiations since union members must vote to ratify the agreements, which are bargained by committees, not individuals.

Art Wheaton, a labor expert with the Worker Institute at Cornell University, expects the scandal will further strain an already-delicate relationship between union leaders and rank-and-file members — particularly at Fiat Chrysler.

"There's a huge breakdown in trust with the membership," he said in an interview. "I think that's going to be problematic." The breakdown in trust, according to Wheaton, is expected to make it difficult for union leaders to get any potential deal ratified by union members during this year's negotiations.

The highest-ranking officials involved in the case include Alphons Iacobelli, a former Fiat Chrysler vice president who led labor relations for the automaker, and two ex-UAW vice presidents. Three other company officials were also convicted, along with four union officials and the widow of UAW Vice President General Holiefield, who died in March 2015.

While the investigation started with Fiat Chrysler and the union, the probe expanded to include similar training centers with GM and Ford. However, no executives or union leaders involved with those two automakers have been accused or convicted of any crimes.

Tech disruption

Autonomous and all-electric vehicles are expected to completely upend the way the automotive industry builds and sells vehicles.

Such complex technologies are anticipated to require an increase in software developers and technical engineers but less traditional manufacturing jobs — a long-term concern for union leaders and their rank-and-file members.

UAW President Gary Jones made it clear last week that the union wants to address many of those concerns during this year's negotiations.

"I will tell you, the UAW is excited to be part of the evolving workforce: EV propulsion, energy storage; autonomous vehicles and related components, new mobility businesses and the joint ventures," he said during a meeting with GM last week at its world headquarters in Detroit. "We welcome progress and our role in that progress."

The union has said it expects all-electric vehicles to take less labor to build and could put an estimated 35,000 or more jobs at risk. Autonomous vehicles are expected to add to those declines as well, according to industry officials.

United Auto Workers President Gary Jones and General Motors CEO and Chairman Mary Barra shake hands during an event on Sept. 3 to officially open contract negotiations in Detroit.
Source: General Motors

Company executives, including GM CEO and Chairman Mary Barra, tried to ease such concerns during meetings last week with union leaders to officially begin the contract negotiations.

"In a transforming industry, if we want the company to grow, and to grow jobs, we can't keep doing things the same way," she said last week at the company's global headquarters in Detroit. "Disruption creates uncertainty but it also creates vast possibilities and I'm very excited about the opportunities in front of us that will enable General Motors and the UAW to lead in the transformation of the auto industry."

Mark Stewart, chief operating officer of FCA - North America, also characterized the disruption as "an opportunity." Ford CEO Jim Hackett said the goal is to figure out ways to use technology "not to replace work but augment" employees to give them more information and assistance.

Barra also mentioned the company's need for flexibility amid a "very uncertain trade environment in a long-lead industry."

This year's negotiations will set the wages and benefits for 158,000 auto workers and lay out the investment plans in the coming years for the companies. Current contracts expire on Sept. 14, however it's common for that deadline to be pushed back weeks, if not months.