Big 3 Automakers And Labor: How Will Talks Play Out?

If you've been reading the headlines this week, you've probably seen stories about the big 3 planning to push for pay and benefit cuts totaling 30%. Often the headline is accompanied by a sub-headline saying the United Auto Workers and the Big 3 are headed for a collision course. Folks, get ready for a long hot summer of posturing, trial contract offers being floated, and the yes, the very real possibility that we could see a work stoppage.

What many of you don't know is that many of the parties involved have been telling their side of the story to reporters in off-the-record briefings designed to give reporters facts, figures, and scenarios to support the case for how the next contract should be structured. on top of that, there are people talking to reporters off the record to "spin" their particular approach. From all of these discussions, I've reached some early conclusions.

1. The Big 3 WILL be adamant about moving their labor pay and benefits closer to their foreign competition.

UAW

Right now, the average UAW worker makes roughly $73 an hour in pay and benefits compared to $48 for the average line worker at Japanese automakers plant here in the U.S. That $25 difference can not continue for Detroit's automakers. The biggest chunk of that disparity ($13) is tied into pension and healthcare benefits for retirees. Do I expect the next contract to put the big 3 on exactly the same pay scale as their Japanese rivals? NO. But that $25 difference will be cut.

2. Will the UAW dig-in and go for the "usual" contract demands or be creative with new ideas?
UAW president Ron Gettlefinger and his team are savvy negotiators. He spent the better part of the last year on the DaimlerChrysler board so he knows first hand that the numbers for Chrysler are legit, and he also knows the situation at Ford and GM . While Gettlefinger may be a lifelong UAW man, he's also progressive in his approach to working with the big 3 (look at the health car agreements with Ford and GM in the last couple of years). I expect him to be creative in considering other ways to make sure the UAW members can benefit if the big 3 get contracts that make them more competitive- profit sharing is one example.

3. Will there be a work stoppage?
It's too soon to tell. Many involved believe the talks will go down to the wire on September 15th, and I think there's a decent chance we could see a work stoppage. When you have the groups bargaining over potentially substantial cutbacks, the odds of them being unable to get a deal by mid-September will grow. Also, the automakers have the cash to withstand a strike if it happens. That doesn't mean they want one, but it does give them the flexibility to dig in and show the UAW that they are serious about seeing their costs reduced.

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