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GM and union need to find ways to lower automaker's labor costs
By Doron Levin Bloomberg News Service
Published on Wednesday, Sep 26, 2007
For those who believe General Motors Corp. is in the midst of spectacular turnaround from its many woes, Monday's walkout by the United Auto Workers union was a dose of reality.
The No. 1 U.S. automaker still hasn't resolved the central threat to its future: an acrimonious relationship with GM factory workers.
Workers ought to be a team, united with one another in pursuit of common goals on behalf of the company. Striking workers, instead, are the adversaries of managers, shareholders, dealers and lenders.
For days, GM and UAW negotiators seemed to be making progress toward a new labor contract. The centerpiece of the talks is a proposed multibillion trust funded by GM and run by the UAW, meant to relieve the automaker from further obligations to provide retirees with health care coverage.
U.S. automakers pay $25 to $30 an hour more for labor than Japanese automakers Toyota Motor Corp. and Honda Motor Co. at their U.S. plants, and much of the gap is a result of the cost of retiree health care. GM's negative $4.25 billion shareholder equity, or assets minus liabilities, at the end of last year reflects new and tougher accounting standards that compel public companies to include health care promises on their books.
U.S. automakers now rue the days they made extravagant promises to the union, even though those promises were made more or less reluctantly, under the threat of strike.
Quid pro quo
The UAW unfortunately now thinks of GM management's creative solution as something the union is being asked to concede rather than a golden opportunity. This viewpoint is tragically short-sighted; if GM should file for bankruptcy (no longer a remote possibility), a $50 billion health care entitlement covering GM union retirees might go up in smoke.
Instead, the union is demanding job guarantees in return for approving the Voluntary Employees Benefit Association trust. The UAW wants GM workers to be allowed to keep their jobs for the life of the contract, as well as a promise that GM won't close U.S. plants without union permission.
GM long ago should have halted the historic pattern of adversarial bargaining with the union. But now no one could blame Rick Wagoner, GM's chief executive officer, if he were devising an accelerated strategy to increase vehicle production in foreign plants while paring back in the United States.
Eastward ho
Here's a statistic that ought to scare the daylights out of Ron Gettelfinger, UAW president. Vehicle exports from China (where GM has been investing heavily in new plants) could rise 46 percent this year, according to the country's Ministry of Commerce. China has more than tripled automobile output since joining the World Trade Organization in 2001.
If Gettelfinger wants to keep jobs in the United States for UAW members, if he wants to ensure a future for his union, he and Wagoner must find mutually acceptable ways to bring GM's labor costs into line. Instead, what Gettelfinger seems to offer with one hand, a VEBA guarantee, he wants to take back with the other in the form of expensive, non-competitive job commitments.
The UAW in 2004 agreed to two-tier wages for auto parts factories so companies can pay new hires wages that are closer to what the market pays in other U.S. factories. The union ought to think about a similar system for GM final-assembly plants, allowing the automaker to pay competitive wages and maybe keep a few more plants in the United States.
Mutual hostility
But now GM and the UAW have gone to the mattresses. Pickets are carrying signs proclaiming solidarity. Gettelfinger, sounding petulant, released a statement saying ''we're shocked and disappointed that General Motors has failed to recognize and appreciate what our membership has contributed during the past four years.''
No one can say for certain whether the hardening of positions in the final hours of bargaining was intended to provoke a short strike. In the often-perverse world of Detroit labor relations, a walkout sometimes helps union bargainers sell an agreement to members and improve the chances for ratification.
But the risk of a short strike is that it can turn into a long one. GM can ill afford a repeat of the billions of dollars it lost in a UAW work stoppage in 1998. Under no circumstances can GM afford to keep building vehicles in the United States if it can't find common ground with its workers.
For those who believe General Motors Corp. is in the midst of spectacular turnaround from its many woes, Monday's walkout by the United Auto Workers union was a dose of reality.
Get the full article here.
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