High wages put Detroit union under pressure
By Bernard Simon in Detroit
Published: December 15 2008 02:00 | Last updated: December 15 2008 02:00
Blue-collar workers have found themselves as much in the line of fire as their jet-setting bosses in the debate over a bail-out for Detroit's three troubled carmakers.
The chief executives of General Motors, Ford Motor and Chrysler have assuaged their critics - at least for the time being - by agreeing to draw nominal salaries, sell their corporate jets and forgo golden parachutes.
However, the wages and benefits of United Auto Workers union's members remain a target for Detroit's critics.
A stand-off between the UAW and a group of Republican senators over the timing of fresh concessions scuppered a deal in Congress late last week to extend a $14bn (€10.5bn, £9.4bn) lifeline to GM and Chrysler.
The Bush administration on Friday indicated it might provide the funds from the troubled asset relief programme.
Management and the union are under pressure to bring labour costs into line with those at non-union plants, mostly in the southern states, operated by Toyota, Honda and other foreign carmakers.
UAW members have a long reputation as the aristocrats of US labour. Their generous pay and benefits are credited with bringing blue-collar workers into the middle class.
GM estimates its labour costs at $69 per worker per hour, compared with $53 at Toyota. But these bald numbers, the ones most cited by Detroit's critics, do not tell the full story. While a gap remains, it is closing. Ron Gettelfinger, the UAW's president, used a baseball analogy to make his case that the union had made more than its fair share of sacrifices to keep the carmakers afloat. "We're on third base and the other stakeholders are not even in the ballpark," he said.
GM and Toyota workers earn similar wages of about $29 an hour.
The big difference is in fringe benefits, such as healthcare insurance and pensions.
The overall labour-cost figures also include retiree benefits. Thousands of GM, Ford and Chrysler workers were on pensions with generous healthcare benefits - foreign carmakers have a fraction of the number of retirees.
The UAW made significant sacrifices in contracts signed last year, but many of the savings have yet to be realised by the company.
The union agreed to a two-tier wage structure under which new assembly-line workers would be paid about $14.20 an hour, compared with $29 for existing workers.
GM has so far hired about 3,000 people at the lower wage, but all are likely to lose their jobs as it closes plants and cuts shifts in line with the fall in vehicle sales.
Under last year's contract, the companies will shift responsibility for blue-collar workers' healthcare to a union-managed trust, due to be set up in 2010.
The UAW has made a symbolic concession by offering to suspend the much criticised "jobs bank", which allows idle workers to collect full pay and benefits just for showing up at their plant each day.
GM has 1,000 workers in its jobs bank, down from 7,600 in May 2006. The numbers are likely to rise in coming months as assembly lines lay idle.
The three carmakers - led by Ford - have negotiated more flexible work practices at many plants. For instance, the UAW has agreed to the outsourcing of some non-production tasks, such as housekeeping.
Hal Stack, director of the Labour Studies Centre at Wayne State University, says Mr Gettelfinger and his colleagues are realists who understand the problems facing the industry.
"They know that it's better to live to fight another day than to go down nobly with the sinking ship," Mr Stack says.
