Detroit's three big automakers head into contract talks with the United Auto Workers next week with an uncertain economy and limited prospects for gains for the union's 100,000 workers. People familiar with thinking inside General Motors, Ford and Chrysler stressed they were not willing to go back to "the bad old days," when labour contracts added to fixed costs and bled the companies financially.
"It's important we establish a new business model," said one executive familiar with the negotiations who asked not to be identified. The old model of regular pay raises and rich benefits was unsustainable as shown by the 2009 bankruptcies of General Motors and Chrysler, he said. "We're going to have to fix our model (The new contract) has to be sustainable." In pre-crash negotiations stretching back into the 1990s, even while all three were shrinking their workforces, the union and the companies continued to enrich the contracts.
The 1999 contract, with its guaranteed raises over four years and benefit enhancements, stands out as the richest in the history of the UAW. Even in 2003 and 2007, with the companies facing pinched cash flows, GM offered to boost retirement benefits in an effort to encourage workers to retire.
"They thought they could pay for the extra benefits from the pension surplus," said an executive familiar with the negotiations. "The union's chances of winning a pension increase this time appear greatly diminished, according to information presented during the pre-negotiation briefings at all three companies.
Negotiators for GM, Ford and Chrysler are also likely to press the union for new concessions on health care. UAW President Bob King has said repeatedly he wants to make the companies become more competitive globally. "I know Bob understands all of our issues," an auto executive said. One point of contention, however, is the new starting wage of $14.50 per hour, which is significantly less than the $28 per hour collected by long-serving autoworkers.
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