GM TALKS: IT'S FLEX TIME FOR THE UAW
The United Auto Workers union tends to talk tough but bargain pragmatically. In its recent deal with Ford, it received job guarantees for nearly all of its members in exchange for a two-tier pay system that allows the auto company to make cost savings in making new parts. The union also threw in enough loopholes to allow Ford to circumvent the employment guarantees in the face of a recession. The big question now is whether the UAW will show even more flexibility in negotiating with General Motors, which employs nearly half of all the UAW's auto members. We hope it does (page 32).
Time is running out for all three Detroit auto makers. Their record profits derive almost entirely from sport-utility vehicles, minivans, and pickup trucks. The Japanese are pouring into these sectors, putting pressure on margins. Thanks to a strong dollar and the "decontenting" of their cars, the Japanese are cutting prices as well. Detroit needs to move fast.
GM must move the fastest. It needs to cut as much as 30% of its labor force to become as competitive as Ford and Japanese transplants. Its plan is to ride the attrition curve down, since some 12,000 employees retire every year. With any luck, GM can meet its goals in five years--but not with the same kind of contract Ford agreed to, which guarantees 95% of all jobs.
We're betting the UAW gives GM wiggle room. GM needs to cut employment by a larger percentage than Ford. This is particularly true in the company's large auto-parts facilities, which are more expensive than those of nonunion competitors. A two-tier job guarantee, such as 95% for assembly and 85% for parts, may be one way to provide the savings GM needs. There are others. The UAW can best ensure its own survival by helping Detroit do what it must do.