Auto Bailout: UAW Chief Draws a Line

Ron Gettelfinger may not be able to hold off wage and benefit cuts as he hammers out a restructuring with GM execs
United Auto Workers President Ron Gettelfinger (center) speaks at a press conference in Detroit. Bill Pugliano/Getty Images

If General Motors (GM) and Chrysler executives want federal loans beyond the initial $17.4 billion provided by President Bush and the Treasury Dept. on Dec. 19, they will need to wring concessions from the United Auto Workers. And that means dealing with Ron Gettelfinger.

As became clear in mid-December, Gettelfinger, the 64-year-old union president, is no pushover. With the fate of an industry hanging in the balance, he refused to back down when Senator Bob Corker (R-Tenn.) demanded that the UAW commit to cutting wages to secure a bailout of Detroit's Big Three. Gettelfinger's stance—critics call it intransigence—pushed a government rescue to the brink until the Bush Administration stepped in.

But even after the Administration released funds for GM and Chrysler, Gettelfinger bristled at the labor concessions that Treasury is insisting on. In response to the Administration's demands for wage and benefits cuts, he said: "We are disappointed that he [Bush] has added unfair conditions singling out workers." Gettlefinger even said he would go to the Obama Administration—which promises to be more labor-friendly—to work out a deal.

Push from Bush

That sets the stage for negotiations beginning in earnest in January with management at GM and Chrysler as the union and the carmakers try to craft a restructuring plan. Gettelfinger and his staff will first face off against a team headed by GM President Fritz Henderson.

The Bush Administration has already laid out some concessions that it wants from the union. The plan closely mirrors what Senator Corker wanted Gettelfinger to agree to in advance of getting any government money. In documents spelling out the loan terms, Treasury asked to close down the JOBS bank—an anachronism that keeps UAW workers on the payroll even when they aren't working—and make UAW wages, benefits, and plant floor work rules competitive with those of foreign-owned factories in the U.S. by the end of 2009. (The union agreed to suspend the JOBS bank in early December.) The union also must take company stock instead of cash for half of the money that car companies pledged to finance a health-care trust.

The talks themselves are historic: The most powerful industrial union in America will be asked to reopen its contract to ensure the survival of the automakers. And Gettelfinger himself will be walking a tightrope.

On the one hand, he knows that the stakes are too high for the government to walk away from an industry that directly and indirectly employs an estimated 3 million people. On the other, he knows concessions are inevitable and that to sell them to his 640,000 members he needs to be seen as a defender of the working stiff.

Saving Jobs

"The goal is to make these companies competitive so that as many jobs as possible are preserved," says Harley Shaiken, a labor economist at the University of California at Berkeley. "The union has a devastating context in which to achieve it."

Gettelfinger's challenge is to find a way to help save GM, Ford (F), and Chrysler without destroying the union he has spent much of his life protecting. "We're very concerned, first of all, about the companies staying in business," Gettelfinger said in an interview. "Secondly, we want to maintain a decent standard of living. We're also concerned about our retirees."

The earlier brinkmanship in Congress may give a hint as to how Gettelfinger will play his hand. He told Corker that he would agree to take stock instead of cash for 50% of the health-care trust, which is called a Voluntary Employee Benefits Assn. (VEBA). But he would not cut wages, arguing that they are already competitive.

When asked if his workers should take a pay cut from their wage of $29 an hour to match Toyota's base top wage of $25, Gettelfinger maintains that with bonuses, Toyota pays over $30. As for health-care benefits, Gettelfinger points to the fact that the UAW already has already given up a lot: The union agreed to higher premiums and co-pays in 2005 and last year agreed to set up VEBA, a concession intended to take health-care costs off the auto companies' books.

People Skills

Says an exasperated Gettelfinger: "Labor is 10% of the cost of the vehicle, and everyone wants to squeeze another drop of blood out of the workers."

That cost-per-vehicle math—and the higher costs shouldered by the U.S. Big Three vs. their Japanese competition—have been at the heart of the debate over Detroit's competitiveness since the 1980s. That was when Gettelfinger first got involved in union leadership. He was a line worker at Ford's pickup truck plant in Louisville when he joined the shop committee at Local 862 and began honing the political and negotiating skills that helped him rise through the UAW's fractious bureaucracy.

Like many of the politicians he deals with, Gettelfinger has a prodigious memory for personal details—how many kids a UAW worker has, what his hobbies are, even the last four digits of his social security number, which was a worker's identification number back then. Union colleagues say that as savvy as he was on the plant floor, Gettelfinger was evenhanded. If workers had grievances with management, he would fight tooth and nail for them. But if the grievance was frivolous, he'd tell them straight up that it wasn't going to fly, says Lewis Sexton, the retired president and chairman of Local 862.

During his tenure, Gettelfinger also pushed for big quality improvements. Back when Detroit was at its quality nadir, if a part didn't fit right, workers would send it along and let an inspector on the management staff deal with it, recalls Sexton. But Gettelfinger—a teetotaler who uses profanity rarely if ever—got union workers to step up and find a fix on the assembly line.

"He made people responsible for doing the work," Sexton says.

Plenty of Red Meat

Gettelfinger's speeches are full of red meat for union workers: how it's the government's fault there isn't universal health care, or why trade agreements make it tough for Detroit's carmakers to send cars to Asia while Korean and Japanese cars pour into the U.S. He rattles off the fact that state and local governments have lavished some $3 billion in incentives to bring in foreign-owned factories. That has helped him establish the moral authority to make concessions, Shaiken says.

But there is a pragmatic Ron Gettelfinger as well. Three years ago, the automakers were in trouble, and he knew that without concessions there would be no jobs for his members to report to. When Detroit came looking for givebacks, Gettelfinger ultimately agreed to a contract that set back starting factory wages 30 years: New hires will begin at $14 an hour—half the wage for veterans and a pay scale not seen since the '70s. Plus, he has watched the Big Three cut some 80,000 jobs since 2005.

That also brings up a key criticism from Detroit's executives. Gettelfinger made those key concessions starting in 2005, but not until Ford and GM were reeling toward massive losses. The union has never given enough to get the companies ahead of the curve. "It's always a day late and a dollar short," says one former GM executive.

Natural Bargainer

Gettelfinger argues that if not for the recession and credit crunch, the Big Three already would be hiring workers at that much lower wage. Including weaker benefits, those new hires cost $28 an hour. That's half what Toyota's workers cost.

How did he sell the concessions to his members? None of the current workers lost much of anything. They kept their pay, and their health-care benefits are still first-rate. Anyone losing a job got buyouts averaging more than $100,000, and they typically head into the pension rolls. Says one high-level GM executive: "Ron is a natural-born bargainer."

Of course, that plan worked to save the car companies money only so long as they kept growing and had enough cash to buy out older, higher-paid workers. But as the economy slid into recession and auto sales fell into a hole, pressure grew for Gettelfinger to give up even more.

In September, GM executives told the UAW boss that they wanted to merge with Chrysler. The Center for Automotive Research estimated that a merger could cost upward of 30,000 jobs. So Gettelfinger called Steve Girsky, a former Wall Street analyst who once worked as an adviser to GM, to look at the deal. He asked Girsky to tell him the straight truth about what a deal meant, preferring an independent view from the sales pitch coming from GM executives. Girsky discovered that GM was running out of cash, and called Gettelfinger on Nov. 4 to tell him the news.

"He was calm," recalls Girsky. "He just said, "O.K., what can we do?""

Most industry observers believe Gettelfinger will fight to the death to keep wages where they are. But under threat of extinction and government prodding, he may well ditch the JOBS bank. Gettelfinger may even have to persuade his members to pay more for health care. When asked about it, he didn't rule it out: "I'll just have to wait and see what the government wants," he said. How about a GM-Chrysler merger? "No," he said firmly.

The problem is, Gettelfinger has a tough hand. If he goes on strike, "he loses the country," says Ned Hill, dean of the College of Urban Affairs at Cleveland State University. So he will have to hope the Obama Administration is lenient. "At this point, his cards are all political," Hill says.

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