A big fight looms.

Photographer: Bill Pugliano/Getty Images

Showdown at the UAW Corral

Edward Niedermeyer, an auto-industry analyst, is the co-founder of Daily Kanban and the former editor of the blog The Truth About Cars.
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Negotiations between the United Auto Workers union and U.S. automakers aren't scheduled to begin until July, but the pre-talk salvos have already begun in earnest.

Last week, on the day before the UAW's bargaining convention opened, Ford and General Motors floated the idea of opening a third "tier" in the UAW wage structure, which would create an even lower entry wage for union workers. Not only was the proposal an optimistic opening position, but it was ultimately little more than the trolling of a union that is all too aware of the deep divisions and inequality caused by its two-tier system. Though the third-tier proposal will likely go nowhere, it's a sign of how closely fought the upcoming battle will be.

The two sides are miles apart on the issues, and the stakes could hardly be higher. U.S. automakers are more profitable now than they were in any of last few rounds of negotiations, and the UAW is anxious to reverse concessions it made before and during the GM and Chrysler bailouts. Having raised dues last year for the first time since 1967 in order to shore up its troubled finances, union leadership is under increasing pressure to deliver real gains to its membership. And with its organizing efforts at "transplant" factories across the South failing to gain traction, the very future of the union depends on winning attractive new terms.

The stakes may not be quite as high for the automakers sitting across the table, but they aren't about to return to the "good old days" of cozy labor relations, either. GM and Ford still have some of the highest hourly average wages in the U.S. industry, at $58 and $57 respectively, about $10 per hour more than nonunion workers at Honda and Toyota and about $20 per hour more than workers at Volkswagen's plant in Chattanooga, Tennessee. With the U.S. new-car market forecast to flatten out in the coming years, Detroit can't afford to put itself at an even greater disadvantage going into a potential profit crunch.

UAW President Dennis Williams rejected the automakers' "third tier" proposal out of hand and led the ritual roasting of management, but he was hazy on the details of how exactly to give both tiers the raises they demand and "bridge the gap" between the two. After all, the political dynamic that put the two-tier system in place has not changed. Until the top-tier autoworkers -- which have already enjoyed the last best years of the U.S. industry -- put solidarity before self-interest, the UAW will continue to be poisoned by a two-tier structure that makes a mockery of the union's fundamental ideals. Yet there is no indication that they will voluntarily make the sacrifice necessary to create a single, sustainable union wage.

This sets up a rather unpalatable set of possible outcomes: Either the union strong-arms automakers into concessions large enough to "bridge the gap" between the two tiers or it accepts another Band-Aid and allows the two-tier poison to spread. Though GM's $5 billion stock buyback deal with former auto task force member Harry Wilson has been cited as evidence that automakers have cash to burn, a wage concession from the Detroit Three that would be large enough to square the UAW's political circle remains unlikely. Instead, it seems that Williams may attempt an end run around the two-tier issue altogether and demand a greater say in decisions about production, engineering and sourcing investments.

Blaming the union's troubles on the ineptitude of company management may keep Williams's membership supportive for now, but the union's demand for more of a say in management is about as likely to make progress at negotiations as the automakers' third-tier proposal. As talks wear on, the UAW will once again be confronted with its intractable dilemma and may decide that its only way forward lies in obtaining major wage concessions, even at the expense of the union's first post-bailout strike. With the options so limited and the stakes so high, that scenario could be more realistic than anyone wants to believe.

  1. The UAW already has what amounts to a third tier: several hundred GM parts assembly workers who make less than the union's entry wage. The Detroit Free Press explains (sort of): "Those workers do parts assembly work previously done by suppliers. Therefore, it's not viewed as a third tier because it doesn't violate the UAW's principle of equal pay for equal work."

  2. Williams notes that top-tier workers have not had a raise in a decade. However, his analysis chooses not to include profit-sharing bonuses that have averaged $39,250 per worker at GM and $43,200 per worker at Ford over four years. 

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Edward Niedermeyer at edward.niedermeyer@gmail.com

To contact the editor on this story:
Brooke Sample at bsample1@bloomberg.net