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Autoworkers Go On Strike Against Themselves

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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The United Auto Workers decision to take to the picket line at Fiat Chrysler this week was hardly unforeseeable, but it always comes as a surprise when Detroit's often-cozy labor relations break down.

Car sales are headed into record territory and profits are soaring -- a strong recovery narrative now muddled by the impending strike. Thanks to the union's richly deserved reputation for self-destructive behavior, the standard assumption is that this work stoppage is about grabbing as big a piece of the automakers' new-found prosperity as possible. Actually, it's far more complicated than just a return to the bad old days.
QuickTake U.S. Labor Unions

The roots of the current strike, caused by a failure to agree on a new Fiat Chrysler contract, lie not in the distant past, but in the auto industry's recovery itself. The last time the UAW manned the picket lines, in 2007, a two-day strike led to the union's most "innovative" labor agreement, hailed at the time as "the new Treaty of Detroit." One of that agreement's major accomplishments was the transfer of tens of billions in health care liabilities from automakers themselves to the workers' trust fund, a move that probably kept GM and Chrysler from going bankrupt well before their 2009 bailout.

The other innovation, the introduction of a "two-tier" wage structure, in which new hires make half the hourly wage of veteran workers, helped the automakers become more competitive with the growing non-union auto manufacturing sector in Southern states. But over time, it has also become a cancer that threatens to destroy the union from the inside out.

Two-tier wages were an easy compromise back in 2007, as everyone knew the UAW had to help lower costs for its struggling employers, and the strategy was to push the burden onto UAW members who didn't exist yet. The old-timers who approved the agreement weren't asked to make any major concessions, and subsequent hires would make up for it by making far less. It was inevitable, however, that this arrangement would become untenable in an organization whose founding principle is "solidarity" once the lower-paid workers were able to vote on new contracts. 

The day of reckoning was delayed significantly by the bailout, which included a "no-strike" clause for the UAW. Regular cash bonuses also helped keep the discontent among second-tier workers at bay, but only barely: When GM was allowed greater leeway to push workers into the lower tier so it could profitably build a small car in Michigan in 2010, UAW workers picketed their own union headquarters, the ironically named "Solidarity House." The headquarters was picketed again by UAW members just a few weeks ago, as the now-failed Chrysler Fiat contract went out to the membership for a vote. Angry members are at war with their union leadership, not automakers themselves.

The union has again tried to paper over dissent in its ranks by distributing cash: wage hikes for both tiers, as well as a $3,000 "ratification bonus" were dangled in front of members as incentive to sign the Fiat Chrysler deal. But workers' rejection of these terms was predictable: after all, the UAW's latest bargaining convention was dominated not by calls for more cash but by the overriding issue of "closing the gap" between the two wage tiers. Having promised its workers to make this equality a priority and then failing to deliver on it, the union showed just how poorly it represents its full membership.

As all sides move toward a strike that could cost Fiat Chrysler $1 billion a week, not to mention the lost wages for workers, UAW leaders are promising members a "new approach" to a second round of talks. But to make that happen, the union has to accomplish what it couldn't back in 2007: forcing the older workers who enjoyed the long-lost golden age of American auto manufacturing to make sacrifices for the new reality. No union wants to force its members to take wage cuts, but for the UAW, solidarity means sharing the pain.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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

To contact the editor responsible for this story:
Tobin Harshaw at tharshaw@bloomberg.net