UAW Faces Prospect Of More Concessions

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UAW Faces Prospect Of More Concessions

NOVEMBER 17, 2008

UAW Faces Prospect Of More Concessions
By MATTHEW DOLAN and JOHN D. STOLL
WSJ

The United Auto Workers is holding the line against wage and benefit cuts, but it may not be able to escape further concessions if it hopes to get the government to bail out Detroit. Even labor's closest allies are coming out publicly to say the UAW must pitch in to sway a wary public and convince skeptical members of Congress that federal assistance for General Motors Corp., Ford Motor Co. and Chrysler LLC is a good investment for taxpayers.

Robert Reich, who was labor secretary under President Bill Clinton and is an adviser to President-elect Barack Obama, said the union should expect to accept broad wage and benefit cuts to assure Congress that an outlay of public dollars is essential. UAW President Ron Gettelfinger's challenge in the 2007 contract talks was to get workers to accept large-scale concessions he knew had to be made. He is increasingly likely to be put in that spot again, to make his membership comfortable with givebacks once unfathomable to the 150,000 U.S. auto workers he represents.

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"This industry is in a crisis situation not of its own making," Mr. Gettelfinger said, blaming the mortgage crisis, credit crunch and financial-sector meltdown for the auto sector's condition. But that argument is increasingly falling on deaf ears in Washington. Sen. Richard Shelby (R., Ala.) said on NBC's "Meet the Press" Sunday that investing in U.S. auto makers is "money wasted" if they don't fundamentally change the way they do business. "It's throwing money down the drain and it won't work in the long run," Sen. Shelby said. "It's postponing the inevitable." Sen. Carl Levin (D., Mich.) countered that government actually made money on the Chrysler bailout in the 1970s. The government would lose $200 billion in taxes if the Big Three downfall led to the loss of three million jobs, Sen. Levin said.

At stake for union workers could be more than 70 years of collective-bargaining gains, according to labor and bankruptcy experts. In the public's mind, "the UAW has an embarrassment of riches," said Gary Chaison, a professor of labor relations at Clark University in Worcester, Mass. "It has to show some flexibility to show that it is serious about a multibillion-dollar bailout."

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One person close to the UAW said the union may have some flexibility in delaying the cash payments the auto makers committed to pay in 2010. GM alone owes the union $7 billion for its health-care trust fund, but it probably won't have the money to pay. Bankruptcy is "the worst possible route that any of these companies could go down," Mr. Gettelfinger said in an interview Saturday. The union believes the auto makers wouldn't be able to recover from a bankruptcy filing and would have to "liquidate everything," he said. In a bankruptcy, the UAW could only expect to see a "mild advantage" over other unsecured creditors in relation to preserving contracts made before the filing, according to Mark Bane, a bankruptcy attorney with Ropes & Gray in New York.

http://online.wsj.com/article/SB122679146976431189.html (subscription)