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Ford and GM say factories in US face axe: Ailing car giants push union to agree pay cuts

08.30.07

Ford and GM say factories in US face axe

Ailing car giants push union to agree pay cuts

James Doran in New York
Sunday August 26, 2007
The Observer

Ford and General Motors have threatened to leave Detroit and take their car manufacturing operations overseas if unions do not agree to a massive pay cut for hourly paid workers.
The threat to quit the city they call Motown because of its rich automotive heritage would be a crippling blow to Detroit, which is suffering amid a prolonged economic downturn and has been hit by the sub-prime mortgage crisis.

Ford and GM are in the thick of negotiations with the United Auto Workers union, the most powerful labour group in the industry. The car makers maintain they must dramatically reduce manufacturing costs if they are to survive in today’s global economy.

Their biggest burden is the current labour cost per vehicle - an estimated $71 (around £35) per man hour. Workers earn about $27 an hour with the remainder made up of overheads such as pensions and healthcare costs for the thousands of retirees on their books.
Ford and GM have made it clear that they expect to reduce the hourly cost from $71 to about $50 - a cut of about 30 per cent. The companies are keen not to cut workers’ hourly pay, but they insist that other overheads must be reduced.

If a deal cannot be reached, Ford and GM negotiators have said the companies will have no choice but to move their North American operations to countries in Latin America and Asia where manufacturing costs are cheaper.

The current credit crisis is not helping the ailing US car manufacturers to reverse their fortunes. Many senior figures in the industry are calling for action from the Federal Reserve to spur markets and the economy. Bob Nardelli, the new Chrysler CEO, has been most vocal in calling for an interest rate cut to help boost consumer activity.

Alan Mulally, the Ford chief executive, said last week that economic conditions were proving to be a ‘big headwind’ working against the company’s turnaround plan. He stopped short of calling for an interest rate cut but stressed the importance of ‘focusing on economic growth’.

A GM spokesman said: ‘From a GM perspective, the focus of the talks is on closing the competitive gaps and building a viable long-term future for the company and our people.’

Sources close to senior GM executives confirmed that the prospect of shifting operations away from North America was very real. ‘We have seen it in every other industry,’ one said. ‘There are no sacred cows today. Globalisation means just that, it’s a worldwide playing field.’

Dave Cole, chairman of the Centre for Automotive Research, a leading car industry think tank in Detroit, said: ‘This threat is very real and the UAW is aware of it. Both GM and Ford have made it clear to the union that you do whatever you have to do to stay in business.’

The car makers are also discussing ways in which they can work together with the UAW to offload billions of dollars of pension and healthcare costs they have amassed. It is understood the talks focus on creating a ‘Voluntary Employee Beneficiary Association’, which would be part-funded by the companies to take care of retiree health care costs. The talks must reach a conclusion before their current contract with the UAW expires on 14 September.

http://observer.guardian.co.uk/business/story/0,,2156191,00.html

3 comments so far

We need to tax auto imports heavily instead of cutting wages and benefits for employees.

Dear Stephen Crockett,

To: Brothers and Sisters

From: Ron Gettelfinger

Subject: Remembering Reuther on Labor Day

As we celebrate Labor Day by marching in community parades,
attending local union picnics and other activities, may we all
enjoy the time with family, friends and co-workers.

This Labor Day weekend has a special meaning for UAW families.
On Sept. 1, we will be remembering Walter Reuther on the 100th
anniversary of his birth.

Walter P. Reuther served as UAW president from 1946 to his
untimely death in 1970. During his administration, the UAW
negotiated collective bargaining agreements that raised the
living standards for the entire working class. But, it was never
just about another nickel in the paycheck or another dollar in
pension credits. To Reuther, the UAW was not only a trade union;
it was a social movement.

From the Civil Rights movement to fighting for national health
care, Walter Reuther made sure the UAW was front and center.

It was the Reuther years that ensured democracy in our union
through the Public Review Board; demanded honesty and integrity
through our Ethical Practices Code; and instituted measures to
encourage younger leadership.

On this Labor Day, the UAW honors the life of Walter Reuther as
we carry forward his legacy for future generations.

Happy Labor Day!

In solidarity,

Ron

For more information, http://www.uaw.org (click on the UAW history button).

Dear Stephen Crockett,

The address of a Wayne State University Web site marking Walter
P. Reuther’s 100th birthday was incorrectly listed in a Get
Active messaging campaign sent out by the UAW on Friday, Aug.
31.

We regret the inconvenience. The correct address of the Web site
is: http://reuther100.wayne.edu/index.php .

UAW Members Speak Out About Strike Vote

By TOM KRISHER
AP Auto Writer

SALINE, Mich. (AP) ## Ford Motor Co. has brought a lot of uncertainty into Gerald Williamson’s life.

The factory where he works is on a list of plants slated to be sold or even closed, and like other workers, he’s had to give up part of his pay raises to help the company fund its huge retiree health care bill. So when it came time to vote to give union leaders the power to call a strike if contract talks go south, Williamson got some satisfaction last week out of casting his ballot in favor.

“To try to force us to make any more concessions, it’s unreasonable and we’re willing to shut them down,” said Williamson, 55, who works at a plant that makes instrument panels and other parts in Saline, about 40 miles west of Detroit.

Plenty of United Auto Workers members share his thoughts. At his plant, 99 percent approved the strike authorization. Voting nationwide wrapped up last Friday, but the final tally was not announced. Typically, though, strike authorizations are approved overwhelmingly.

With contracts between the union and Ford, General Motors Corp. and Chrysler LLC set to expire Sept. 14, UAW leaders have asked members during the past few weeks to authorize a strike. It’s standard procedure and it doesn’t mean that a work stoppage will occur.

Williamson, a 13-year Ford worker from Ypsilanti, says he doesn’t want a strike and he doesn’t think the company wants one either. But like many workers, he’s unhappy that he’s had to give up money when new Ford President and Chief Executive Alan Mulally is making millions.

“When you ask people to make concessions and they help out and chip in, then everyone has to make concessions,” Williamson said after voting on Wednesday.

Mulally’s compensation package was valued at $39.1 million during his four months on the job last year, according to an analysis of a Ford filing with the U.S. Securities and Exchange Commission. Workers at many Detroit-area factories often refer to executive compensation when asked about concessions.

The package also bothers Bill Garner, 54, who voted in favor of a strike. He thinks the salaries of Mulally and other top Ford executives should be cut.

“If they were down more, I don’t think it would be near the issue it is now,” said Garner of Saline, who has seen only one strike in his 35 years with Ford.

When Mulally was asked last week about criticism of his compensation, he said that leadership counts.

“All the skills required to run a business are market-driven,” said Mulally, who was hired away from Boeing Co. last year to rescue the money-losing Ford.

All three Detroit-area automakers are seeking concessions from the UAW as contract talks progress behind closed doors. They point to what they say is around a $25-per-hour labor cost disadvantage to their prime Japanese competitors. A big chunk of that is the multi-billion-dollar long-term retiree health care obligation, which the companies want to unload by paying the UAW a lump sum so it can form a trust to pay the medical bills.

Led by Ford’s record $12.6 billion loss last year, the three Detroit automakers lost a collective $15 billion in 2006. Ford had to mortgage its factories to generate enough cash to stay in business.

The losses, brought on by high gas prices sending consumers away from Detroit’s trucks and sport utility vehicles, led to restructuring at all three automakers. Thousands of union workers left their companies under buyout or early retirement packages.

As part of that restructuring, Ford last year took the Saline plant and 16 others from its former parts arm, Visteon Corp., and placed it into a holding company for sale or closure.

Workers at Local 892 in Saline don’t know if they will have jobs or for whom they’ll be working in the future. They also don’t know if they’ll be part of whatever national contract the UAW negotiates.

Yet in Saline, many of the 1,300 hourly workers have some hope. Ford recently has been moving equipment into the plant to make interior parts for new vehicles, the workers say.

While most workers interviewed after voting last week said they would strike to get what they want, some fear the results.

“I would say this would be the worst time in Ford’s history to be on strike,” said Darryl Varney, 38, a worker from Belleville.

Some were skeptical of the UAW taking on retiree health care, while others said they needed more details.

Williamson said if Ford gets concessions this year, it will continue to ask for more, so the union should draw a line.

“They would look at that as the way to go,” he said. “Obviously they want to drive wages the cheapest.”

Dorothy Smith, a UAW Local 572 retiree who sat along the route of a Labor Day parade Monday in Detroit, said she had hoped labor leaders would use the parade to give some word on progress in the talks, but heard nothing.

“We want to compromise, but we want to be able to hold onto what we have,” said Smith, 65, who worked in maintenance for 20 years at GM’s former headquarters.

UAW President Ron Gettelfinger said as he left the parade that it provided a public chance to celebrate but not negotiate.

“This is an opportunity to come together as working men and women … and celebrate what workers have done for the country,” he said. “Negotiations are best done if they’re handled at the bargaining table, not in the media.”

##

AP Business Writer Jeff Karoub in Detroit contributed to this story.



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