Autoblog

More than one-fourth of GM's 74,000 hourly employees are going to grab the loot and skedaddle. Earlier this year, UAW President Ron Gettlefinger estimated that 15,000 would put their hands out, but another couple thousand decided to hop on the General's money train. The workers are expected to finish their employment by July 1. GM's most recent deal with the UAW means it can replace those folks with lower wage workers and save itself a bundle on payroll. And that will make the job of saving itself that much easier.

[Source: Automotive News, sub req'd]

Buzz Hargrove isn't mincing words about his opinion of Chrysler LLC's strategy. Calling the decision to send the Magnum and Pacifica models out to pasture and cut shifts and jobs at the Brampton, Ontario plant "stupid," Hargrove has said the Canadian Auto Workers aren't interested in the type of concessions the UAW recently agreed to. While the UAW is allowing new hires to be given a lower pay level, as well as taking on a health care trust fund, the CAW will be having none of that, according to Hargrove.

Cuts were expected, but Chrysler's recent scaling back is more than necessary, according to Hargrove, who counters that what the company's really trying to do is reduce supply in order to drive up demand and keep prices higher. It sounds like a good way to make the automaker profitable, thinning the lineup and trimming overproduction. The problem, according to The Buzz, is that Chrysler's plan is anathema to the long union tradition of providing jobs that pay well enough to allow a solid middle class life for autoworkers. With the pay cuts, Hargrove says that autoworkers will no longer be able to afford to buy the cars they build. The recent fall of the dollar isn't helping matters, and will likely give Chrysler another point to argue when asking for concessions. The Canadian Auto Workers will begin duking it out with Detroit in July, so expect the rhetoric to become even more heated in the months to come.

[Source: Automotive News - Sub. Req.]

GM has been chosen as the lead company in the UAW contract renegotiation talks. That means that the UAW will come to a contractual agreement with GM first, and that contract will be used as the template for negotiations with the other two carmakers, Chrysler and Ford.

Of course, that also means that GM becomes the first target of a strike. The UAW's agreements with all three carmakers ends today, September 14th, and Chrysler and Ford have managed to work out extensions. GM, however, has not, and the UAW has told its members to be ready for a strike that could come as early as today.

[Source: Auto News, sub req'd]

The Big Three automakers' massive pension liabilities are well known. To remove that burden, a fund called a VEBA -- voluntary employee beneficiary association -- has been mooted. Automakers would put an agreed upon sum into the VEBA, after which they would be free from further pension obligations. The UAW would be responsible for administering the fund. Goodyear used that exact setup last year to end a strike with the United Steel Workers.

Goodyear, though, put $1 billion cash into the fund. The automakers have suggested using cash and stock. It's been speculated that GM could need to throw $30 billion into a VEBA to be free and clear, and that's a burden that would be more easily handled with cash and stock. Goodyear's stock increased by 25% after the steel workers agreed to the VEBA, but there are no guarantees that that would happen again with GM, Ford, or Chrysler stock.

To get any of this to work, the UAW will have to agree to the VEBA at all, and then convince members to take the cash and stock option, which would require getting everyone to believe that the stock will appreciate quickly enough and steadily enough to keep pace with disbursements. It is the automakers, however, that are really under the gun. To avoid any chance of a strike, automakers need to come to an agreement with the UAW by September 14. That's the date the current agreement expires, and a strike could occur any time afterward.

[Source: Just Auto, sub req'd]

Hyundai's labor union has taken a note from the Teamster playbook and is attempting to strong-arm the automaker. During a ceremony to celebrate the new year, union members ganged up on Hyundai's president and discharged fire extinguishers. The ceremony came screeching to a halt with the president suffering a facial wound in the melee. The hubub arose over bonus pay. Workers were given a bonus equivalent to 100 percent of their normal pay. The extra pay was directly correlated to how close they came to hitting their production target. In this case, 1.62 millon cars was 98 percent of the goal. Nice and tidy, eh? Not so fast.

If labor had managed to eke out that last 2 percent of volume, they would have found 150 percent tucked in their envelopes. Unfortunately, the union isn't acknowledging that the reason for the near miss was their own doing. 2006 was rife with labor unrest for Hyundai. The unions kept striking in an effort to increase pay, while the Won climbed against the dollar, putting Hyundai in a bind between labor's outstretched hand and a vehicle that was suddenly more expensive than its competition. Disregarding the slip in market share, Hyundai's union kept ringing the bell for more pay, all the while forcing losses on Hyundai. Hyundai even lowered the production target to accomodate labor's inability to attain the original number. Hey, we'd love to get paid more for doing less, but demanding a bonus you didn't earn seems counterintuitive to us.

[Source: Digital Chosunilbo]

The political alliances in the Motor City have historically been rather black-and-white, with the UAW lining up alongside Democrats and management favoring the Republicans. Yes, one can find exception to these stereotypes, but the above comes as close as one can to describing 40-some years of voting behavior in one sentence. But the times are changing, and traditional alliances between the political parties and their supporters in the auto industry are increasingly stressed.

Most recently, the heads of the Big Three are said to be getting a bit miffed with the White House after receiving a third postponement of a scheduled meeting with President Bush. Additionally, we've heard recent requests from Ford's Mark Fields for "cooperation" between the automakers and government on health care, which can been seen as a position contrary to that of most conservatives. Bob Lutz has gone so far as to claim that he may vote for Hillary Clinton in 2008 as a means to protest the lack of support from Bush.

Keep in mind that the union isn't exactly getting a lot of support from those who have traditionally been in its corner, either. Dick Gephardt was said to be labor's favorite candidate in 2004, and we all know how far his campaign went.

It would seem as if the auto industry is no longer a priority for most politicians from both parties.

[Source: BusinessWeek]

George Reisman, professor of Economics at Pepperdine University and author of the book Capitalism: A Treatise on Economics, attempts to answer the question of where would General Motors* be today without the United Auto Workers. Some of his ten conclusions include:

#1. GM management could fire inefficient employees without worrying about a strike, resulting in higher quality vehicles.

#2. GM would be able to use more efficient, lower-cost methods in building their products instead of negotiating it with the union to the point of creating 'phony' jobs to placate the membership.

#6. GM would not be paying $140,000 per employee to leave.

#10. GM workers, without the union benefits, would be motivated to consider saving for the future instead of threatening for more money from an already financially-strapped company.

Hmmm. A bit harsh but perhaps there are some grains of truth in there. Opinions? Shout out in comments.

*Reisman does state his analysis also applies to Ford Motor Co. and Chrysler. He chose GM for his example since it's the largest automaker.

[Source: Ludwig von Mises Institute]

The consensus seems to be that Delphi's decision to once again push back its deadline for a motion to cancel the union contract was a healthy sign. The funny thing is, no one seems to be willing to give any solid reasons that convince us to feel the same way.

Sure, it gives Delphi, the UAW and GM six more weeks to hammer out a deal that hasn't happened in the past four months - if indeed one can be worked out (Wagoner isn't making any promises) - but what does such a deal really mean to the situation? GM can offer up a multi-billion-dollar buyout of the union, but that will simply accelerate the automaker's demise (think of how many new platforms could have been purchased with the coin that GM will drop on this fiasco). And make no mistake; if GM goes down, it will surely take Delphi with it. This is a two-way street.

In the meantime, Delphi continues to bleed cash at the rate of somewhere between $200M and $1B for each month that the situation goes without being resolved. That's money that will come from someone's pockets, or it'll simply add momentum to the toppling process.

The number of outcomes in this situation have essentially been narrowed down to two - GM pulls off a buyout like the Ford/Visteon deal and thereby adds in a bit more forward stick on its own nosedive, or Delphi plays tough and the union strikes. If anyone has any other scenarios, feel free to post 'em, and hopefully the various parties involved will take note. Until them, I think they're just biding their time until there's nowhere else for this situation to go but in the ugliest direction.