This year’s quadrennial negotiations, which opened in July, aren’t likely to go off the rails at a time when the industry’s decade-long run of prosperity is continuing and the American car companies need an engaged workforce more than ever.
Some pundits believe the most likely outcomes are typically similar contracts between the UAW and General Motors, Ford and Chrysler that will give their nearly 150,000 union members an even bigger share of industry profits than they’ve enjoyed for the last several years as the companies seek to cap fast-rising fixed-labor costs. At current levels, each unionist’s share amounts to about $1,000 for each $1 billion in industry profitability, meaning that a lot of autoworkers got checks in the high four figures over each of the last few years.
Labor costs have shrunk to only about 5 percent of the overall cost of building a vehicle in the U.S. these days, but they’re also the most controllable component.
GM CEO Mary Barra, Ford CEO Jim Hackett and Fiat Chrysler Automotive CEO Mike Manley each is dealing with a basically similar, yet somewhat different, hand as they seek to guide their companies while new UAW President Gary Jones helms the union for the first time in national talks.
Collectively, the automakers have been enjoying record billions in profits over the last few years and have been taking huge advantage of the dramatic further shift in the American market toward pickup trucks and SUVs and away from traditional sedans. That has left all three of them closing down car production or shuffling it off to places like Mexico while typically being able to fill newly opened capacity in the United States with new and more profitable truck-based models. This is the picture that Jones likely will target with a push for even greater profit-sharing for his members – and perhaps baking significantly higher wage increases into their compensation for the first time in some years.
At the same time, the industry collectively also is facing some grim developments. The deceleration of overall U.S. auto sales already has begun nicking Detroit Three profits and could worsen with threats of a general slowdown in the American economy, making the automakers more vulnerable to UAW demands at exactly the wrong time. Meanwhile, every automaker now is in the midst of committing not-long-foreseen billions of dollars into what seems like their inevitable transition to emphasizing all-electric and autonomous vehicles.
“The union’s motivations are to make things more permanent, whereas the company wants to make things more contingent,” Kristin Dziczek, vice president of industry labor and economics at the Center for Automotive Research in Ann Arbor, Michigan, told Automotive News.
Yet the individual circumstances of the CEOs, and their companies, do differ in significant ways. Barra ranks as the veteran of the three at this point, and generally has gotten high marks for her five years at the helm of GM. But she created particular rancor with Jones and his lieutenants, as well as the company’s rank-and-file, with her abrupt decision early this year to close permanently four U.S. plants in GM’s transition away from sedans and as a form of preemptive cost-cutting.
“We will not leave [a] stone unturned” in fighting Barra’s decision, Jones said during the traditional opening-handshake session with Barra last month. “We will fight to keep these union plants open and allocate more products here on American soil. It can be done.”
Ford CEO Hackett has been in the job only two years after he succeeded Mark Fields, who became Donald Trump’s whipping boy during the 2016 campaign in which the Republican candidate was highly critical of Ford’s decision at the time to move production of its Focus small car to Mexico. But while taking some time to get his footing, Hackett finally has laid out a vision and plan for Ford that depends heavily on the success of some new models being made by UAW workers.
And at FCA, Manley is winding up his first year as CEO after the untimely death in 2018 of Sergio Marchionne, the architect of the company’s revival in the wake of Chrysler’s 2009 bankruptcy. He faces unique and interesting circumstances for a number of reasons, including the fact that Fiat Chrysler is enjoying record profitability as its Ram and Jeep brands keep scraping bits of market share from the rest of the industry. Also, FCA is building a new assembly facility in an old engine plant in Detroit that will become the first new car-building plant in the Motor City in a generation.
Yet it isn’t clear how Jones and the rest of the UAW regard the fact that Manley’s company was the home of a financial scandal in which a U.S. attorney’s office is investigating whether former UAWS leader and FCA executives corrupted the last round of bargaining by misappropriating training-center funds. So far, eight people have been convicted.
In the end, as always, Jones will have to “sell” the contracts to workers at each company, nearly half of whom haven’t experienced a downturn and so don’t know what it’s like to be without a job. It would be stretching things to envision a strike at GM, Ford or Fiat Chrysler this fall, but it wouldn’t be crazy.
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