Autoworkers say they’re feeling unappreciated these days. They made wage and benefit sacrifices when times were bad. Now, after record sales, layoffs loom.
The shocking announcement by General Motors last month to close four U.S. factories was seen, in part, as a message to the UAW to prepare for cost cuts during next year’s worker contract talks.
But the labor union is not without leverage.
It has more than $760 million in its strike fund. And officials aren’t afraid to use it.
“We’re in a position of strength when we go into negotiations,” said Bernie Ricke, president of UAW Local 600 in Detroit. “It’s no different than a country having a strong military to avoid war.”
The Detroit-based union represents about 156,000 workers who will be directly impacted by renegotiation of contracts with General Motors, Ford and Fiat Chrysler Automobiles.
Union contract talks are notoriously exhausting. Members nationwide are meeting to list priorities. The current four-year contract expires at midnight Sept. 13, 2019.
“I think there’s an understanding on both sides, which is different than when I started,” said Ricke, chairman of the national negotiating committee for the UAW at Ford and a 40-year industry veteran.
“There’s an understanding, now, that basically we need each other. Workers understand that the company needs to be successful, but we need to share in that success. There’s nothing wrong or bad about workers sharing in the gains the company makes. Long-term security is an issue.”
Dennis Williams, past president of the UAW, noted in 2017 not only that he rebuilt the strike fund but that his team was not afraid to tap it.
“A strong strike fund, the UAW has found through the years, is the best deterrent to a strike,” said Harley Shaiken, a professor at the University of California, Berkeley, and a national expert on labor. “The choice is not some jobs or no jobs. It’s about a fair share of a rebuilt and highly successful company right now. The competitive challenges for GM are very real. But their workers have gotten GM through the roughest times. They want to share in the better times.”
The union has seen steady growth over the past nine years, to 430,871 members in 2017. About 40 percent of today’s UAW members come from outside the auto industry, including gaming, higher education and health care. Their dues boost the strike fund and make negotiation strength possible. The UAW also represents about 700,000 retirees.
The contract talks have influence beyond the covered workers. UAW wages and benefits influence nonunion workers in auto and supplier plants and elsewhere, Shaiken said. “Nonunion automakers seek to come close to the wage to deter unionization. And the wages affect auto-based communities.”
Everyone is watching to see what happens in coming months. These contracts are complicated and the process can be contentious. But it is highly unlikely the UAW would organize a strike to protest anything until the legal agreements allow for such activity, said UAW sources close to the leadership.
But these are turbulent political times with all players trying to navigate a “contentious administration,” said Marick Masters, a business professor at Wayne State University.
GM has angered autoworkers and politicians with its abrupt announcement about expected closures. And sometimes workers simply don’t care about protocol if they feel there’s nothing to lose, Masters said.
“Look at the wildcat strikes that occurred among teachers in West Virginia and other states. Those worked,” he said. “There’s a growing militancy among some workers and people who have reached perhaps the tipping point. People take extreme action when they feel there’s no alternative.”
The harsh reaction from lawmakers in Michigan and Ohio, high-profile Democrats and Republicans, plus the president, surprised longtime industry observers.
“This is the first time I’ve seen as much negative reaction,” said Kristin Dziczek, vice president of the Industry, Labor & Economics Group at the Center for Automotive Research in Ann Arbor.
She noted the talk pivoted immediately to “punitive” from “how much more do you need to stay?”
Analysts predict thousands of job cuts by GM and Ford, both in factories and offices.
Adam Jonas, a Morgan Stanley analyst, estimated up to 25,000 Ford employees will lose their jobs globally with the corporate restructuring, with major loss in Europe. Ford acknowledges problems in Europe but CEO Jim Hackett has questioned the projected figures.
Part of the solution with Ford has been talk of collaboration with Volkswagen. In recent days, its CEO has said the German carmaker may build Volkswagen vehicles in Ford plants.
UAW workers have built non-Detroit 3 vehicles without a problem in the past, so these discussions seem logical, said Ricke, who represents about 13,000 members who work at Ford and for auto suppliers who build for the Detroit 3 and others.
“There’s precedent for it. Ford had a deal with Nissan back in the ’80s. We built a Nissan on the same line as a Mercury Villager (minivan) in Ohio. And we built a Mazda Tribute (SUV) on the same line that built a Ford Escape,” he said. “We don’t see a problem with it. The ability to support your family is No. 1.”
Plant capacity is a key issue that will shape decisions.
Based on current data from LMC Automotive market forecasting, the Detroit 3 carmakers have a lot of unused factory capacity. Workers negotiate long-term investment in the plants, plant capacity and product allocation — seeking to ensure there’s product in there.
“All three — GM, Ford and Fiat Chrysler — likely need to further reduce plant capacity in North America,” said Jon Gabrielsen, a market economist who advises automakers and auto suppliers. “If they talk about keeping one plant open, the companies will have to find another plant to close in North America.”
As of December 2018, GM has four of 12 plants operating below recommended capacity. Ford has three of nine plants operating at that level. And FCA has two of six plants operating below recommended capacity.
“You have plants that are set up for trucks and crossovers. It takes investment to move things around,” said forecaster Jeff Schuster, president of LMC Automotive, whose company compiles capacity data.
“This is not sustainable,” he said. “There’s going to need to be some movement. It depends on what happens with the UAW talks. Maybe we’re not done yet.”
The timing is not ideal for autoworkers, industry observers said.
“If I were the workers, I would’ve wished negotiations happened in 2018,” said Mark Gottfredson, who is based in Dallas and coheads the Bain & Company automotive practice for the Americas.
“You have a downturn, you make all kinds of concessions. Then things are good, you get better wages. If they wanted to get their wages back, 2018 would’ve been the time to do it. We’re coming to the end of a cycle. We’re already seeing automotive sales beginning to moderate. When we go into a recession, leverage goes away,” he said.
The auto industry often doesn’t prepare for cycles and ends up producing too many cars and failing to grasp an inevitable recession, he said. “The more we oversell today, the more we’re going to pull back during a recession.”
A new study Gottfredson coauthored, “Triple Threat to Automakers: Recession, Demographics and Disruption,” also suggests that younger consumers simply aren’t buying traditional vehicles at historic levels, and sales in the near future could shrink to 2009 levels. That, coupled with electric and driverless cars, will upend the industry, he said.
“It’s an extreme scenario,” Gottfredson said. “The future is not bright in terms of volumes for automakers. Bottom line is, most are not prepared.”
And those who dismiss the threats of pending pressures on the auto industry as too abstract to take seriously face potential disaster, he said.
“Was the iPhone abstract two years before it happened? Was Netflix abstract two years before it happened?” Gottfredson asked. “I believe the change we’re going to see will be bigger than the change from the horse to the horseless carriage.”