Opening guns in the contract talks
Big Three seeking big cuts from UAW
NEW YORK (CNNMoney.com) -- Detroit automakers are ready to take a hard
line with the United Auto Workers in negotiations this year and push for
about a one-third reduction in hourly labor costs, according to a
The Wall Street Journal quotes unnamed auto executives as saying that
General Motors (Charts, Fortune 500), Ford Motor (Charts, Fortune 500)
and Chrysler Group will threaten the union with moving more production
outside of North America unless they're able to close the gap in wage
and benefit costs compared to Asian rivals such as Toyota Motor (Charts)
and Honda Motor (Charts).
All three automakers have announced plant closings and deep job cuts in
recent years, trimming more than 70,000 UAW members from their payrolls.
But now they're focused on reducing the cost of the 210,000 UAW members
left in their plants. Their contracts with the union expire in September.
The paper says that the traditional Big Three automakers estimate their
labor costs at $70 to $75 an hour, while the nonunion Asian automakers
have labor costs of $40 to $45 an hour.
"We need to eliminate most, if not all... like 80 percent" of the gap, a
senior automotive executive involved in labor planning told the
newspaper. "It has to be gone by the end of the contract, or doing
business in the United States is unsustainable."
That estimate would mean a savings of about $24 an hour, or about a
third of current labor costs.
The Detroit News reported Wednesday that internal discussions at Ford
estimated its total labor costs at $71 an hour, and wants to cut that to
Winning the concessions from the UAW leadership and the rank-and-file
workers will not be easy. While the UAW did agree to open the existing
contract early to grant health-care cost savings to GM and Ford due to
losses there, they did not agree to the same savings at Chrysler,
because parent DaimlerChrysler (Charts) had remained profitable. And the
limited changes in health-care coverage only narrowly won rank-and-file
approval at Ford.
DaimlerChrysler has since announced plans to sell the Chrysler unit to
private equity firm Cerberus Capital, essentially paying the firm to
take over Chrysler and its ongoing health-care obligations.
UAW President Ron Gettelfinger, who declined to comment on the coming
negotiations to the newspaper, has argued his workers shouldn't bear the
entire cost of Detroit's restructuring.