Opening guns in the contract talks
Big Three seeking big cuts from UAW
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 about $50.
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.