Auto union must look out for companies, too

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The United Auto Workers' mission used to be simple — fight Detroit's automakers for better pay and job security.

But things got more complex when the government bailed out General Motors and Chrysler two years ago in a deal that left the union with big chunks of stock in both companies. Now the UAW has to be both owner and worker advocate, essentially sitting on both sides of the bargaining table.

The tricky dual role is causing problems for union leaders, and in particular UAW president Bob King, as they prepare for contract talks later this year.

"That conflict of interest, I think, should probably be illegal," says Nick Waun, who works at a GM plant in Ohio and says King should put workers first.

In 2009, when GM and Chrysler nearly collapsed, the companies were allowed to use stock rather than cash to pay into UAW trust funds that cover health care costs for about 800,000 retirees. With bankruptcy looming for the automakers, the union was faced with taking the stock or risking getting nothing.

The trusts now own about 13 percent of GM stock, which is publicly traded, and 65 percent of Chrysler, which is privately owned but could go public later this year. The trusts can sell the stock to help pay bills.

King, 64, contends union members will benefit if the companies' stock prices go up. He has tried to position the union as a business partner rather than an adversary of Detroit's car companies.

Angry union members say he's more concerned about profits than winning back raises and benefits surrendered by the union the last six years. And if enough of them doubt his motives, they could reject any contract he brings back from the negotiating table and force up labor costs — just as General Motors Co. and Chrysler Group LLC are starting to recover from bankruptcy and gain ground against rivals.

That distrust could also create a more hard-line union once King's tenure ends in 2014.

"The seeds are there for an insurrection within the union if it's not handled correctly," says Gary Chaison, a professor of industrial relations at Clark University in Worcester, Mass.

So far, the number of union workers voicing distrust is small. But discontent has spilled into the open.

Workers at a GM parts factory in Indianapolis recently voted down a King-backed deal that would have cut wages. In December, a King lieutenant was booed at a Chrysler factory near Detroit by workers upset about concessions. Ford workers embarrassed King in 2009 when they rejected some concessions on another contract, although the company later won a lot of the givebacks through plant-by-plant negotiations.

Ford will go through similar contract talks with the UAW this summer, but it never took government bailout money, and the union has no ownership stake.

Under the concessions, which began in 2005, autoworkers gave up cost-of-living pay raises and allowed rule changes so workers could do several jobs. The health care trusts also were created to shift the cost and management of medical costs to the UAW, helping automakers shed billions in liabilities. In return, the companies promised them regular payments.

Gary Walkowicz, a Ford worker who ran against King for president last year, said the concessions are examples of a gullible union believing the company line. "If we continue to base everything on what the companies tell us, what their profits are, we have no place to go but down," he said.

UAW membership has been shrinking for years. It's down to 355,000 active workers from 1.5 million in 1979.

King recently agreed to wage cuts in a deal to build a subcompact Chevrolet at GM's plant in Orion, Mich., near Detroit. The deal saved 1,500 jobs that would have gone to Mexico, but it lets GM pay up to 40 percent of the plant's workers, mainly new hires, about $15 an hour, or half what senior UAW workers get.

Workers like Waun and Walkowicz want concessions reversed now that GM is making money again — $4.2 billion in the first three quarters of last year. The UAW estimates that each hourly worker has given up more than $7,000 a year in pay and benefits.

As part of the 2009 government deal, the union forfeited the right to strike over wages in this year's talks. In the past, the UAW wielded that weapon to win pay and benefits that helped establish the U.S. middle class.

But the union gains left the Detroit companies with labor costs that were much higher than foreign-based competitors. The givebacks brought costs more in line with Asian automakers that have U.S. plants. GM now pays roughly $58 per hour — $29 in wages and the rest in benefits and other costs, according to the Center for Automotive Research. For Toyota, that figure is $56. Before the concessions, GM's costs were about $70 per hour.

King, a veteran UAW negotiator and law school graduate, said in a recent interview that keeping companies profitable is just as important to the union as it is to management. "That's the only way we're going to protect the pensions, the retiree health care, all the things we want for our members, good wages."

That's the reverse of former UAW President Stephen Yokich, a firebrand who said the union was in an "an all-out war" with GM during a crippling strike in 1998.

The health care trust, which supplements Medicare, has to pay benefits for the next 80 years. At GM, the trust has at least $16.6 billion, still short of the $20 billion it needs. It has $2 billion at Chrysler, plus a $5 billion company note, short of the $11 billion it needs.

To help make up the difference, the trust needs GM's stock price to rise. It began trading publicly again in November, and has gained more than $3 from the $33 starting price. Chrysler, which hasn't been publicly traded since 1998, could sell stock to the public later this year.

King dismissed conflict-of-interest allegations, saying an independent board runs the health care trusts.

King, who said he won't run for president again, is viewed by company managers as realistic and cooperative. He still wants workers to share in the companies' profits, but he's mindful that GM and Chrysler could have died and taken the union with them.

Although GM, Chrysler and Ford won't go back to the old wages and benefits, negotiations are under way for other rewards, such as profit-sharing. Companies prefer bonuses to raises because they come only if a company makes money or meets goals. UAW workers at all three companies are getting bonus checks for their work in 2010.

Despite the critics, most members support King and are happy to make $29 an hour.

Jenn Bramlett, who had to transfer from the Orion factory to Lordstown, Ohio, to keep her pay and benefits, said everyone knew the Orion plant would have lower wages because the tiny cars it makes don't bring in enough to cover higher labor costs.

"They aren't going to pay us more to build the car than it's worth," she said.

Art Schwartz, a retired GM negotiator who runs a labor consulting firm, thinks that even with cooperation, King and the UAW will get a good deal in contract talks.

"It doesn't mean the union's going to roll over and play dead all the time," he said.