What Will Surface at the Bargaining Table?

by : Anthony Fontanelle

The Ford Motor Co. and the General Motors Corp. started the traditional talks Monday with the United Auto Workers (UAW). The beginning of the anticipated series of talks is aimed at alleviating the condition of both the auto industry and its workers.

Monday's talk is an effort to slash labor costs and formulate terms and conditions for the betterment of auto workers. It is also anticipated to play a key role in the survival of the automakers in the industry. The would-be contracts could make a trend if ever negotiating bodies find it crucial to business and survival.

The union formally opened negotiations with the Chrysler Group on Friday, and the national contracts with all three expire Sept. 14, wrote Tom Krisher of The Associated Press. The three automakers lost a combined $15 billion in 2006 and are in the midst of shrinking themselves and rolling out new vehicles to better compete with Japanese companies. Industry analysts have said reducing labor costs is critical, he continued.

Among Detroit's Big Three, Ford is in the worst shape. The Dearborn-based automaker has mortgaged its factories to set up a $23.4 billion line of credit to cover losses and pay operating expenses while it restructures. Even could not embellish the bleakness surrounding the company. To note, the automaker lost $12.6 billion in 2006 and $282 million in the first quarter of this year.

Analysts in the industry say Ford likely will seek deeper concessions than the other two automakers, perhaps including temporary wage cuts. Meanwhile, Detroit's Big Three say the talks need to bring them into labor cost parity with Japanese automakers, who make about $2,000 per car more in profits. Big Three divulged its hourly labor costs are about $25 more than those of the Toyota Motor Corp., Honda Motor Co. and the Nissan Motor Co. when health care, pension, retiree and other costs are factored in.

The Detroit automakers all have the same problems, said Laurie Harbour-Felax, managing director at Stout Risius Ross Inc., who has conducted detailed studies of auto manufacturing costs. "Ford is probably not as well-positioned as GM today... but they still have the same issues around health care that are crippling them," she said.

Harbour-Felax added her studies have shown that the three automakers pay $1,200 to $1,500 per car in health care costs, far more than the Japanese automakers. She also said she agrees with the union that companies must do more to cut costs and become more efficient.

The Big Three will move toward leaner manufacturing and engineering techniques and will use same architecture globally on multiple models.

The UAW, however, has said that labor costs represent only ten percent of the price of a new vehicle. President Ron Gettelfinger said that after talks opened with Chrysler that the jobs bank is not an issue, because so many workers have left the companies under early retirement and buyout deals negotiated with the union.

"The harsh reality, though, is with all the progress that we've made together, we still have a lot to get done" during these negotiations, said Joe Laymon, Ford's group vice president of human resources and labor affairs.

GM, meanwhile, will put concessions on the bargaining table. "We know that these are going to be difficult contract negotiations," said Diana Tremblay, GM's chief negotiator. "We know that we need to make some changes to make the business sustainable over the long term."

Meanwhile, Gettelfinger noted the talks are about defending America's middle class and are not limited to wages and benefits in the auto industry. "I think it's fair to say we've given a lot," he said.