The road ahead

Manufacturing News, Source : The Manufacturer US
Published : 10 Oct 2003 9:54

The new contracts ratified by members of the Detroit-based United Auto Workers union last month may be a sign that unions are being forced to face the economic realities of the automotive industry.

The new contracts ratified by members of the Detroit-based United Auto Workers union last month may be a sign that unions are being forced to face the economic realities of the automotive industry.

New four-year agreements were signed with DaimlerChrysler, as well as with Ford Motor and its spinoff Visteon. (At press time, a tentative agreement had also been reached with General Motors and Delphi.) “In the last five days we have successfully concluded negotiations with five of the largest manufacturers in the world,” UAW President Ron Gettelfinger said in an announcement at the end of last month.

But exactly how good are these deals for their members? Both deals include an up-front signing bonus of $3,000 for salaried workers—a significant gain over the $1,350 of the 1999 contract. But the new pay-raise percentages are somewhat lower this time around: a two-percent raise in 2005 and a three-percent raise in 2006, versus the previous contracts’ annual three-percent raises. And Ford announced at the beginning of October that they would layoff 3,000 U.S. workers by the end of the year, in an attempt to cut costs by 10 percent. The union pact allows Ford to lay off up to 1,600 more workers thereafter. Unions appear to be unwilling to push the automakers too hard in trying economic times.

Automakers are definitely anxious to cut costs any way they can. The U.S. Department of Transportation recently reported that only 8 percent of U.S. households don’t own a vehicle. In today’s economic climate, those households may well put off buying an SUV. And the automakers are losing money due to steel tariffs, which they claim are costing them millions.

According to a survey last month by management consulting firm A.T. Kearney, 36 out 40 senior executives surveyed at North American automotive manufacturers and suppliers said they plan to move certain non-manufacturing business processes to low-cost offshore locations. Moving some functions of their operations to, say, India, could conceivably “reduce automakers’ and suppliers’ costs by nearly 50 percent,” said Richard Spitzer, vice president at A.T. Kearney.

That sort of thinking could mean more layoffs, and more plant closures. Indeed, DaimlerChrysler intends to close nine facilities and Ford intends to close at least four facilities over the next four years.

And there are a lot of jobs on the line: the Center for Automotive Research released a report last month claiming that the auto industry is directly or indirectly responsible for some 13 million jobs—one out of every 10 jobs in the country, including 6.6 million jobs in auto manufacturing and sales alone.

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