2010 UAW National Convention: Bob King Elected New President

   
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Tags: Gettelfinger • King • Union • UAW • President • Convention • AFL CIO • Trumka • GM • FordChrysler • profit • bankruptcy • concessions • contract 

June 17, 2010


The United Auto Workers Union (UAW) held its 35th constitutional convention in Detroit this week and elect a new president to replace Ron Gettelfinger who is retiring after serving in that role for eight years.  Bob King who was vice president of the UAW's Ford department, was elected the unions new president on Wednesday.

The union which represents the three Detroit auto companies is at a crossroads.  At the time of the UAW bargaining convention in Las Vegas in 2007, the union had 576,000 active members. With the significant downsizing at the US auto companies, today there are about 350,000 members.  The uniononly  has about 113,000 members at GM, Ford and Chrysler.  Furthermore, the union estimates at least 123,000 of its members work in nonautomotive fields.  At its height in 1979, the union represented 1.5 million workers.

Since the Detroit 3 began significant restructuring over the past five years each UAW member employeed at an auto company have given up $7,000 to $30,000 in concessions.  The union capitualted raises, bonuses, cost-of-living increased, the jobs bank and agreed to a two-tier wage system where new hires make about $14 an hour, half the amount hourly production workers are now paid.  UAW labor costs, including wages and benefits, have fallen from $75 an hour to about $55 and equal to the foreign transplant labor in the US.

King, who is a lawyer by training, worked his way up the union ranks from the shop floor.  He is known for being pragmatic and fair.  However, last year King tried to pushed for concessions at Ford that would have aligned the contracts with GM and Chrysler.  This caused a stir with members and the proposed concessions were defeated by the Ford union members..  GM and Chrysler as part of their bankruptcy proceedings reached an agreement with the union that will prevent it from striking when the contract is renegotiated next year in addition to a simplification of work rule and job classification. 

As the auto sector improves, King already faces demands by the membership to restore the benefits that were given back to the Detroit 3 during the recent upheaval that allowed their labor costs to be competitive with the foreign transplant manufacturing sites.  

AFL-CIO President Richard Trumka said at the convention:

“The three major U.S. companies are making profits again … We salute their success, and we demand that they do right by the workers who have done right by them… Just as there has been shared sacrifice in periods of pain, there must be shared prosperity in periods of gain.”

The Detroit New went on to report that Trumka later called for the restoration of pay and benefits is likely to become an issue next year when the UAW, under a new president, will negotiate a new national contract with Detroit's automakers.  There were even calls to strike Ford which does not have the no-stirke clause in its agreement with the union.

Discussion:

The US automakers are still struggling in their home market.  Just last month, GM resorted to fleet to inflate their results.  Fleet sales accounted for 38% of the company’s May sales where retail sales were up 7% for a total monthly gain of 17%.   It is not just GM but the improvement in sales in 2010 overall has been driven by fleet sales.  Total industry sales in the US are up 16% but that is largely driven by a 61% increase in fleet (Table 1).  Of concern is Chrysler's retail sales have fallen 35% this year.  It should be noted that GM's results the lose of four brands in the bankruptcy.  Ford's retail sales have improved but again fleet is driving the overall results.


Retail

Fleet

Total

Chrysler

-35

111

-5

GM

-3

136

16

Toyota

8

4

7

Honda

9

83

11

Ford

20

121

37

Hyundai-Kia

31

-18

14

Nissan

37

15

31

Industry

6

61

16

Table 1: 2010 US Fleet – Retail Sales Mix (Source Automotive News)

The US auto companies have improved their financial results this year but this should not be an indicator to the UAW that the good times are back and begin to make unreasonable demands on the companies.  For the 1st Quarter Ford reported a total of $2 billion pre-tax profits with $1.2 billion generated by automotive division and $800 million from financial service.  It North American operations made $1.2 billion.  The company also reported having $25 billion in gross cash, however, that was offset by $34 billion in gross debt.

During the same period GM’s corporate earnings totaled $1.8 billion and its North American operations contributed $1.2 billion.   GM Europe reported a loss of $500 million.  Gross debt at the end of the quarter stood at $14.2 billion.

Post bankruptcy Chrysler, now run by Italy's Fiat Group SpA, posted a $143 million operating profit before interest and taxes in the same period.

The UAW must look not at the bottom line corporate numbers but only how the US or North American operations are doing.  These companies are multi-national and the UAW is contributing a smaller and smaller percentage of the total as other markets contribute more to the bottom line.

Conclusion:

The election of Bob King as president of the UAW should be a sound choice and someone understands the issues the auto companies face and the members he represents.  His biggest challenge is to educate that membership that the Detroit 3 still have a long road to recovery and keep their demands in check as the situation improves.  The concession the UAW has made were fair and reasonable given the competition from the foreign manufacturers.  It should also not be forgotten that the UAW’s retiree healthcare trust funding is directly linked to the future profitability of the both GM and Chrysler.  The trust controls about 17.5% of GM and 65% of Chrysler and the funds raised from the sale of that ownership stake will go to the trust.  In late March of this year the trust raised $1.78 billion by selling Ford financial warrants it received from the company to pay for their healthcare obligation.

The union must also remember that in the GM and Chrysler bankruptcy, the pension system was not cut and remains intact in addition to the funding for the healthcare trust that was negotiated in the 2007 labor agreement.  Unlike shareholders and debt holders, the union did not take a substantial haircut and walked away pretty much unscathed.

Instead of picking a fight with the Detroit 3 auto companies, to level the playing field the union should try to organize the foreign transplant manufacturing sites in the US.  Currently the UAW does not represent the workers in any foreign owned plant. 

The union under the leadership of Bob King, will likely remain pragmatic as it was under Gettelfinger.  Behind the rhetoric of a few, the union cannot afford a confrontation with the Detroit 3 if the union wants to survive at all.  The US economy remains on shaky grounds, Ford is laden with over $33 billion in debt, GM is just now showing signs of life and Chrysler barely has a pulse.  The futures of these three companies are not guaranteed in the short term.

The days when the UAW membership manufactured close to 100% of all vehicles sold in the US has been over for decades and cannot make demands like they once did without putting the respective companies at a competitive disadvantage.  Today UAW members manufacture well under 50% of the vehicles sold in the US and the labor rate to keep the work must remain competitive.  

The real concern is if the UAW decides to strike Ford next year when the contract is up for renegotiation and if King can prevent it.  

 

 

References:

AFL-CIO chief: Restore autoworker benefits, Detroit News, June 15, 2010

Unions: Restore concessions, Detroit News, June 15, 2010

Gettelfinger's legacy? King says he saved the Detroit 3, Automotive News, June 14, 2010

GM's 17% sales gain driven mostly by fleet sales, Automotive NewsJune 2, 2010

Spurt by fleets is major factor in sales recovery, Automotive News, June 14, 2010

UAW leaders deny debate on proposals demanding givebacks, Detroit News, June 14, 2010

New groups diversify UAW's base, Detroit News, June 16, 2010

UAW dissident says some Ford workers ready to strike, Automotive News, June 13, 2010

King elected UAW president; union wants payback from concessions, Automotive News, June 16, 2010


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