Deadline looms: Will auto union pragmatism help strike a deal?

With the United Auto Workers' labor contract set to expire at midnight, the union and the three US automakers continue month-long negotiations that will determine how much workers will share in the comeback of the industry.

So far, pragmatism seems to be the operative stance, rather than contentious lines in the sand. That stems, analysts say, from a recognition that the US automotive industry has taken its lumps these past two years. General Motors and Chrysler are barely recovered from bankruptcy, and all three automakers, including Ford, have had to prove they can succeed with vehicles that are smaller and more fuel-efficient – and make those sales at a time when cash-strapped consumers are hesitant to buy.

"The reason you're seeing so much cooperation is they understand what is at stake," says Kristin Dziczek, director of the labor and industry group with the Center for Automotive Research, an industry think tank in Ann Arbor, Mich. "This is a moment that all of the parties don't wish to squander."

The United Auto Workers (UAW), which represents about 355,000 members, entered negotiations last month on a tightrope. Some workers want to restore many of the benefit and salary cuts surrendered during the crisis, but others see cooperation with the automakers as essential to the union's survival given this rocky period for the industry. Car and truck sales are expected to reach 13 million units this year, but that's a far cry from the industry's 17 million peak in 2005.

Union leaders and automakers both realize how friction not only makes the domestic industry vulnerable to foreign competitors, but it also risks weakening their public identity, analysts say. That doesn't mean talks have been easy, though.

During the last negotiations in 2007, and the emergency talks in 2009 when GM and Chrysler were thrown into bankruptcy, the UAW agreed to slash wages and benefit packages by almost a third.

Hourly wages for veteran workers are now averaging $50, compared with $76 earlier last decade. Entry-level hires are averaging about $14 to $16 an hour under a controversial two-tier wage structure the union agreed to in 2007 designed to improve the competitive position of the domestic automakers vis a vis foreign companies, which traditionally pay their workers less.

All three US automakers are wrangling to keep wages at current levels and instead reward workers through longer-term benefits such as profit-sharing packages and bonuses linked to quality, productivity, and attendance. Some workers say that they should share in the spoils of Detroit's comeback and that the entry-level wages are eliminating the middle-class security the automotive industry long guaranteed to workers.

However, recently elected UAW president Bob King has suggested he opposes repealing the two-tier system. He says performance-based bonuses help the industry by keeping fixed costs low, which benefits all by providing "long-term security."

"People don't want a guillotine hanging over their head. They don't want to have to worry about whether they have a job tomorrow or not, or if their pension is secure, or if their health care is secure," Mr. King told the Detroit News last month.

Representatives for all three Detroit automakers, as well as the UAW, have not spoken publicly about the labor negotiations because of the sensitivity of the talks. The UAW and Ford agreed on Tuesday to extend the current four-year contract past the Wednesday deadline so they can keep talking for a few more days.

Harley Shaiken, a labor economist at the University of California at Berkeley, says the UAW is going through a "very painful period" as it fights a historic drop in membership – 76 percent from its peak in 1979 – and the effects of an economic downturn.

"The UAW is in no danger of disappearing anytime soon, but its authority as a voice at the bargaining table can be severely damaged depending on what it does going forward. So it's truly a turning point," Mr. Shaiken says. "A great contract today isn't going to be particularly meaningful if there's no jobs tomorrow."

Most agree that what makes these talks different from those in past years is King. The union president "is a different beast than his predecessors … this is not a fire-breathing guy," says Gerald Meyers, a business professor at the University of Michigan in Ann Arbor, who knows King.

"Ask him what success means for the union and he'll say 'quality of product,' 'cost savings' – he'll say all the things that management talks about. I find that astounding," Mr. Meyers says.

Part of that geniality is King's desire to expand membership, especially by organizing workers at foreign-owned US plants. "This nice-guy talk would be a way to get in the door," Meyers says.

King is also pressing automakers to restart idle plants or to invest in others. "There are some places where deals could be made to bring more jobs," says Ms. Dziczek.

For GM and Chrysler workers, striking is not a possibility. Terms of the 2009 bankruptcy restructuring prohibit striking, leaving Ford as the only company the union is legally eligible to strike. If the union does reach an impasse with GM and Chrysler, binding arbitration is the next step.