UAW agrees to contract with Ford: How much did the union give up?

UAW workers at Ford from across the US voted late Tuesday to accept a four-year contract with the automaker. The vote pitted today's labor costs against future union membership.

Ford auto workers from across the US voted late Tuesday to accept a four-year contract with the automaker.

The deal was controversial enough that, by late last week, the union was preparing its members to strike.

The vote to finally accept the contract, agreed to by 63 percent of its 41,000 members, resulted in a harsh reality check – the recognition that an increase in labor costs today might shrink union membership in the future.

Union members originally wanted annual pay raises but were offered profit-sharing bonuses, inflation adjustment payments, and other incentives considered less risky for the automaker, collectively totaling $16,700 per worker through 2015.

Workers were upset that FORD CEO Alan Mulally received a $26.5 million pay package for 2010 when they were forced to sacrifice benefits and raises during the industry’s most severe economic downturn in history.

Also a bitter pill union members had to swallow: the controversial two-tier salary structure, which, established during the 2007 talks to bring down labor costs, forces incoming workers to accept a lower pay rate than veterans, a dynamic that contradicts the union’s goal of equitable pay for all workers.

Analysts say that conceding much of what they had originally wanted, Ford workers ratified the contract because they understood a strike would prevent the United Auto Workers [UAW] from expanding membership, especially if the automaker cut future jobs in order to pay for upfront labor costs.

“These agreements were about minimizing risk and holding the line on labor costs as well as holding the line on [union] membership. They couldn’t bring back raises and achieve those three goals,” says Kristin Dziczek, director for the labor and industry group for the Center for Automotive Research, an industry think tank in Ann Arbor, Mich.

Voting for the contract forced workers to confront “reality and philosophy,” Ms. Dziczek says. “The philosophy may be ‘solidarity forever’ but in the plants right now we have the two-tier system and that’s hard for some people to swallow.”

UAW membership dropped significantly from the heyday of the automotive industry decades ago. Members tallied 1.5 million in 1979, but today that number is close to 355,000, one-third of which works in the auto industry, says labor historian Mike Smith at Wayne State University in Detroit.

The two-tier system in 2007 was “a massive philosophical change for the UAW” and signified the organization was becoming more willing to cooperate with the domestic automakers in order to keep their membership numbers solvent and prevent further labor cuts.

“The whole game has changed. The main issue for bargaining now is job security,” Mr. Smith says.

Workers at Ford’s dual assembly and parts stamping operations in Chicago rejected the contract last week, despite a pledge by the company to add about 2,000 new jobs and over $200 million in plant investments. However the contract’s ultimate passage was seen as a win to the local and state economies. In a statement released Wednesday, Chicago Mayor Rahm Emanuel said “Ford’s increased presence in Chicago bolsters [the city’s] economic competitiveness.”

Overall, Ford is adding 12,000 new hourly jobs to its US operations by 2015 and a total of $16 billion in infrastructure improvements.

Even when the economy improves, UAW workers should not expect a return to the earlier era when they were guaranteed certain pay and benefit packages and were not necessarily forced to share in the long-term success of the company, says Marick Masters, director of the Douglas A. Fraser Center for Workplace Issues and Labor at Wayne State University in Detroit.

“What you’re going to see is a continuing effort to reward a leaner workforce in a way that doesn’t balloon the fixed costs of the company,” Mr. Masters says.

Striking will also be a riskier choice for the union, especially if it comes at a time when the public at large is suffering form high unemployment and job insecurity. In this current negotiation cycle, Ford is the only domestic automaker that had the option to strike.

“The public is going to look at people who, in their mind, have good paying jobs and they’ll say. ‘You want to risk these jobs by going on strike to gain something that we can’t even begin to achieve?’ I think they would look on that as the height of irresponsibility,” Masters says.

The UAW has already reached a successful agreement with General Motors, whose workers approved their contract last month. UAW workers at Chrysler begin voting on their contract Tuesday and are expected to finish voting by the end of next week.