The UAW today released its complete “Principles For Fair Union Elections” [full PDF here], the document that it wants every transplant auto manufacturer in America to sign ahead of its organizing campaign which kicks off later this month. With so-called “card check” legislation dead in congress, the UAW hopes to shame foreign automakers who manufacture vehicles in America to guarantee certain concessions to the union that, having helped kill off its Detroit “partners,” now owns large stakes in the bailed-out successors to GM and Chrysler.

In the past the UAW has failed to organize a number of transplant factories, including Nissan’s Tennessee plants and Toyota’s Kentucky factory, and the introduction of these principles ahead of the next organization attempt signal’s the UAW’s perspective that “manipulation” by management prevented UAW organization in transplant factories. If bosses from Nissan, Toyota, Subaru, Honda, Volkswagen, BMW and Mercedes don’t sign onto these principles, they will be on the menu for the UAW’s new campaign… but are the principles worth agreeing to? Let’s take a look…

The UAW clearly knows it’s going into this fight with a likeability deficit, as its states in the preamble to its principles that

The UAW of the 21st Century inhabits a global economy, therefore, the union must be fundamentally and radically different from the UAW of the 20th Century.

The preamble goes on to tout the UAW’s commitment to the success of its “partners,” at which point it immediately falls into a credibility gap. After all, the UAW may have changed its perspective in regards to its major partners, GM and Chrysler, but only because it owns large equity stakes in the two automakers, thanks to its privileged position in their government-run bankruptcies. In regards to Ford, the UAW’s largest “partner” in which it owns no equity, the UAW has trampled on decades of “pattern bargaining” (in which the union negotiated the same agreement with all three Detroit automakers) by forcing Ford to give concessions that the union has not asked for from GM and Chrysler. It can not be denied that the 21st Century UAW has not been a fair partner to firms like Ford, let alone Toyota, which it only recently stopped picketing for a NUMMI pullout that can only be fairly blamed on GM.

The preamble then calls upon automakers to sign the principles attached as a way of “embracing the fundamental change” that the UAW claims it has set an example of. The union alleges that the current framework of labor law “does not protect the rights of workers to freely decide whether or not to join the UAW,” a conclusion that would be better worded as a piece of ipso facto: national labor laws have not resulted in UAW organization of the transplant factories. That logic also applies well to the UAW’s first principle, which states

The right to organize a free trade union is a fundamental, human right.

As, of course, is the right to not organize. The UAW has recently embraced high-minded rhetoric to support its agenda, but the talk conceals a pretty significant issue: the UAW is hardly a neutral party in all this. Yes, organizing is a right, but as the list of principles wears on, it becomes clear that the union isn’t any more interested in a level playing field for organizing than the transplants are. Without card check, the odds are skewed somewhat towards the transplants, but under the UAW principles, things skew heavily towards the union… to the extent that they imply not merely that the NRLB fails to protect workers, but that transplant employers violate National Labor Relations Board rules codified under the Taft-Hartley Act.

Principle numbers two, three and four state that

• Employees must be free to exercise the right to join a union… in an atmosphere free of fear, coercion, intimidation or threats
• Management must clearly articulate that if workers choose to unionize, there will be no negative repercussions from the company.
• Management will clearly articulate that it does not promise increases in pay or benefits if workers choose not to unionize

However, all three of these principles are already protected by the Taft-Hartley act, which [accord to a quick glance at Wikipedia] guarantees that

employers have a constitutional right to express their opposition to unions, so long as they did not threaten employees with reprisals for their union activities, or promise benefits as an inducement to refrain from them

Implying that transplant managers deny their employees these basic rights is not only a slur on these companies which employ thousands of Americans, it’s also deeply hypocritical. After all, UAW members recently filed an NRLB complaint against the UAW for forcing 40 percent of the Orion Assembly Plant to take a 50 percent pay cut. TTAC has heard of no such complaints against the transplants. So who do transplant workers need to worry about violating labor laws, their employers or the UAW?

Jumping ahead to principle number seven, it’s absolutely clear what attitude the UAW is taking into this campaign. Though principle seven demands

No disparaging the other party,

the UAW’s second, third, and fourth principles are clear disparagements of the foreign automakers, implying as they do that violations of Taft-Hartley are commonplace in their workplaces. Furthermore, the principle seeks to freeze management’s ability to tell its employees the truth about the union by demanding that transplants

should acknowledge that the other party is acting in good faith with good intentions.

Even though the union’s history (distant and recent) suggests that the UAW looks after itself (specifically its leaders). If transplant factory managers simply tell the truth about the UAW’s ongoing NLRB dispute with its own members, it would risk violating this principle as well as principle number four (as workers could reasonably expect some kind of wage decrease under union representation).

Taking the speech-chilling one step further, principle six calls for management to not only not tell the truth about the UAW, but to actively disavow denunciations of the UAW by members of the plant community. The principle reads

Management will explicitly disavow, reject and discourage messages from corporate and community groups that send the message that a union would jeopardize jobs. Likewise, the UAW will explicitly disavow, reject and discourage messages from community groups that send the message that the company is not operating in a socially responsible way.

Which is convenient, considering the UAW just wrapped up a year-long campaign of disparagement against Toyota. But it also asks companies to actively create conflicts between itself and its workers and their families and community by forcing them to work against every interest except the union’s.

But the greatest overreach by the UAW, and the issue which will likely keep most (if not all) transplants from signing these principles is number five, which guarantees

Equal access to the electorate

During the course of a union representational campaign, employees will have the opportunity to hear equally from both the union and management regarding this issue. There will be no mandatory meetings of employees on the issue of unionization unless the UAW is invited to participate in the meetings. Written and oral communications must be equal. The union must be granted the same ability as the employer to post campaign material.

But transplant factories in “right-to-work” states typically have no-solicitation policies, as is the right of any private property owner. Transplants are not legally obligated to offer the union any access to its property, let alone enforce a kind of “fairness doctrine” in its workplace. As long as no-solicitation policies were in place prior to an organizing campaign and are enforced equally with non-union solicitors, these bans do not create an unfair organizing environment.

The union’s concluding principles guarantee third-party conflict resolution, a secret ballot election (as already mandated by law), bargaining (as is standard union-management practice) and a commitment to “partnership in mission.” But in sum, the UAW asks the transplant factories to give up several legal rights and offers little in the way of credible concessions.

The problems facing the UAW’s organizing campaign are fairly simple: first, the UAW can not reasonably promise workers better pay, and indeed the evidence suggests that UAW representation would eventually worsen the workers’ pay rate. Second, the union projects an image of itself as a “21st Century UAW” that is distinct from its past practices, when that image clearly does not comport with reality. Finally, the union asks companies to give up major concessions not required by law, and requires them to not educate their workers about the reality of the union’s past and present for fear of “disparaging” the UAW.

What’s especially galling about these principles is that they would have been largely unnecessary if the union-backed “card check” legislation had been passed into law by the previous congress. Because our elected representatives failed to approve that legislation, the UAW is demanding that private companies effectively enforce it in the name of “democracy.” Which is not at all how democracy is supposed to work.

Earlier this week, newly-elected UAW President Bob King gave a speech before the Center For Automotive Research Conference, touting the deep changes that have transformed the union. The first half of King’s speech sounded a much-needed note of contrition, and highlighted the new spirit of cooperation between the UAW and Detroit’s management class. But a number of observers noted that the second half of King’s speech represents the flip side of the UAW’s new sense of responsibility for the fate of Detroit: a commitment to targeting the transplant factories that have made life hell for the union and the Detroit automakers alike. After all, nothing brings enemies together like a common adversary. But the UAW’s enemy isn’t just South of the Mason-Dixon line… it’s lurking within its own confused body politic.

Of course, some are happy to simply see the new UAW-Detroit alliance simply as peace and love breaking out all over. Indeed, Michigan Governor Jennifer Granholm even broke out an old Detroit chestnut in order to describe the UAW’s transformation in as glowing terms as possible [via The Freep].

I think that’s a national story, that this is not your father’s UAW. I mean, it’s really the old mind-set being adversarial, the new mind-set being partnership, that we’re going to be competitive together in the global economy

But the transition to a “21st Century UAW” working in partnership with the Detroit automakers needn’t be explained as a sign of maturity in the union’s new leadership. After all, the UAW’s VEBA account owns a majority stake in Chrysler and a significant stake in GM as well. Keeping Detroit competitive has always been in the union’s interest, but since the bailout, this reality has become a lot more difficult to ignore. The problem is that the union’s stake in GM and Chrysler makes its leadership less responsive to the needs of its members. Which is why the second half of King’s speech takes aim at the transplants.

King’s short reign as the head of the UAW has already been characterized by a sharp uptick in the union’s old-school, left-internationalist rhetoric… for several good reasons. First, two-tier wages, the NUMMI closure, and the end of pattern bargaining have left an already-weakened UAW more vulnerable to internal division than ever before. By talking up a worker’s crusade against the evil transplants, King can gloss over the very real inequities within the UAW, protect its “investment” in Detroit by disrupting its competitors, and give the UAW a much-needed image makeover. And what political leader would turn down an opportunity to do “God’s work” while protecting his own venal interests?

This contradictory posture is apparent in King’s proposal of “UAW Principles for Fair Union Elections.” With national support for the union-backed “Employee Free Choice Act” flagging, King is proposing UAW-defined standards that he explains will

include requirements such as equal access to the employees for both union and management and prohibition of making derogatory, insulting or untruthful statements about the other party. The UAW principles ban any threats or pressure by either the union or management.

We will soon be unveiling these principles, and we will present them to the executives within the industry who are not currently unionized. We will ask them to sign on to these principles. If a company agrees to adopt the UAW Principles, and then abides by these principles, we will respect the decision of their workers whether they vote to join the union or not.

However, if companies do not agree to these principles, and instead engage in threatening behavior towards workers who want to organize a union, or fire workers who try to organize, or close down facilities to thwart union activity, then the UAW will not tolerate the violation of workers’ First Amendment rights…

Let me be clear, our goal is not to force auto companies to unionize. This is not about our institutional self-interest; it is not about getting dues money. It is about democracy, and goes to our fundamental mission and the reason for our existence: to protect the right of workers to organize unions and collectively bargain for fairness, dignity, and a democratic voice.

Of course it is about institutional self-interest. And it’s absolutely not about the First Amendment. As Paul Kersey of the Mackinac Center For Public Policy points out

These guidelines will prohibit “derogatory, insulting, or untruthful” statements. King declined to say whether or not the guidelines will allow employers to call attention to the UAW’s role in bankrupting two out of three domestic carmakers.

Whose First Amendment rights appear most at risk from the UAW’s proposed guidelines, the workers’ or the transplant managements’? After all, the main reason for workers to oppose UAW organization is the last 40 years or so of the union’s history. If that can’t be brought up due to its “derogatory” nature, are workers’ best interests really being looked after?

And as Automotive News [sub]‘s James Treece notes,

inside that olive branch was a stick. If the vote is not fair and unfettered, King warned — if management issues threats or intimidates workers who ask for a vote; if disparaging attacks sully the election — we’ll come after you with every weapon we have. He didn’t quite promise to burn down management’s house, but he didn’t rule it out, either.

And what’s most funny about the UAW’s new peace, love and understanding offensive, is that (internal union struggles aside), the UAW is still the greatest threat to the recovery of the Detroit automakers. Ford is already being hit with unequal treatment from the union, and conflicts over Delphi VEBA contributions, buyouts, local plant decisions and more are souring the UAW’s united front with even the automakers it partially owns.

Behind all the talk of a 21st Century union, cooperation with Detroit, and the UAW’s civilizing mission, lies the same blindered self-interest we’ve come to expect from the UAW. And there’s nothing funny about that.

Recently, there have been voices that mentioned that the attacks on Toyota could be politically motivated. Let’s face it: Toyota has problems. So have other auto makers. There are marked differences in reaction to and treatment of these problems.

One of the tenets of warfare is that you never attack the innocent. You wait until your opponent bumbles. Tricking an “enemy” into doing something really stupid, and exploiting this to declare a “righteous” war, is as old as Julius Caesar. Being the “defender” makes you a winner in the war of  public opinion. You need the public on your side to win a war.

Using an outside scapegoat to deflect criticism is the oldest trick in the book. Time and again, people fall for it.

The Japanese were docile, polite, and cautious when in came to Toyota’s troubles. The more surprising is today’s piece in the Nikkei [sub]. Usually, we don’t copy and republish whole pieces. But in the name of authenticity, and because the Nikkei is only available on-line as paid subscription, we make the whole piece available.

„Toyota’s Woes Seen As Warning Sign For Foreign Firms In U.S.

WASHINGTON (Nikkei)–The midterm elections this coming November may be one reason why the U.S. government and Congress have taken a hard-line stance on Toyota Motor Corp. (7203) over vehicle defects.

Toyota itself undeniably compounded the problem by bungling its response. But the fact that the Japanese auto giant has sharply increased its market share in the U.S., while General Motors and Chrysler headed for bankruptcy, provoked a strong reaction to its vehicle problems.

Another likely reason for the government’s tough response now is that the Department of Transportation was criticized by some consumers as too lenient.

Last month, U.S. President Barack Obama used his State of the Union address to put forth his vision of reviving American manufacturing and doubling exports — a move seen as an attempt to reverse his sinking approval rating ahead of the midterm elections.

With unemployment stuck at high levels and public anger over the Wall Street bailout still strong, the government and Congress are looking for a scapegoat to channel voter frustration away from themselves.

These circumstances prompt some U.S. watchers to warn that Toyota’s experience may be just a harbinger of a growing backlash against foreign firms.

Canada’s Financial Post made a similar assessment in a commentary titled “The war on Toyota” in its Feb. 3 online edition.

“The attack on Toyota, at this time of U.S. economic weakness and populist excess, is fast turning into a great American nationalist assault on a foreign corporation,” the piece read.

With the Japanese government also having bumpy relations with Washington right now over the relocation of the U.S. military’s Futenma base in Okinawa Prefecture, Toyota could be put into a very difficult corner over the quality problems.”

The Nikkei is not the only publication that takes this stance, in carefully chosen words. Publications on this side of the Pacific are more outspoken.

Canada’s Financial Post says:

“There can be little doubt that Toyota, the world’s greatest auto maker in recent years, has become the victim of much more than another typical out-of-control All-American media frenzy. When top-line political gamesman such as U.S. Transport Secretary Ray LaHood, Congressional pit bull Henry Waxman, and conniving United Auto Workers executives start piling on, this is clearly much bigger sport that the usual ritual public lynching of auto executives, a routine occurrence in Washington. The attack on Toyota, at this time of U.S. economic weakness and populist excess, is fast turning into a great American nationalist assault on a foreign corporation, an economic war.”

The Washington Examiner uses even harsher language:

“What is it about the automotive industry that inspires such thuggish attitudes in the Obama administration? The Examiner’s Michael Barone coined the term “gangster government” to describe threats by the White House last spring against Chrysler creditors who had the temerity to insist that bankruptcy laws be followed in the bailout of the perennially ailing third member of the once-fabled Detroit Big Three. Now along comes Transportation Secretary Ray LaHood muttering darkly that “we’re not finished with Toyota” in the controversy over sticking gas pedals in vehicles made and sold in America by the Japanese automaker… Keep the controversy going and odds are good that Toyota sales will continue to drop. The biggest losers besides American consumers will be the men and women who own and work at Toyota’s 1,200 U.S. dealerships and the 30,000 Americans who build Toyotas in its five factories here. LaHood might as well have said “Nice car company ya got there, be a shame if anything happened to it.”

Investors Business Daily says:

“Is it just us, or is there something off about regulators’ big public show against Toyota over a safety issue? Might that be a conflict of interest between Government Motors’ owners and a foreign rival?… LaHood’s targeting of Toyota is creepily reminiscent of the Japan-bashing of the 1980s. But it won’t work as long as Uncle Sam acts as both owner and regulator.”

You will find more, if you just take the time to sort through the chaff.  Toyota is not the only target. Toyota is the most opportunistic target. The Obama administration has been on the trade war path ever since they took power. History tells that trade wars during recessions are suicide. Some trade wars turned into shooting wars.

Today, the world is too interconnected to survive a trade war. The first victims of Obama’s moronic tire war were American companies and American jobs.

Who will suffer most from trade wars?

You.

You pay for trade wars with higher prices. You pay for trade wars with inflation. You pay for trade wars by being forced to give up your freedom to pick the product you want. Don’t end up as collateral damage.

Perhaps one of the biggest similarities between GM and Hyundai: a disfunctional relationship with its organized labor. Actually, the comparison leaves the GM-UAW relationship looking downright touchy-feely. In 2006 alone, Hyundai lost 118,293 vehicles worth $1.75b due to strikes and walkouts alone. When it refused to pay year-end bonuses of 1.5 times the monthly pay (even though the production goal wasn’t met… due to strikes and walkouts) workers (wait for it) walked out.

Hyundai caved a few days later, with bosses calling the bonus as a “fresh deal” and “an opportunity to clearly recognize that appropriate remuneration can only come after workers achieve the goals.” But Hyundai management is well-trained by now. Their notoriously militant union has held a strike every year since 1987. Except for 1994. Maybe NAFTA scared them for a year. In any case, if the brand that was launched by Rodney King wants to join the Toyotas of the world, something will have to be done about its labor relations.

But Hyundai management doesn’t have much moral high ground from which to fight. The antics of President Chung Mong-koo would make Blagojevich blush. Mong-koo was convicted on $100m embezzlement and bribery charges–and then freed on the grounds that he could “contribute to the company and the national economy one last time.” Although his son Chung Eui-sun has left the top spot at Kia, he’s still considered the dynastic heir apparent to his headline-grabbing father.

Kia was supposed to provide an opportunity for Eui-sun to prove himself. That hasn’t panned out. High steel prices in Asia and union turbulence have played merry hell with Kia’s thin profit margins. “Kia’s profitability this year and its longer-term competitiveness depend largely on labor flexibility,” says Stephen Ahn of Woori Investments. His theory: it will be better for Eui-sun to keep his hands clean. With another Hyundai strike looming and some serious coming to terms with economic reality ahead, he may be right.

So Eui-sun will stay on as head of Kia’s overseas operations, busying himself with successful Slovakia operations and a giant factory under construction near West Point, Georgia. While basking in the glow of Kia’s new products, from the current Euro Cee’ds to their forthcoming cousins, the Soul, Forte/Spectra and YN. But even on the product front, more symptoms of “Big  Company Syndrome” loom for the Hyundai conglomerate.

If the Genesis got people thinking differently about Hyundai, a super-Genesis will bring in the few remaining skeptics, right? That seems to be the thinking behind the Equus, the troublingly named, packed-with-technology, S-Class fighter. The car will clock-in with a reported price tag north of $95k. Luckily for Koreans, recent rumors of a stateside debut for the Equus means grey-market imports a la Genesis can begin.  

Even at a lower price, the Equus reeks of “Big Company Syndrome.” Whereas the Genesis adds least some enthusiast rear wheel-drive panache to the Hyundai brand, the Equus is a staid limousine. Its owner (Chung Mong-koo?) will likely never stray from the back seat, as he or she is shuttled from payoff to “political fundraiser.” More importantly, a $96k car in the midst of an economic downturn doesn’t say anything positive about the Hyundai brand that the Genesis doesn’t. A budget S-Class is one thing, a Hyundai Maybach is another. And that’s before you start on the name.

In reality, Hyundai is letting Kia take over as the purveyors of cheap and cheerful. And as the “junior brand” picks up its game with the Forte and Soul, Hyundai is chasing the American brands with SUVs, Crossovers and RWD offerings. Product overlap between the two brands, a coming labor confrontation and untimely upmarket ambitions by Hyundai may be enough to take some shine off the Hyundai-Kia juggernaut. Moody’s is eyeing a credit rating cut for Hyundai-Kia, as a weak Won kept things from getting too nasty in 2008. This year will be tougher still.

For all of its famous affect on “creating America’s middle class,” it’s important to remember that Henry Ford’s “five-dollar day” (actually a bonus program) was a solution to an intractable problem. Put simply, Crazy Henry had to hire 40k men a year to have 10k working.

There are two things that haven’t changed about auto assembly since those early days: assembly-line work is a grind (imagine doing the same thing, 500 times a day) and auto production requires a steady work force. The initial raise in pay was to give the worker a stake in sticking with a nasty job. Yes, the worker could be replaced. But replacing him slowed the whole process down.

While there have been epic debates, and not a little violence, over unionized automotive workers’ wages and conditions, they generally conform to a worldwide pattern. The type of union– “company” (tame), “trade” (often bribed into submission) or “Industry”– doesn’t have much effect on the outcome. Recent surveys revealed developed world hourly wages for assemblers as more-or-less equal. It’s the “other” stuff– health care and pensions– that makes the biggest difference.

In theory, the USA’s lower corporate taxes should compensate for the advantages enjoyed by automakers operating in countries where employees get their health care and pensions from their government. In practice, Detroit’s sunk by simple math. While The Big 3 have been reducing their total workers. their pool of retired ones has been growing. Ford, GM and Chrysler have more retirees than active workers. Which accounts for much of the “$75 an hour” numbers you hear quoted in the MSM.

Worse, The Big 3 have funded all these benefits on a pay-as-you go basis. Instead of setting aside funds to cover pension and health-care throughout a worker’s career, like a company-level 401K, Ford, Chrysler and GM have been paying their retirees out of current revenues.

This is the same “trick” the U.S. government uses for Social Security. But at least the tax base is growing (and not aging much). The Big Three have shrank and aged themselves into a huge problem.

In theory, the Mother of All Health Care pay-it-forward UAW VEBA fund should finally allow the 3 to put these “legacy” costs behind them (in another two years). Only they still have to fund the fund. Putting company stock in the fund in lieu of cash is going to be about as welcome a blanket smeared in smallpox.

Pay and pension issues can always be laid at the feet of the money-men, who never looked past the next quarter. Health care and pensions can be “finessed.” But union work rules are, apparently, forever. This could be Detroit’s Gordian knot.

Put simply, you can’t. The UAW work in accordance with a series of massive documents directly exactly what every employee is allowed to do, how they should do it and how it’s judged. Having to adhere to a book of rules that practically require a forklift (and designated “operator”) to carry makes anything resembling “management” a major undertaking.

But before we lay the blame completely at the UAW’s feet, let’s consider how management performed when the Union Slacker’s Guide to Life, the Universe and Everything didn’t apply. The California NUMI plant (Toyota Matrix/Pontiac Vibe) doesn’t count. Toyota runs the show there. Saturn is the exception that proves (i.e. tests) the rules.

For GM’s different kind of car company, The General hand-picked workers willing to dump the rules, and then had them build one vehicle for almost a decade. Later on, GM set up the Aztek/Rendezvous plant in Mexico (lower cost AND no restrictions). Bottom line: both ventures failed to sell enough vehicles to make their plants pay. As restrictive as the work-rules are, they seem to conform to standard Big Three thinking as much as management thinking conforms to them.

Perhaps the UAW’s greatest sin, then, is the fact that they’ve been “along for the ride.” More specifically, a seemingly endless supply of money has narcotized the union into suicidal apathy. Worse still, their public persona projects a sense of entitlement that’s toxic to all but their closest political allies.

The UAW’s protests that “we’ve done nothing wrong” is true as far as it goes. But not doing wrong is not the same as doing right. As we shall see.

Let’s start with the substance of the poll, which would probably send Karl Rove into an ecstasy of nostalgia. After the usual demographic and exclusionary (no media, no auto workers) questions, the first substantive query shows where things are headed.

How important do you feel the American automobile industry is to the American economy–extremely important, very important, somewhat important, not important, or not at all important?

Needless to say there’s no satisfactory way to answer this question, let alone any metric provided to measure “importance.” Anyone who knows nothing about cars or the car business knows there’s only one answer here: somewhere between “extremely important” and “very important.”

As the questions go on, they make it clear that this poll isn’t about ascertaining public opinion. It’s about communicating and legitimizing pro-bailout arguments. In Hart’s words, “the prioritization of strategic consideration and tactics over substance.”

You know the pro-bailout arguments; we’ve sliced them and diced them all over this blog. Presented in their most misleading forms as questions, is it any surprise that they poll… decently? Actually, the poll result’s relative ambivalence is surprising, considering how questions’ inherent bias.

“The federal government has recently provided financial aid to the insurance and banking industries to make sure that these industries do not fail. Do you feel that providing financial aid to ensure that the U.S. auto industry does not fail is more important, just as important, or less important?” Only 14 percent answered “more.” Just 55 percent picked the obvious “correct” answer: “just as important.”

The scaremongering picks-up as the poll goes on, with subsequent questions asking respondents to rate the “importance” of a host of possible dire consequences of industry failure. Not that there are any guarantees that a bailout would prevent or solve any of these sinister symptoms. Just “which ones scare you the most?” Of course, when these questions meet with even the tiniest amount of context, the Hart poll’s results begin to look like the PR stunt they are.

Alternatively, a Rasmussen poll which asks the respondent to examine the entire economy and base priorities from there finds that 45 percent of Americans oppose a GM bailout, with 20 percent undecided. The same poll shows that the automotive industry has actually fallen eleven points as a priority since March 2007. Oh yeah, and 80 percent were “concerned the government is getting too involved in the private economy.”

Again, this is in the context of the larger economic picture. Only by looking at the auto industry through the wrong end of a telescope could Hart achieve the results his clients paid for.

Bias is evident enough in the substance of the post (have a look for yourself). But a quick peek at Hart Associates’ online client list is the final piece of the puzzle. Politically, it’s all Democrats, many from automaker states (with their party affiliation left unstated). On the corporate front, Hart’s benefactors include “DaimlerChrysler,” as well as notorious federal teat-sucklers Boeing and Fannie Mae. Then there’s the United Auto Workers, the AFL-CIO, Teamsters, SEIU and other unions, large and small.

In short, Hart works for this country’s biggest bailout backers, from the worlds of industry, politics and labor. Including of course, the big Kahuna: GM. As the Detroit News puts it, “General Motors Corp. paid for the poll but had no input or review of the design, methodology, content or interpretation.” Then again, why would they handsomely reward Hart if he wasn’t pro enough to give them exactly what they wanted, without them asking?

In any case, opinion polling, as Hart himself lamented, is a dark art. He correctly identified its significant shortcomings a long year ago– only to appropriate the very tactics he denounced in aid of a multi-billion dollar giveaway to failing companies.

And they say the master’s tools will never tear down his house.

Not well. It's evident that Buzz Hargrove has little respect for the men who run the companies that employ his members. "We've made sacrifices. They have no sense of sacrifice."

"[Chrysler CEO] Bob Nardelli's big claim to fame, when he came in, was that he wouldn't need a big salary because of what he made at Home Depot. But today, he still won't disclose his salary." It reminds him of Lee Iacocca's first year as Chrysler chairman. "He came on saying he would only be paid $1/year. What he didn't tell you was next year he picked up $21 million. I'd take $1/year if you paid me $21 million the next year."

It's a credibility gap that irritates Hargrove and offends his political beliefs. "It's the guys at the top looking out for the guys at the top. That's capitalism."

Hargrove characterizes Ford CEO Alan Mulally and GM CEO Rick Wagoner as bright guys who understand the car business but can't get it done; they can't stop their companies' shrinking market shares. Again, Hargrove lets Chrysler's Nardelli have it with both barrels.

"I'm not convinced he's the right guy. It's a very complex industry. [Cerberus boss] Stephen Feinberg told me he hired him over Tommy [Lasorda] because he was the only one who admitted Chrysler was in trouble. That's true, but I'm not sure those are the best credentials to pick someone to run a multi-billion dollar business."

Cerberus itself was a source of controversy for Hargrove. Asked why he originally opposed the takeover and then supported it, Hargrove recounts a meeting with Feinberg. "They assured me they would continue to invest in Canadian operations."

"GM said the same thing," I counter.

Hargrove suggests it's not his fault that he took the auto execs at their word. Equally surprising, he isn't worried about the Canadian auto industry's future. I ask him if Canadian labour costs are scaring away automakers.

"That's completely ridiculous," he declares without hesitation.

"Chrysler just committed to making the new Caravan in Canada, Ford invested in Windsor, and GM committed the Impala. Labour costs are only a component. If it was such a big cost, we wouldn't have had any new investment. They've spent billions here."

You get what you pay for, according to Hargrove, citing Oshawa's quality ratings among the GM family of plants. As to what taxpayers pay for, Hargrove is unrepentant about asking for government bailouts.

"The CAW pays the educational costs for thousands of its members. We are one of the largest tax bases in Canada. When things are going well, we don't ask for taxes back. What we're asking for is our own money. All we want is for [the governments of Canada and Ontario] to respect that."

When I bring up the recent $350m investment announced by Canadian Finance Minister Jim Flaherty (and, oddly, current MP for Oshawa-Whitby), Hargrove's composure begins to fray.

"That's peanuts. That won't even open a bicycle plant. This is a billion-dollar industry."

"Flaherty never got it – not when he was at Queen's Park [as an MLA for Mike Harris' provincial government], not now."

 Another political irritant for Hargrove: the current push for free trade. "The old Auto Pact turned an industry around for 20 years. The volume of imports in North America is so high, higher than Europe and Asia."

So high, in fact, that Hargrove rejects all comparisons to the heavily-unionized car industry of 1960s Britain. "It's two different industries completely." Hargrove points out that Europe and Asia didn't open their markets as freely as Canada and the USA, which gives them a huge competitive advantage on the global scale.

"They wanted to push through that free trade deal with Korea. I met with Stephen Harper and with Flaherty, and they could not disagree with me. These are free market guys. It was not a good deal for us."

Hargrove feels vindicated that the deal fell through. But he maintains that the current situation still favours foreign manufacturers.

 All of which suggests Hargrove is leaving a bit of work behind for his eventual successor. Asked about the timing of his departure, Hargrove lays it out. "I've changed it so that retirement is mandatory at 65. It can be tempting to stay on too long. I have to set the example. My credibility is very important to me."  

Hargrove first came to the national forefront in 1985, when he assisted then-Canadian-UAW director Bob White in the chapter's secession from the UAW, and the subsequent foundation of the CAW. Hargrove recalls the friction caused by the UAW's top-down approach. "They were going down a road we did not agree with," he recalls.

"They were of the opinion that it had to be the same deal for everyone. We're a separate country. Some of the concessions they made, on health, on strike pay, on benefits, we didn't need to make. In retrospect, it was the best decision we ever made," he declares. "We doubled our membership [from 125k to 255k], and the UAW has gone from 1.5 million workers to less than half a million today."

If the monumental UAW/CAW split is Bob White's legacy, Hargrove's is more difficult to define. He's been CAW president for sixteen years. During that time, through tough negotiation and currency fluctuation, Canada has become one of the world's most expensive places to build cars.

Hargrove acknowledges that it's a what-have-you-done-for-me-lately world. GM-Oshawa's fate will weigh heavily in history's judgment.

"One of my big goals was to take care of Oshawa before I left." Hargrove crossed that one off the list back in May, when GM promised to continue production in Oshawa. Then GM reversed course and decided to close the Oshawa plant. Hargrove claims he was stunned by the move. And he's still bitter.

"I don't know if it's Rick Wagoner or someone else, but someone at GM management lied [to us]. They sabotaged the deal."

As for GM as a whole, Hargrove continues to wax philosophical. "The decision making is day-to-day over there. You can't run a company of that size making decisions like that." As I scribble furiously, Hargrove pours it on: "They did it for the shareholder meeting to say ‘look, we're serious about cutting costs'. The stock jumped, but it went back down."

The parallel to the recent GM-UAW deal almost draws itself: "They did the same thing for the UAW. Well, they got their VEBA, they got their two-tier pay, they got job cuts, and the stock price went up to $35. Now, they still have their VEBA and the stock price is down anyway."  

Hargrove was satisfied with Oshawa's eventual semi-reprieve, echoing local president Chris Buckley's assertion that the CAW made the "best of a very terrible situation." Still, Buzz admits the cordial relationship he had with Wagoner was "undermined" by the Oshawa events. The perceived slight prompted some unexpected candour.

"I told Rick it's not a question of if you're going to have to file for Chapter 11; it's a question of when."

My pencil literally dropped on the floor. This from the man whose accountants had a good old look at GM's books before the union signed their latest contract. Recovering, I ask Buzz for Wagoner's response to his comment: "Never." 

 "I know the reality when I sit down at the negotiating table," Buzz maintains. "You can't continue to lose market share and stay in business." Hargrove's delivered the same message to Chrysler and Ford. "They just haven't shown me how they plan to grow the business." Hargrove believes a Chapter 11 filing is unavoidable for all of Detroit's former Big Three. And he thinks sooner is better than later.

"They're delaying the inevitable. They will lose market share when they file because of consumer confidence, but they're losing it right now anyway. Everyone will take a haircut on what GM owes them, but it will allow them to retool and come out stronger."

Canada, he thinks, will be OK. "They're all making money in Canada… partly because of higher prices. It's the U.S. that is losing money, and it makes the North American numbers look bad. The assets, the plants aren't going to go away. The trustee will continue to make a hot-selling Impala until GM is ready to come back."

"What about the UAW?" I ask.

"The UAW already took a haircut on their last deal," he deadpans.

[Part 2 of this interview will run tomorrow. It will cover Hargrove's thoughts on Canadian labour costs, free trade, political involvement, Cerberus, Bob Nardelli, executive compensation and Hargrove's imminent departure.]

The most recent and obvious evidence of Detroit’s internecine perfidy: Chrysler’s decision to cut 12k jobs, kill models and downsize production just five days after the United Auto Workers (UAW) ratified their new contract. Never mind that the move reveals the UAW’s complete betrayal of their own rank and file, who would have never ratified the Chrysler contract (if indeed they did) if they’d known of the wholesale slaughter to follow. The more important impact of this [necessary] bloodletting will be on Ford.

Now that Ford’s UAW members have witnessed the fallout from the Chrysler contract, they will never ratify an agreement without iron-clad job guarantees. And if you thought that deep-pocketed, privately-owned Chrysler needed a free hand to downsize production, pity poor Ford; the sickest, most vulnerable automaker in the biz. It’s mortgaged up to its eyeballs, losing market share by the minute and drowning in an ocean of red ink. You can see their cash burn from Cincinnati. FoMoCo can afford job guarantees like the average pistonhead can afford a Bugatti Veyron.

Could Chrysler have waited THREE WEEKS before swinging their mighty axe, so that Ford could have secured the same sort of no-strings-attached deal for their UAW members? Sure. And there’s only one reason Chrysler CEO Bob Nardelli didn’t stay his hand: to shiv his cross-town rivals. 

If you read the reactions to yesterday’s Ford – UAW deal carefully, you can see the damage the Three-Headed Dog’s automaker has inflicted on The Blue Oval Boyz. "Our goals for this contract were to win new product and investment, to enhance job security and protect seniority,” pronounced UAW Veep Bob King, director of the union's National Ford Department. Yes, well, would the UAW be stupid/brazen/corrupt enough to ask its Ford members to ratify a guarantee-less contract after the Chrysler massacre? Not if you take UAW boss Ron Gettelfinger at his word: "We encouraged Ford to invest in product and people."

In fact, Ford needs to follow GM and Chrysler and invest in getting RID of products and people. They have too many brands, models, employees and production capacity to survive. While Ford’s new union contract includes a huge payment into the UAW’s inconceivably large, eminently lootable VEBA health care superfund– securing the automaker a cost-reducing two-tier wage system– Chrysler has made sure that Ford can’t downsize in time to reap its benefits.

And what of GM? It must be said that GM’s sitting relatively pretty in all this. With the help of the UAW management, they got away with making empty job guarantees to their union workforce (we’ll give plant X the new car– you know, IF there’s a new car). They’re now free to slice production to match demand, and slice they have. Even better, they’re eating Chrysler and Ford’s lunch. 

Check out last month’s sale figures. Compared to October '06, GM sales rose by 3.4 percent. Did the market expand? No. Did Toyota, Honda or Nissan sales slip, indicating that The General’s much-hyped new or revised products harvested conquest sales from the transplants? Hell no. The salient stat is that Chrysler and Ford sales plummeted. While there’s no hard data on this, common sense suggests that American car buyers who tend towards domestics (a well-documented predilection) are switching their patronage to GM.

We’ve mentioned that old joke about the “buddies” chased by the bear who realize that they only have to outrace each other to survive. Well, there you go. GM’s in the lead and Chrysler’s tripped Ford. Which is all very well and good for The General and The Dog, but Ford still has a secret weapon (that nobody sees): bankruptcy. While GM and Chrysler have dropped some of their union-related baggage through clever negotiation (i.e. paying off the UAW VEBA-wise), Ford could lighten even more of their load through Chapter 11.

I don’t mean UAW pay or benefits; as [non-co-opted] union members maintain, that’s not the real issue. I mean dealers. All three so-called domestics are hamstrung by their bloated dealer network, which prevents them from consolidating models and killing brands. If Ford files, they can ditch their duff dealers, drop bad brands, beat-up (not remove) the UAW and emerge a far leaner and meaner carmaker than either Chrysler or GM. 

Of course, none of this gets rid of the "barbarians" pounding on Detroit's gates.

When Detroit was king of the American automotive hill, The Big Three were loathe to shut down an assembly line. Factories were churning out cars 24 hours a day; they were making billions by feeding the American public mediocre products based on other mediocre products. So the automakers gave the union pretty much whatever they wanted, just as long as they helped keep the money train on the track and on time.

Then them damned furriners showed up and spoiled the party. Fast forward forty years and everything is turned upside down. The Big Three Minus Twenty Percent are losing money on almost every car they produce in North America. Their "foreign" competitors have invaded their home turf. With the weak dollar, more automakers are threatening to set up operations stateside.

On the union side, UAW membership is the lowest its been in decades, as factories shut down and workers take buyouts. Apparently no one bothered to tell the UAW they no longer have the upper hand. At the UAW's bargaining convention in March, Gettelfinger said they'd fight in whatever way necessary in order to defend their members' pay and benefits, even "if need be, on the picket line." 

Perhaps he should have taken Teddy Roosevelt's advice about soft talk and big sticks. After issuing nuclear option threats, Big Ron had no alternative but to call a strike at some time during the negotiations. He had to put his members' money where his mouth was. 

So Gettelfinger decided he'd take on GM and call a strike. Industry analysts were all abuzz, speculating how long it would last. The more jaded amongst them wondered how long before GM followed protocol and caved to whatever demands the UAW was making. Two days later it was over.

UAW leadership claims the strikelet broke the logjam with GM and forced their employer to settle on terms favorable to the membership. In reality, shutting down production for two days did GM more good than harm. GM entered September with a 67-day supply of vehicles, most of them 2007 models. The strike gave them most of what they wanted– a two-tier wage system and a health care VEBA. AND it saved them two day's union pay and cleared a bit of inventory. When seen in this perspective, this UAW strike was, at best, a mosquito bite on an elephant's ass.

The six-hour coffee break at Chrysler was even more meaningless. Chrysler had a 72-day supply of vehicles going into September. Six hours didn't even give time for the impact wrenches on the assembly lines to cool down. The details of the agreement aren't available yet, but there's no way the UAW's token tantrum got Cerberus to change their mind on anything.

Ford's next. They had a 68-day supply of vehicles going into September. No question: they're in the worst financial shape of The Big 2.8. The Blue Oval Boyz will be demanding the most back from the union. How will the union respond? Based on performances so far, they'll probably have the workers bow their heads for a moment of silence on the assembly lines, and then capitulate on all fronts (as long as they get some more billions into the plunder-ready health care VEBA). 

The Freep's Walsh sings Gettelfinger's praise. He claims Big Ron "is on the verge of doing something … historic, forging the most important UAW contracts since the GM sit-down strikes of 1936 – 37." David Cole from the Center for Automotive Research agrees: "When all this is over we'll look at Ron Gettelfinger and say this is an amazing guy to have pulled all this off."

The only thing Gettelfinger pulled is the wool over his members' eyes. The entire strike scenario was just a way to get them to buy into a contract that gave up a lot more than it gained. By having them walk a picket line, even for a few hours, he convinced them they had a part in making management cry "uncle."  They'd look pretty foolish to reject a contract they went on strike to get. 

And it worked. Sixty-six percent of GM's UAW workers ratified their new contract. Gettelfinger called the approval a "triumph." He crowed: "we helped protect middle-class manufacturing jobs in communities throughout the United States." Of course, in protecting them, he put their retirees' health care benefits at risk, lowered the wages for many of them and got unenforceable promises of future jobs. That doesn't sound much like a positive strike outcome to me, in either the short or the long-term.

The exact details of the agreement haven't been released. They won't be final until the members ratify the new contract. However, the Detroit Free Press has released what "a person briefed on the deal said" would be included in the new contract. 

The biggest change: the establishment of a Voluntary Employee Beneficiary Association (VEBA). This health care superfund is designed to pay for UAW members' health care for "the next 80 years" (according to UAW boss Ron Gettelfinger). For GM, the VEBA unloads transfers health care responsibilities to the union. Industry soothsayers are currently pegging GM's contribution to the VEBA at around $35b. That's substantially less than the over $50b bill GM faced.

The amount of cash vs. stock GM will use to pay for the VEBA is the big question hanging over this part of the deal. Even if GM has to pile on even more debt to git 'er done, the Street loves this VEBA. So it's a big win for GM– for now. Whether or not it will work out for the UAW is a whole 'nother story, as it puts the union into the unfamiliar position of administering their members' soaring health care costs and raises the possibility of massive fraud and mismanagement. Score: GM 1, UAW 0.

GM and the UAW disagreed over wage structures. GM wanted to institute a two-tier structure where new workers receive lower pay and different benefits from current workers' compensation. Of course, the union found the idea entirely unacceptable. And then gave in. However, since this fits right in with the "just don't mess with my benefits" mentality most UAW members exhibit, GM gets the win. Score: GM 2, UAW 0.

The UAW also agreed on different wage structures for "non-core" jobs: those workers who don't actually assemble vehicles. As compensation to non-core workers who currently enjoy full pay and benefits, GM will offer a "targeted special attrition program" to "relieve the pain of the wage reductions." In other words, GM will eventually pay some of their workers less. Score: GM 3, UAW 0.

The new contract doesn't include any wage increases per se, but it does include a $3k bribe to accept the contract signing bonus. The signing bonus will cost GM much less than a strike or any other form of compensation. Score: GM 4, UAW 0.

The contract contains another bonus: lump sum payments over the last three years of the four-year contract. The bonuses are roughly equal to three percent of annual wages. That works out to an $1,800 payment for someone who makes $60K per year. It's still a lot cheaper than across-the-board raises and if it's tied to profits, well, what profits? Score: GM 5, UAW 0.

Other terms in the agreement include the "possibility" of GM maintaining the level of its union workforce in the U.S. and modifications to the jobs bank program. The details of the jobs bank changes aren't available yet, so it's too early to score that one. Getting even the hint of a promise that GM won't cut its UAW workforce is a major point for the union. Score: GM 5, UAW 1.

The UAW's national leaders will convene late this week to vote on the deal. The full membership will vote on it this weekend. The UAW's president is optimistic it'll be approved. "It's an agreement we're proud to recommend to our membership," Gettelfinger crowed. "This contract will be better in some ways; it will be different in some ways. Our retirees will be exceptionally pleased with the contract." 

Different? Of course, GM CEO Rick Wagoner had his sound bite as well: "This agreement helps us close the fundamental competitive gaps that exist in our business. The projected competitive improvements in this agreement will allow us to maintain a strong manufacturing presence in the United States along with significant future investments."

Wagoner's statement reveals an inconvenient truth: GM management continues to see labor at the root of all their problems. Unloading retiree health care costs, not giving raises and paying new workers less won't close any "fundamental competitive gaps." To be competitive they have to offer a competitive product.

The new UAW contract may improve the bottom line for a few quarters, but until GM sorts out its brands, trims its dealers and starts designing world-class, brand-unique products for those workers to assemble, there's nothing any contractual fine-tuning can do to save the company's failing North American operations.

Sean McAlinden, analyst for the Center for Automotive Research, outlines the target– and the stakes. "For the survival of the union, they have to start organizing the Toyota system in North America. Right at the head of the line is DENSO.''  

DENSO is Japan's largest auto-parts company. Twenty-one percent of DENSO's total $31.1b annual sales come from North America. Stateside, DENSO has ten factories in six states employing over 6,800 [non-union] employees. DENSO supplies all three U.S. automakers and Toyota (which owns 23 percent of the company). In North America, 45 percent of their business lies with The Big 2.8. And here's where the plot thickens.

The Big 2.8 are currently negotiating their UAW contracts. One of their main goals: dump transfer responsibility for retirees' health care onto the union via a union-administered Voluntary Employees' Beneficiary Association (VEBA) superfund. The union is fully aware that Wall Street is hot for the deal, which means the automakers want the VEBA more than anything else (save sales). The UAW is using this leverage to their full advantage.

U.S. labor laws allow employers to openly campaign against a union's attempts to organize their workers. UAW negotiators have threatened to oppose a VEBA unless the U.S. auto manufacturers pressure DENSO to "remain neutral" while the UAW tries to organize their workers. 

According to Bloomberg, General Motors has indicated a willingness to roll over do as the union asks. No surprise there: GM has the most to gain from a UAW-run VEBA (and the most to lose if they don't set one up). The jury's still out on Ford's and Chrysler's reaction. But let's face it: if a mobster was leaning on sports promoter to pressure a fighter into taking a dive, it would be called  extortion. Apparently, when the union does the same sort of thing, it's called "negotiation."

No matter what you call, this does not bode well. If The Big 2.8 are doing business with DENSO, it's because DENSO can supply the best parts for the lowest price. Applying pressure to DENSO could triger a counter-strike (so to speak). While 45 percent of DENSO's North American business comes from Detroit, that's 45 percent of the 21 percent of the company's total business that's done in North America, or just over 10 percent of the total. If DENSO tells the UAW's Detroit puppets to go pound sand, the company retains 90 percent of their current business. Safe!

But not so safe for Detroit. How long do you think it would take GM and Friends to find other suppliers, and how many UAW production lines do you think they'd have to shut down in the interim?

Alternatively, DENSO could agree to step aside and allow the UAW to plunder organize its workers. The cost of the parts they produce will rise accordingly. The Big 2.8 are complaining that union labor costs are driving them out of business. If Detroit's looking for ways to cut production costs and increase profits, forcing their suppliers into a situation where they'll have to charge more probably isn't a helpful strategy.

Hopefully, GM and the others will come to their senses and refuse to play the UAW's game. If they give on this one, they'll show the UAW how desperate they are. They'll signal the UAW that they're willing to be the union's bitch in other power struggles. But The Big 2.8 want that VEBA so bad it hurts. So is it damned if they do, damned if they don't? More like same old, same old. Once again, it's a question of short-term versus long-term thinking. 

If there's one thing American automakers need to learn, it's how to say no to those forces that have steered them onto the edge of the abyss, and hold fast for a brighter future. While there's no doubt that GM, Ford and Chrysler need to rethink their own role in creating their current predicament, acquiescing to the union's ambitions at this critical stage of the game would be like cutting off their nose so they can smell better. Going along to get along didn't work then. It won't work now.

Going into this year's contract negotiations, GM, Ford and Chrysler have all made it abundantly clear that they expect the UAW to make concessions on health care, wages and working conditions. Of course, the UAW's leadership bared their teeth and growled; workers at several plants voted to strike if necessary. The saber-rattling worked in previous years, so why not try it again?

For one thing, the UAW is a pale shadow of its former self. In 1969, the organization counted 1.53m members. Today, the union can claim no more than 180k dues-paying autoworkers. The days when union bosses could summon powerful politicians with a single Vito Corleone-esque phone call are over. Less contentiously, Dana Johnson, chief economist of Comerica Inc., says the unions are no longer "the pacesetters of the overall economy." 

Equally important, the union's employers are not what they once were, either. Setting aside the fact that all of them are mortgaged up to their eyeballs, staring down the barrel of bankruptcy, The Big 2.8 are no longer land-locked enterprises with distant relatives.

Ford and GM have established production facilities in China, India, Thailand, Brazil, Mexico and other low-labor-cost countries. What's more, U.S. car brands have "gone native," mixing their DNA with foreign-made vehicles. GM sells German Opels as Saturns, Korean Daewoos as Chevrolets, and Australian Holdens as Pontiacs. It's only a matter of time before Chinese Buicks hit the scene.  

Chrysler also sells "hecho en Mexico" vehicles, and recently signed up with a Chinese partner. Ford's moving as quickly as it can towards "globalization." In short, while The Big 2.8 still need their UAW-staffed U.S. production facilities, they don't rely on them to the extent that they did merely a decade ago. The threat of out-sourcing looms large over many a UAW factory, tipping the balance of power in the automakers' direction.

At the same time, the UAW must now deal with the end of pattern bargaining, where all three domestics signed identical union contracts. While the union itself signaled this change by refusing to offer DaimlerChrysler the same "health care giveback" afforded GM, Chrysler's transfer to private equity group Cerberus guaranteed the end of Detroit's "all for one and one for all" arrangement.

For example, Ford and GM will most likely offer to establish a multi-billion dollar union-controlled health care fund to ditch their endlessly escalating health care costs once and for all- eventually. As befits an equity fund, Cerberus is more interested in a short term solution. And no wonder: they had enough trouble raising the funds to buy Chrysler in the first place, and the credit markets have contracted since. A gigantic lump sum payment is simply out of the question.

For the UAW, two- (or even three-) track negotiations are an enormous headache. If the union tries to hang onto pattern bargaining, one or more of the automakers could choose the nuclear option. If the UAW allows different contract terms for different companies, they're bound to piss off part (or all) of their membership. 

In the face of this diminution of their bargaining power, the UAW has tried to open a fourth front: Toyota. This morning, members of [a UAW invention called] the Kentucky Workers' Rights Board submitted a list of "recommendations" for improving working conditions at ToMoCo's KY factory. Needless to say, company executives refused to meet with them. Toyota spokesman Rick Hesterberg stated, "If they have recommendations or proposals for us, they can leave them here for us to review."   

The UAW doesn't stand a chance. If the union looks set to organize their plants, Toyota's bound to retaliate by closing their only UAW facility: the NUMMI plant in California. If it escalates from there, Toyota's top dogs could pull part of their U.S. production back to Japan. And last but not least, Toyota builds Camrys in China; if anyone can export vehicles to the American market from China, it's got to be Toyota.

The UAW's effort to glom onto Toyota is a quixotic campaign that only serves to remind industry observers how the mighty have fallen. In truth, the UAW's hold over domestic automakers is weak, and getting weaker. While none of The Big 2.8 are bound to do anything that looks like union-busting, they're methodically positioning themselves to operate without any UAW members. But even that may not be enough to guarantee their survival. Mutually assured extinction?   

Mr. Nardelli has a reputation for getting results. Before the exec was asked to leave Home Depot's employ earlier this year, he doubled the company's sales. OK, Nardelli's tenure coincided with one of the biggest building booms in years, but he successfully expanded the franchise into Mexico and China and increased earnings 20 percent for four straight years. The fact that Home Depot's stock price fell eight percent during his reign is irrelevant to Chrysler; Cerberus is a privately owned firm that doesn't have to answer to stockholders. 

While at Home Depot, Nardelli earned a fearsome reputation as an abrasive and ruthless cost-cutter. While profits soared, customer satisfaction and employee morale plummeted as he replaced experienced full time employees with cheaper part-timers. Nardelli also alienated store managers with his insistence on centralized command and control and micro-management. At the Depot's home office, "Boot'em Bob" replaced 98 percent of the top executives within the first five years.

Nardelli's forced departure from Home Depot was as controversial as his tenure. Of his $210m severance package, House Financial Services Committee Chairman Barney Frank said, "Mr. Nardelli's contribution to raising Home Depot's stock value consists of quitting and receiving hundreds of millions of dollars to do so."

So that's who's at the helm now: an ironfisted, hard-charging beancounter who has no qualms about dumping experienced employees to save a few bucks. He's a perfect fit with a company that emphasizes turning a profit as quickly as possible and doesn't mind tearing new acquisitions apart to do so.

And what of former CEO Tom LaSorda, the guy who had to deal with all the crap Daimler dished out, who Dieter Zetsche ordered to cook up a turnaround plan even as Chrysler's German masters were making plans to dump the company? Indeed, it's only been a few weeks since Cerberus Chairman John Snow praised LaSorda and his turnaround plan at a Detroit Economic Club luncheon.

The party line: LaSorda "agreed" to stay on as vice-chairman and president. Nardelli says LaSorda will "continue to have primary interface, responsibility and authority of working closely with UAW."

Of course they're going to keep him around for that.  LaSorda comes from a family of union activists; he has a good relationship with both the United Autoworkers Union (UAW) and the Canadian Autoworkers Union (CAW) leadership.

Nardelli, on the other hand, is about as non-union as they come. During the exec's tenure at GE, roughly six percent of the company's workforce was unionized. It's no secret that Home Depot has an almost Wal-Mart-like aversion to unions. Nardelli may not be the last person the UAW and CAW would want to see sitting across a negotiating table, but he's definitely at the back of the line. 

Given Boot'em Bob's rep for ousting execs, once "Tommy" (as Nardelli calls him) finishes dealing with the unions, LaSorda's golden parachute will unfurl. Gerald Meyers, a professor of business management at the University of Michigan and former chairman of American Motors, sums up the situation: "His days are numbered. I thought they were going to give him six months. They aren't going to give him six days." 

Burnham Securities' auto analyst David Healy agrees.  "It's hard to interpret this move in any other way than they didn't like LaSorda's record. Clearly, they were not happy with LaSorda or they would not be making this change."

How does all this sit with the unions, who are smack dab in the middle of negotiating their new contract? UAW President Ron Gettelfinger is taking his usual ask-me-no-questions, wait-and-see attitude about the management change. Equally characteristically, CAW president Buzz Hargrove hasn't been shy about expressing his "reservations." Hargrove said he was "surprised and concerned" by the choice. "We left [the initial meeting with Cerberus] with an understanding… that Tommy and his team would remain intact."

This doesn't bode well for Chrysler's hopes of remaining a fully integrated American automaker. Clearly, Nardelli is Cerberus' hatchet man. He has no compunction about making changes to produce short-term profits, regardless of the long-range ramifications. "Strip and flip" may eventually look like it would have been the kindler gentler option. Pre-Nardelli, pre-Cerberus, Chrysler was standing on the ledge looking into the abyss. Nardelli is about to kick it off.   

First, the majority of that disparity comes down to The Big 2.8's retiree overhang. Including workers' spouses, Chrysler pays health care and pensions to 78,435 non-active UAW beneficiaries. Ford pays out to 123,007 off-line union dependents. And GM signs checks to 338,902 non-working union members. Take those numbers out of the equation and the actual direct labor costs between domestic and transplant automakers are roughly comparable.

Second, when it comes to union concessions, what's the big deal? For the sake of argument, let's say the UAW negotiators lose their collective [bargaining] minds and agree to a $20/hour cut. GM has approximately 80K active UAW workers on its payroll. Cutting $20/hour from their union personnel costs will save them $1.6m/hour. Now, let's take that out to a year, based on a 40-hour work week (2,080 hrs/year). In theory, GM would save $3.3b/year. 

Let's also assume GM sets up a union-controlled VEBA for UAW retiree health care. That little item would run anywhere from $30b to $40b. While a UAW VEBA would only require a one-time payment of cash and stock, it would take The General at least ten years to recoup the cost from the resulting savings.

Ford? Same boat. FoMoCo's in hock up to and including their Blue Oval, facing a mountain of long-term debt. Any savings The Blue Oval Boys realize from cutting UAW salaries/benefits might cover their interest payments. Chrysler must fry the same fish.

Detroit must look for more fundamental solutions. The Big 2.8's existing union contracts and a woeful lack of flexible manufacturing capacity make it cheaper to keep a factory turning out cars (and let them pile up on storage lots) than it is to suspend production (and let supply decrease to match diminished demand). The results: excess inventory, fire sales,and continued brand degradation. Union negotiations need to focus on facilitating efficient operations, rather than simply cutting costs.

Meanwhile, the crucial adjustments must come from management. They can try to lay blame wherever they want, but the union didn't approve the lackluster designs that have been rolling out of Detroit for years. The union's not responsible for badge-engineered product planning. The union didn't fill the executive suites with yes men (and women) who will kiss whatever they have to kiss to keep their jobs. And the union had nothing to do with putting beancounters in charge instead of engineers.

Bottom line: labor costs have zero impact on what cars consumers decide to buy. You could argue that an extra grand here and there– taken out of direct costs and plowed back into new vehicles– would make The Big 2.8's vehicles more competitive. Given the failure of heavily discounted domestic product to strike back against the Toyotas of the world, you could make an equally compelling case that lowering the domestics' production costs wouldn't have any impact on the end result and, thus, U.S. consumers' choices.

While Mulally's Ford seems to "get it." GM under Wagoner singularly fails to recognize this simple fact. And Chrysler is now even more of a question mark. Lest we forget, the automakers have been digging themselves into this very deep hole for a very long time. Decades of hit-or-miss product planning, questionable quality, emphasis on quarterly profits instead of long-term results and obscene executive bonuses have all yielded a lineup that can't cut the mustard.

There's only one way to "save" Detroit. American automakers and their unions must set aside their adversarial relationship and find a way to build the world's best cars– price no object. That's right: they must stop focusing on margins and start focusing on market share. Making a small profit on a smaller and smaller slice of the U.S. market will do nothing more than prolong The Big 2.8's agonizing journey on the road to oblivion. They need to recapture the high ground, destroy the transplants' mindspace advantages, restore America's carmaking reputation and THEN think about profits. 

Is there enough time? Probably not. At this point, committing all remaining resources to building the world's best automobiles at any cost is a death or glory strategy that has more than a whiff of the grave to it. But thinking that Detroit's future depends largely on reducing labor costs is the worst kind of self-delusion: the kind without any chance of working. 

The Big 2.8's beancounters estimate that retiree medical coverage adds $1k to $1.5k to the price of every new car and truck they sell. In response, the UAW has been calling for a national health care policy. But even if Michael Moore's mantra passed into law tomorrow, it would take years for the new policy to have any effect on the automakers' bottom line. And right now is when the automakers need relief.

The Big 2.8 has to do something at the bargaining table; at the least, they must show both Wall Street and their stockholders they're not down for the count. So they've decided to go cold turkey and foist all their retiree health care obligations onto the UAW. 

There is precedent. In last year's contract with the United Steelworkers (USW) union, Goodyear agreed to transfer all their USW retiree medical obligations to a Voluntary Employees' Beneficiary Association (VEBA).

A VEBA is a trust fund set up specifically to pay eligible medical expenses. It's funded by employer contributions, payroll deductions and other sources (e.g. cashing-out unused leave upon retirement). The assets in the account are tax exempt, and they can be used to pay medical expenses directly or reimburse participants.

At the time the contract was signed, Goodyear's total health care obligation to their retirees stood at $1.2b. Goodyear will make a one-time $1b payment in cash and stock into the VEBA. After that, the company will have no further obligation to their retirees, current or future. They get to move a $1.2b liability off their balance sheet. In return, Goodyear's retirees get medical benefits that can't be touched should Goodyear file for bankruptcy.

If The Big 2.8 succeed in setting up a similar arrangement with the UAW, the initial payments would be high, but the long term savings would be impressive. If GM got the same deal as Goodyear– paying 83 cents on the dollar– they'd end up forking out a bit over $38b to rid themselves of a $46b debt. Ford would pay just over $19b, and Chrysler could shell out just under $15b. A lower rate would save even more money.

It's likely the UAW would agree to such a plan. Again, there's precedent. When the UAW signed its "historic health care giveback" with GM (upping members' contributions), the General set up a $3b company-controlled VEBA [partly] to cover members who couldn't afford the additional payments.

The UAW knows they've got to do something. At a union seminar earlier this month, UAW vice president Bob King acknowledged that Ford could easily be forced into bankruptcy. Assuming the UAW wants to help Ford avoid Chapter 11 (and believes it can), and assuming Ford could find the money to fund the plan, a union-controlled VEBA would certainly be viewed as "helpful."

And of course, if Ford gets a health care VEBA, GM and Chrysler will want one too. And that means the UAW could end up running one massive medical fund for all their automotive industry retirees. And, as the UAW has been recruiting members from other industries, it's logical to assume other employers would want to join the VEBA club.

The U.S. health care industry is one of the UAW's growing "partners." That's right: the UAW's organizing an industry they could soon be paying to support. In fact, under the VEBA scheme, the UAW would become their own customer. The prospect of the UAW entering into the health care management business creates some interesting "what ifs?"

If the union went looking for the lowest health care services rates possible (as most medical plans do), would they refuse to pay for care at a hospital where the charges are higher to cover the increased benefits paid to their UAW employees? Would they make their retirees use a non-union medical facility because it costs less? Would they call for a strike at a hospital where it could put their beneficiaries at risk of sub-standard care when the nurses and technicians walk out?

If the UAW balks at a health care VEBA, the automakers may file for Chapter 11. If the union agrees to a union-controlled VEBA and an automaker goes belly-up before the deal goes down, the union's stiffed. Even if everyone stays in business, a UAW health care VEBA will encounter the exact same inflationary pressures formerly experienced by the union's previous employers AND it will generate tremendous conflicts of interest. Regardless of what happens, someone is going to be unhappy with the outcome. 

GM and Toyota formed NUMMI (New United Motor Manufacturing Inc.) in 1984. The Fremont, California facility was Toyota’s first foray into American manufacturing and GM’s chance to learn about Toyota’s take on lean manufacturing. The 380-acre NUMMI facility currently cranks-out approximately 250k cars (Toyota Corolla, Pontiac Vibe) and 170k trucks (Toyota Tacoma) per year.

The NUMMI plant employs around 5440 “team members.” Some 4550 of these employees also play for the UAW. This makes NUMMI the only Toyota plant using UAW labor and one of the highest-labor-cost manufacturing facilities in the entire American automotive industry.

Some NUMMI workers earn more than $32 per hour, plus benefits. Combine this compensation with the joint venture's location– a high-cost area away from Toyota’s major suppliers– and it’s no wonder the factory’s drawn negative attention from its Tokyo taskmasters. 

In a prepared statement, NUMMI officials recently declared that the plant must do more to improve its “competitiveness” and stated it would only stay in business “only if it is able to do so.” That’s management-speak for “if we can’t get labor costs under control we’re abandoning this turkey.” 

Moving Tacoma production from Freemont to a lower-cost production facility does not pose insurmountable difficulties. Toyota’s Tijuana plant already makes the beds for all Tacomas, along with small quantities of complete trucks (34K in ’06). For the money saved in labor costs, the world’s largest automobile manufacturer could expand their Mexican production facility to accommodate increased Tacoma production.

Toyota also has excess capacity at their new Tundra plant in San Antonio. As the automaker builds Tundras in both Texas and Indiana, they could shift production around to open up some spare capacity for the Tacoma, at either location. And Toyota could also modify plans for their new plant in Elvis' birthplace (Tupelo, Mississippi) to build Tacomas as well as Highlanders.

The UAW knows Toyota’s serious about walking away from NUMMI. Last week, leaders from Local 2244 and 890 told their members that they stand a good chance of losing Tacoma production and warned “we are now fighting to exist.”

There are still a couple of years before the axe falls; the current UAW contract at NUMMI expires in August 2009. In the meantime, a “no layoff” clause means Toyota can’t trim costs by jettisoning employees. So the union must devise other alternatives to entice Toyota to change their mind.

The UAW’s already started making nice with management, offering proposals for the increased use of temporary employees and other cost-cutting measures. These stopgap measures may or may not satisfy Toyota. The Wall Street Journal recently reported that high level Toyota executives are actively contemplating cutting back North American production.

According to the report, Toyota’s U.S. production capacity is growing faster than sales, and a cheap yen makes importing cars from Japan a cost-efficient proposition. Toyota’s pulling back on plans for new plants and revamping pay policies. They’re on a cost-cutting spree, and anything between the Pacific and the Atlantic is fair game. 

NUMMI's Toyota bosses will be watching the outcome of this summer’s UAW negotiations with The Big 2.8 with considerable interest. As Toyota products account for the vast majority of NUMMI production, when it comes to any decisions regarding the facility's operating costs or, indeed, its future, Toyota calls the shots.

Toyota is sure to use the upcoming negotiations as a barometer of the local UAW’s willingness to accept wage or benefits cuts and/or changes to work rules. These concessions will be the deciding factor when Toyota makes their final decision on whether or not to maintain California production.

But two years is a long time to wait if you’re trying to cut costs. And there’s just so much you can do with suppliers, utilities, work rules and other expenses. Short term, Toyota has two choices: coerce the UAW into giving back some of what they gained in the last contract or move production elsewhere. Look for the Japanese automaker to take the path of least resistance.

The uncertainty surrounding NUMMI reflects the fact that the union’s future isn’t looking too rosy right now. Delphi’s UAW workers just took a massive cut in potential earnings and other benefits. The upcoming negotiations with The Big 2.8 seem to have the deck stacked in Detroit’s favor. And in spite of the UAW’s attempts to gain ground in Toyota’s plants, Toyota still holds the trump card. 

Delphi separated from GM in '99. The newly-independent parts maker inherited a hefty UAW-negotiated wage structure and 4K laid-off employees (drawing full pay in the "jobs bank"). When Delphi filed for bankruptcy in October 2005, the company had 185K workers on their payroll. Of these, roughly 25K were UAW members, averaging about $27 per hour plus benefits. The new management team wanted to kill the jobs bank, cut union wages by more than half and trim benefits.

Bankruptcy or no, the UAW wasn't having it. They threatened an industry-killing strike. Delphi responded by threatening to void the UAW's contracts in federal court. GM and Judge Robert Drain weren't having that. Negotiations dragged on, and on, and on.

Meanwhile, GM shifted away from Delphi as a supplier. Both companies used the interregnum to radically downsize their union workforce (with GM's cash), move production overseas and pay their executives large bonuses (despite ongoing losses) for their amazing management skills. 

Cerberus then made a play to buy the smaller, more Eurocentric Delphi. The UAW balked at a deal that was worse than their current setup, but better than Delphi's demand. When Cerberus pulled out and bought Chrysler, GM finally stepped in and cut a deal that will cost them around seven of their borrowed billions, and just under a billion per year thereafter.  The UAW left singing GM's praises but viewing Delphi CEO Steve Miller as the demon spawn of Satan.

Under the agreement, Delphi will cut all wages to the new-hire rate, about $14 to $18 per hour. Employees with seniority will receive $35K cash annually for three years to "make up" the difference. All workers' health benefits will change to match those of new hires, with higher out-of-pocket expenses. (Needless to say, nothing was said about decreasing union dues for workers experiencing pay cuts.)

The contract also calls for [more] drastic downsizing. Some 4k of Delphi's remaining 17k employees will be offered buyout payments ranging from $70k to $140K (depending on their seniority). Delphi will close up to ten plants, give three to GM (or a third party designated by GM), sell four and keep four.   

Delphi's UAW members will now vote on the contract tomorrow (Thursday). It is NOT a lock. According to the Detroit Free Press, the mood at union meetings held at Delphi plants on Monday "ranged from relief to frustration." In fact, it may be less of a "range" and more of a "transition."

Initially, many union workers are happy they've still got jobs. The old union-bashing tool– accept our offer or we'll close this plant, move overseas and leave you without work–was in full force during the negotiations. Now that the plant issue has been resolved, the workers who've been spared obsolescence will breathe a sigh of relief, have a look at the fine print and say WTF?

For example, the $105K three-year "top up" offered to senior UAW members to compensate for the wage cut is really just a forced landing for GM-era members working at full pay. It also means those 4k higher-paying Delphi jobs are headed for extinction. Which leaves 13k [lower paid] newbies bumping up against a glass ceiling; these union members will NEVER earn the wages and benefits enjoyed by their elder colleagues.  

Back when there were 45k UAW members at Delphi, it's highly unlikely this contract would have been ratified. The UAW– and by extension GM and Delphi– is counting on the malleability of a smaller, psychologically-weakened workforce: the "temps." By offering this majority job security, they hope to overwhelm the GM-era workers, who are looking at three more years of their current compensation before taking a 40 percent cut in their wages. 

But the size of the remaining workforce cuts both ways; it makes it easier for a relatively small group of determined union organizers to mount a campaign against the agreement. The union knows this; hence the 21 month negotiation vs. four-day deliberation schedule. The UAW "Soldiers of Solidarity" splinter group– which published the contract on the Internet (thanks guys)– better watch their backs.

Anyway, why would the UAW agree to this kind of two-tier contract? 

You could argue that the strategy reflects a new realism from the UAW bosses. It provides the union with an exit strategy from the gold-plated wage and health care deals that threaten their host's survival– without alienating their longtime, hardcore members.

Yes but– playing it down the middle is a risky strategy. If this blows up, all bets on the future of the American auto industry are off.

The stakes couldn't be higher. While much of the media conjecture leading up to the negotiations has centered on health care costs that make the word stratospheric seem pedestrian, there are other points that'll require agreement: plant closures, the infamous (and still unspecified) jobs bank, temporary hires and more. 

Setting the tone for the upcoming negotiations, UAW President Ron Gettelfinger "strongly disagrees that we are part of the problem in the auto industry." He also declared that he considers reports that American auto companies "need" a $30 reduction in hourly wages and benefits as "nothing more than posturing." The UAW boss pooh-poohs this "supposed" gap between Detroit's union and the transplants' labor costs.

Meanwhile, The Detroit News reports that "sources inside Ford" state that unless the UAW agrees to lower their workers' $71 per hour wages and benefits down to $50 per hour, The Glass House Gang will go out of business. And the Wall Street Journal quoted "an unnamed Detroit executive" saying the domestics will move production overseas if the UAW doesn't help them compete with their ascendant competition.

Again, the battle lines are drawn, even before the game begins. Once they start, interested parties (and who isn't?) will have eight weeks to hammer out a new agreement before the old contract expires. And if they can't?   

During a Q&A session with UAW members, a worker asked his president if a strike is an "option in the national negotiation." Gettelfinger responded with a simple "yes." In his address to the UAW Bargaining Convention in March, Gettelfinger stated the union would fight at the bargaining table and "if need be on the picket line" to protect their standard of living. In January, the union reported that their strike fund totaled $900m.   

Would the UAW be stupid determined enough to launch a strike against GM or Ford? As noted in our Deathwatch series, both automakers' finances are in a precarious position (i.e. mortgaged up to their eyeballs). The UAW's 47-day strike against GM in 1998 reportedly cost the automaker $1.6b– roughly $34m a day. Given The General's and Ford's current cash reserves, a drain of that size or duration would have disastrous financial consequences.  

If a strike stretched into months, it would force either– or both– automakers into Chapter 11. While bankruptcy doesn't automatically void the UAW's contracts, it certainly wouldn't help their bargaining position.

Back when Detroit owned the domestic auto market, the UAW called the shots. Now, the automakers are saddled with expenses they can't afford: high wages, the job bank, "cradle to grave" health care benefits and restrictive working practices. The golden days of huge union membership, enormous dues and unbridled power are gone.

In spite of the posturing, Gettelfinger knows someone has to give. He's already stated that the union's now willing to give Chrysler the same "concessions" they allowed Ford and GM in 2005.  But will the UAW really be willing to surrender anything substantive?

That depends entirely on how you define the word "substantive." There's a high likelihood there will be some kind of deal on retiree health care provision. The most likely scenario: The Big 2.8 will divest themselves of retiree health care liabilities through a UAW-run VEBA similar to the health care deal and the recent agreement with Goodyear (i.e. they'll pay them now so they don't have to play them quite as much later). 

You can also bank on the jobs bank cashing out– slowly. The automakers will want to kill it dead. But the UAW will negotiate a grandfather clause for current employees. In other words, old employees will live out their lives of leisure while new employees will not enjoy the protection of having a non-job job waiting for them when if their services be excess to requirements.

Temporary employees will be another hot topic. The Big 2.8 will want to use temps whenever and wherever they see fit, even in traditionally unionized jobs. The UAW will demand restrictions on their use or, at the least, require union dues. The union will concede on many job classifications. In return, they'll get their money.

Should the UAW and their employers reach an agreement, it's important to remember that there are– and always have been– suckers at the table. Truth be told, both the union and management are playing with someone else's money. Once upon a time, it was the American consumer's cash. Now it's the automakers' shareholders and union workers funding the game. No matter what happens, they're both bound to lose their shirts.

The meeting was the direct result of a major management screw up. In January, Toyota’s leadership discovered that an employee at the plant had unearthed a confidential file on a shared network drive . The document disclosed the fact that ToMoCo's management was discussing "a greater emphasis on variable pay and ways to slow the growth of our labor costs, including the cost of benefits."

The memo recommended that Toyota work to bring its wage structure into closer alignment with other local industries and "not tie ourselves so closely to the U.S. auto industry or other competitors." Translation: Toyota’s higher ups are unhappy that the company’s labor costs (as a percentage of sales) are increasing faster than their profit margins.

Despite Toyota’s attempts at damage control, the press got ahold of the memo. Rather than fess-up and explain their competitive dilemma, Toyota sacrificed a pair of a scapegoats. They fired two Georgetown plant employees for allegedly accessing and distributing the confidential document.

The employees admitted reading the doc (as did several hundred others), but denied sending it to the press. As allowed by Toyota personnel policy, they pleaded their case before a five-member peer review board. The board ruled that they were both innocent. Toyota management overruled the review board’s decision and fired them.

Salting the wounds, Toyota remained silent on any investigations into– or disciplinary actions against– the person or persons who left the confidential document on the company-wide computer network.

As expected, the UAW seized upon this “unpleasantness” to step up their efforts to unionize the Toyota plant, to gain a precious foothold deep in the heart of non-union territory. On Saturday, the UAW hosted a town hall forum entitled “The Human Cost of Toyota’s Success” in Lexington, Kentucky.

About 150 UAW representatives, Toyota employees, members of the press and other interested parties attended the meeting. Even though the Georgetown plant employs almost 7k workers, only five people spoke at the gathering, including the workers who were dismissed over the confidential document. No representatives from Toyota management attended– at least not officially.

The speakers addressed the document’s implications for Toyota’s HR plans. They also aired a number of complaints about the way the Georgetown plant is managed. They asserted that Toyota does not take workplace injuries seriously, that full-time workers have “disappeared” (to be replaced by lower cost temporary workers) and that training opportunities have dwindled to the point of extinction.

Needless to say, it this was music to the UAW’s collective ears. “It’s time for Toyota to sign a contract with us like everyone else they do business with,” Vice President Terry Thurman announced. The man who directs the UAW’s National Organizing department and helped organize the meeting added, “This is all about Toyota workers.”

The sequence of those two statements tells you everything you need to know about the UAW’s priorities. There’s only one reason they’re making a full-court press against Toyota: it’s their only hope for survival. If the UAW has any success organizing Georgetown you can rest assured they’ll start looking for further inroads into the rest of the transplants’ non-union plants.

Even though the UAW stated their Toyota kvetchfest was not an “organizing event,” they now have a foot firmly in Toyota’s door. The UAW and the National Jobs with Justice Campaign plan to capitalize on their success by establishing a Worker’s Rights Board in Kentucky. According to the UAW's press release, this organization “will be available to hear personal stories of Toyota workers and recommend appropriate remedies when necessary.” In other words, they’ll be collecting information they can use to further their attempts to organize the plant.

And they’ll be moving on from there. One worker from the Toyota plant in West Virginia attending the Kentucky meeting asked if the UAW could conduct a similar meeting for workers at his plant. Of course, the union immediately agreed, seizing the chance to get a presence established at a second Toyota location.

Toyota has no one to blame but itself for this perilous state of affairs. Their sloppy record keeping and short sighted damage control could give the UAW the leverage they need to start pulling Toyota into the same rat hole that disappeared Detroit. Meanwhile, even as they seek to organize Toyota, the UAW continues to call the automaker their enemy. And so it is. 

Admittedly, on-line surveys are far from statistically significant. However, the “put your hands up for Detroit” results are a clarion call to the UAW. The days when the union could demand the sun and get the moon are gone. Even a brief look at the automakers’ balance sheets indicates that they can no longer afford to keep idle workers on the payroll, or pay for full time employees who work on a part-time basis, or carry enormous “legacy costs,” or even keep pace with rising health care costs. 

Yet the UAW is like Oliver Twist on an endless loop; they keep asking for more. The speeches and 103-page Resolution approved at their collective bargaining convention all indicate they’re not willing to give many (any?) concessions to their employers. In fact, the UAW wants MORE benefits and job guarantees.

Saber rattling? Don’t be so sure. The UAW doesn’t seem to grasp the simple concept that they’re on the verge of pricing themselves out of a job. The organization is deeply infused with a sense of entitlement, a “Don’t mess with us, we ARE the company” credo that informs everything they do– even if it threatens to take them all the way to the unemployment line.

UAW President Ron Gettelfinger signalled that his union brothers and sisters are ready, willing and able ($847m strike fund and counting) to down tools should their employers get stroppy. Even though Big Ron’s got a look at the automakers' books, he doesn’t believe The Big 2.5 are on the ropes. The fact that Ford and GM have recently topped-up their checking accounts, that investment bankers are clamoring to buy Chrysler, merely reaffirms the UAW's bottom line: where there’s a contract, there’s a way.

Bankruptcy? Fuhgeddaboutit. Gettelfinger vehemently denounced Delphi for trying to use bankruptcy to break their union contracts. Yet Chapter 11 awaits any of the The Big 2.5, should their unionized work force choose to strike. Make that all. If any one of the domestics collapses, it will cause a chain reaction that will end the American auto industry as we know it.

Of course, the automakers aren’t innocent victims in any of this. No matter what you’ve heard, the paradigm has not changed. The automakers still threaten to close plants or withhold new cars from particular plants, using new models and continued employment as hostages to get what they want from the UAW. The workers at GM’s Lordstown, Ohio plant are sweating bullets right now.

What's more, auto company executives are equally mired in the entitlement mentality. According to Ron Tadross at Banc of America Securities, the base salary of the average GM, Ford, or Chrysler vice president is about the same as the total compensation for the CEO of Toyota (just under $1M). Add in the bonuses and stock packages (regardless of how well the company did) and Detroit’s top dogs are making 40 to 50 times as much as the workers they say they can no longer afford.

When was the last time you heard any of these executives offering to take a pay cut or refusing a bonus to preserve their company’s future?

You want to know why the Cadillac DTS, Lincoln Town Car and Chrysler Aspen’s interiors look and feel cheaper than a $17K Honda? Why Motown’s motors lag behind in fuel economy and alternative propulsion? Detroit’s overheads are so high, their bureaucracy so stratified and stultified, that they simply can’t afford to produce what the market demands at a price that the market expects. That’s why the American auto industry, once known for technological innovation and trend setting, is playing a perpetual game of follow-the-leader.

And so the UAW and the Detroit-based automakers continue to squabble like a couple of four-year-olds, each threatening to knock down the other’s blocks and go home. The first concession both sides should make is to reality. The reality is that the old ways no longer work. Those of us on the outside realize this, from top-flight industry analysts all the way down to the poor sap on the dealer floor, trying to sell lackluster domestics against the class leading transplants. But there is no indication whatsoever that the UAW, GM, Ford and Chrysler “get it.”

A wake-up call is on its way, and it ain’t gonna be pretty. 

No doubt about it: Toyota’s on a roll. They posted a record $3.6b third quarter corporate earnings and hope to exceed $13b profits for this fiscal year. In spite of growing profits worldwide, the picture isn’t so rosy on this side of the globe. Although their revenues in North America were up 17.3 percent, their North American operating profits were down 22.4 percent in the third quarter. 

Part of Toyota’s American problem relates to federal contract-sized cost overruns on their new truck plant in Texas. When ToMoCo started the project, they budgeted $850m to git ‘er done. To date, the company’s sunk almost $1.3b on the plant– and they’re still spending.  The expenditure seems manageable enough, until you tote-up the cash they’re also shelling out to build another Canadian facility and modify the Subaru plant in Indiana to build Camrys. 

Perhaps Toyota should be putting some more of their resources into making sure their products live up to their reputation for quality. As production numbers rise, their recall rate is keeping pace. The latest recall– involving faulty ball joints in the previous generation Tundra and Sequoia– could end up costing Toyota more than $600m.

And then there are the high hundreds of millions of dollars Toyota may need to settle the class-action suit for oil sludge (affecting about 3.5m Toyotas and Lexi). All in all, we’re talking about a serious chunk of change coming directly off the bottom line.

Meanwhile and in any case, sales of the Pious Prius are down. Whereas the automaker once measured the model’s supply in hours, there’s now a 30-day supply sitting on dealers’ lots. Though it’s nothing like the 80 day supply of GM product lingering on their dealers’ lots, the growing Prii glut is definitely trending in the wrong direction.

The extra inventory is attributable to a combination of factors which, uncharacteristically, Toyota didn’t read correctly. They increased production just as gas prices started going down, the hybrid tax credits started going away and those buying hybrids to make a social statement had bought them. So, for the first time in the model’s short lifetime, Toyota’s offering incentives.  They’re nothing on the scale of The Big 2.5’s spiffs of course, but it’s cash on the hood nonetheless.

These issues pale in comparison to one problem that could make or break Toyota’s North American operations:  their relationship with their hourly workers. In a confidential memo that accidentally ended up in workers’ hands, Seiichi Sudo, president of Engineering and Manufacturing in North America, discussed the cost of American labor and the steps they need to take to control those costs. 

The memo, which was inadvertently stored on a shared computer drive, states the US auto industry pays some of the highest manufacturing wages in the world. It compares American wages to those in France and Japan (50 percent higher) and Mexico (500 percent higher). They project their American labor costs will increase by $900m over the next four years.

Toyota’s concerned that even though their profit margin is increasing, it’s not growing as fast as their labor costs. Their strategy: “base our Hourly Wages more closely with the State Manufacturing Wages where each plant is located, and not tie ourselves so closely to the US Auto Industry, or other competitors.” Their “challenge”: how they’ll tell the workers “so that they can understand and accept change.”

The bottom line: “Human Resources is developing strategies which will reduce Labor Cost (and increase Profits) by $300 Million by Fiscal 2011 by focusing on: Headcount and Rate (Wages and Benefits).” This isn’t exactly what you want the rank and file to hear. 

This memo could do more to damage Toyota’s future than any other factor. Toyota got a lot of press when the (non-union) workers at their Kentucky plant made more than union workers on average last year. Now they want the same workers to take a pay and benefit cut. Is that the UAW I hear knocking at the back door?

Ironically enough, Toyota is in the roughly the same position (re: its labor relations) as GM during the ‘70’s. Of course, GM basically rolled over and played dead for the UAW, burdening itself with an unwieldy labor force and an unsustainable cost structure. Will Toyota make the same mistake? It’s not likely. But it is possible.

[Read the Toyota memo here ] 

I’m not saying Terlep’s article was pure propaganda, but if it’d been a bag of cocaine, the dealer would have cut it several times to prevent cardiac arrest. The writer assembled the usual suspects to predict the familiar bacon saving concessions: Big Ron Gettelfinger, UAW Vice Presidents Cal Rapson and Bob King, and GM spokesman Dan Flores.

"Sacrifice," "put aside the adversarial approach," "our fates are linked;" yada, yada, yada. I mean, they would say that wouldn’t they? The UAW and The Big Two Point Five’s management have been in bed for so long they have to turn every thirty minutes to avoid sores.

Meanwhile, testimony from the sharp end gave Terlep’s game changed analysis some major oomph: “’If we don't make a profit, we don't have a plant,’ said James Kaster, president of UAW Local 1714, which represents workers at GM's factory in Lordstown, Ohio. The plant has a program under way to educate workers on why GM's financial success should matter to them.”

Now THAT’S convincing stuff. Well kind of. I mean, can you imagine the “education” involved? “So, explain to me again why my salary and benefits get whacked because the guys upstairs green light crap cars.”

As is the way of such things, Kaster’s quotelette only implies a willingness to make financial concessions. As Terlep’s piece progresses, the front line rhetoric begins to soften and stink, like goat cheese left in a hot sun.

“’If the U.S. auto industry is going to survive, it's going to have to change, and we're going to have to change with it’ said Skip Dziedzic, president of UAW Local 1866 representing a Delphi Corp. plant in Oak Creek, Wis.”

In this case, the reader is left wondering if the "change" in question has any monetary value whatsoever, or if it simply means that more UAW workers will get more payoffs to sit on the sidelines and watch Delphi amp-up its foreign factories. 

And then… “’It's very delicate this year,’ said Jim Stoufer, president of UAW Local 249, at Ford's plant outside St. Louis. ‘Common sense tells you this is going to be rough. We are going to have to play ball with Ford and keep them competitive. But there is going to come a line that we won't cross.’

That line is, of course, a picket line. Think it won’t happen? Neither do I. Again, GM’s “health care concessions” are the new template.

You know; announce that you’ve hammered-out a historic agreement to trim $3b from the compensation package, and then shove $3b into a union bank account and call it good. Or say that workers are forgoing a pay raise, and then earmark the money for health care benefits. That sort of thing. 

The actual line which the UAW won't cross is easy enough to identify: their retired and active members’ current salary and benefits. The union and its paymasters can wrangle all they like about working rules, new workers’ pay and bennies, retirement buyouts, etc. They can monkey around with who gets the money how and when. But there is no way that a single one of the UAW’s current or retired workforce is going to take a major hit on their wallet.

By the same token, The Detroit News can tout the UAW’s “pragmatic stance” and the “unprecedented pressures” facing The Big Two Point Five. But no one’s cutting nothin’.

It all boils down to a simple, inescapable, unavoidable, unanswerable, inarguable question: why should a union member take a cut when the bosses are sitting pretty? UAW workers know that GM CEO Rick Wagoner and his minions are wearing golden parachutes, banking millions. In fact, Rabid Rick’s retirement plan is bankruptcy-proof. Try explaining THAT to the rank and file.

The Big Two Point Five can’t afford their current agreements and they know it. They can’t get out of them and they know it. Their real plan? Weasel, cut and run. Ask the PR flacks how their employers can bear the burden of union-based legacy costs, and they talk about a “new spirit of cooperation,” the value of automation, and the great gains in production efficiency. Meanwhile, they’re all busy moving vehicle production out of the U.S.– even as non-union transplants move production in.

I once heard detente described as a confrontation between a blind mongoose and a paralyzed cobra. Need I say any more?

[Read the original Detroit New article here.]

The UAW was formed in 1935. In 1969, membership peaked at roughly 1.5m members. By 2002, 639k industry workers were paying UAW dues. By 2005, the number sank to 557K members. After the next round of “attrition plans” from GM, Ford, and Delphi, there’ll be fewer than a half million active UAW members left. The exodus occurs against a backdrop of a general decline in the “market” for union representation. According to the US Bureau of Labor Statistics, national union membership has dropped from 20.1% of the U.S. labor force in 1983, to 12.5% in 2005.

What’s worse, some union members are beginning to question the UAW’s efficacy. Speaking to The Detroit Free Press, one Ford employee opting for early retirement noted "it would be belaboring the obvious to say that the UAW's nuclear option of a strike is not as evident as it used to be." If members believe the UAW has “gone soft,” labor leaders negotiating next year’s contract will be between a rock (breakaway dissent, wildcat strikes and a potential fall from power) and a hard place (clinging to contracts that kill the golden goose). Bet on Plan B.

Like many other experts, labor law expert Jim Hendricks doesn’t see it that way. "I don't think they can survive the way they used to. Manufacturers and employers feared this union because of their sheer size and strength." Hendricks thinks the UAW should merge with other unions facing the same problems. While UAW leadership hasn't ruled out the possibility, they seem more interested in conquering new territory on their own.

In the short term, the UAW faces the same problem as The Big Two Point Five: they’ll soon have more retirees than active employees. Like any clued-in capitalist, the UAW’s management knows they have to grow to keep the cash flowing. Logically enough, the UAW has spread their recruitment efforts throughout the rest of the automotive industry, including auto parts and heavy truck manufacturers and auto dealerships (mechanics and back office staff).

At the same time, the UAW is scrambling to organize any group that’s not already represented by some other labor union (and edging into some areas which already are). So far they’ve established a presence in household appliances, brewing, lawn/garden equipment, tools and hardware, firearms, boats, modular housing, toys, musical instruments, pharmaceuticals, cosmetics, food processing, public radio stations, casinos, aerospace and defense.

The UAW has also cast their net over a wide range of professions: draftsmen, industrial designers, engineers, computer specialists, health care professionals, journalists and writers, curators and librarians, graduate teaching assistants and staff lawyers.

Most promisingly of all– given the taxpayer’s seemingly limitless purse and any union’s ability to use political muscle to wrest financial concessions– the UAW is organizing state and local government employees, such as social service workers. Their latest conquest: Michigan’s home-based child care providers. So far, the UAW reports it’s organized about some 40k care providers.

And yet the UAW claims they’re being selective about potential members. UAW Secretary-Treasurer Elizabeth Bunn stated, "We are not interested in representing workers where we don't feel we can act as a powerful voice for them." Translation? Unless you’re in an industry where the UAW has a chance of establishing a stronghold or getting a lot of (dues-paying) members, fuhgeddaboudit!

With the UAW dividing its attention amongst these diverse areas, how can they successfully address the labor issues of any of their smaller constituent groups? Can an organization where the leadership has focused on workers in one single industry for the past 70 years effectively advocate for other totally unrelated industries? 

The needs and concerns of nurses and lawyers aren’t necessarily the same as those of assembly line workers, and you can’t take the same actions against government entities that you can against giant corporations. Is the UAW equipped to handle this diversity, or are they bloating their portfolio beyond any rational hope of quality, GM-style?

If successful, the UAW’s expansion is a major threat to domestic automakers. It will strengthen the only power that any negotiator ever possesses: the power to walk away. In fact, the more industries with UAW representation, the more the union needs to look tough. Autoworkers, indeed the entire domestic automobile industry, could be sacrificed on the altar of the union’s long term survival strategy.    

The Big 2.5’s UAW members receive an average wage of $29.75 per hour and full medical coverage. They also get an average of 16.5 paid vacation days per year, on top of three weeks paid vacation (Canadian members get four weeks). UAW workers who transfer to a plant “outside of their area” get a $25k relocation allowance– even if they don’t change residence. Employment is guaranteed.

The UAW’s Director of Public Relations reports that only 40% of his union's membership work on automotive assembly lines. Paul Krell says the rest are drawn from a wide range of other industries— from casinos to government-funded schools. But even as the UAW successfully broadens its base, the total number of dues paying members has declined dramatically. According to Department of Labor, the UAW lost 144,719 active members from 2001 to 2005. The loss leaves them with 557,099 active members and over 500k retired members spread throughout the United States, Canada and Puerto Rico.

Crucially, despite the drop in membership, the UAW’s assets continue to grow. Over the same four years, the union’s financial holdings have increased by $93,722,955. At the end of 2005, the UAW reported assets totaling $1.235b, including over three-quarters of a billion dollars worth of treasury securities. The union earned $54.4m in interest income during 2005, mostly from their $914m strike fund.

Even when the UAW makes concessions, their cash flow remains sacrosanct. For example, the UAW struck an agreement with Chrysler that permanently denies seniority or full employee status to "temporary" employees at the automaker's Belvidere, Illinois facility. These “temps” receive 70 percent of a full timer’s pay as long as they work. After seven months, they get minimum healthcare benefits. And what do one third of Belvidere’s workers get in exchange for foregoing the usual union-negotiated benefits?  They get to pay full union dues and vote on UAW-Chrysler contracts. And that’s it.

It must be remembered that the UAW has some pretty heavy expeneses, albeit mostly overhead. In 2005, the union spent $8.2m on lobbying and political activities. Another $88m went to UAW employees’ salaries. Forty-two million more covered the UAW employees' benefits. Even if union dues drop, these payouts will continue apace. According to union rules, the Executive Board can divert $50m from their strike fund to their general fund to support operations (as they did at this year’s convention in Las Vegas). In fact, they can transfer up to $60m per year from the same source for the next four years.

In short, the UAW is a large and extremely well-funded organization. Active members enjoy high wages and benefits (estimated by bankrupt auto parts supplier Delphi to cost $76 per hour) along with unassailable job security. Retired members also receive an extremely generous pension and excellent health care provisions. But now that Ford and GM have paid off tens of thousands of the union’s senior members, it’s the less tenured and “temporary workers” who hold the key to the UAW’s— and the automakers’ —future.

Ford and GM’s worker buyout programs have removed the workers who can most afford to make concessions. It’s highly unlikely that the remaining, less well-paid UAW members will agree to significant cuts to their compensation. Union bosses know that holding the line on wages, pensions and benefits could throw Ford and GM into Chapter 11. They also know that large concessions would trigger wildcat strikes, which could also lead to Chapter 11. But most importantly of all, they know they have the cash and non-automotive member base to survive a nuclear winter.

Given these factors, the UAW will do everything in their power to maintain the status quo. In the main, they’ll hold the line on their current compensation. At the same time, they'll dress-up minor concessions as "historic givebacks:" proof of their concern for their employers' well-being. (The tactic will absolve them of any blame if and when the automakers go belly-up.) The “radical” union members are the fly in the proverbial ointment. Whether or not the union bosses can keep them in line will ultimately determine the timing of Detroit’s terminal decline.