American carmakers cast worried glances on Senators and union groups that want to create a level playing field with China. Senators Debbie Stabenow and Sherrod Brown, alongside union representatives and the labor-backed Economic Policy Institute try to push “the administration to bring a possible case at the World Trade Organization or begin a U.S. Commerce Department investigation that could lead to duties on Chinese-made auto parts,” as Reuters reports.

A study by the EPI alleges that the Chinese auto parts industry has received $27.5 billion in government subsidies since 2001. The study forgets that large parts of the U.S. auto industry would not be here anymore, would it not have been bailed-out by the U.S. government.

Why are carmakers horrified by the surely well-meant suggestion? Several reasons:

• Global parts sourcing, especially in China, has helped carmakers the world over to lower production costs. Slapping a punitive tariff on Chinese parts would raise the price of the parts, and make the car uncompetitive. First customers, then UAW members would pay the price for the folly.
• But wouldn’t it bring jobs back to America? The experience with the tire tariff, enacted on instigation of the United Steelworkers, says otherwise: The production of cheap tires simply moved from China to Thailand. From there, the tires could be imported at a lower tariff than from China, for a while even duty-free. Not a single job was created in America with the tire tariff, but a lot of porcelain was broken.
• As the volcano in Iceland, the tsunami in Japan, and the flood in Thailand have shown, the supply lines of the auto industry are intricate and can be easily damaged. Meddling with parts imports from China could have catastrophic effects on the U.S. car industry. By the time large swaths of the Chinese parts industry have been relocated to even cheaper parts of the world, U.S. manufacturers would be out of business, its people would be out of work.
• Especially GM is inseparably tied to China. More than a quarter of GM’s global production is sold in China, GM’s largest single market. Ford is expanding its presence in China. Chrysler hopes to get back into China on the coattails of Fiat. These companies would be on the receiving end of retaliatory measures by the Chinese government.

It is not that the lawmakers and union officials are utterly naive. They know that most of the Chinese parts production was created if not by, then at the behest of foreign carmakers, U.S. and otherwise. Bob King, president of the United Auto Workers union, acknowledges this by urging “global corporations to refrain from a ‘race to the bottom’ to find workers that they can pay the least.”

Debbie Stabenow creates communal cringes on Detroit`s executive floors when she says:

“We need to stand up to the bully on the block. The bully on the block continues to take our lunch money and we need to stop that.”

Her solution seems to be to create empty pockets: Nobody can steal your lunch money, if you don’t have any.

Meanwhile, carmakers take cover and hope that the matter is over when the circus moves out of town in November.

GM’s Washington, DC, spokesman Greg Martin asks me to understand that he won’t say anything else than a prepared statement. It arrives a few minutes later by email.

“GM’s success in China, which is now the company’s largest market, illustrates the benefits of trade and good economic relations to both countries. Because China represents tremendous growth potential for American companies, we hope that both countries continue to work through their differences constructively.”

Well said. Let’s hope the prayers will find an open ear.

The line at Volkswagen’s Chattanooga plant will run a little faster. It will produce 35 cars instead of 31 per hour. That also produces new jobs. In an emailed statement, VWoA announced today that 200 new permanent jobs will be created at its Tennessee plant.

The increased production is needed to keep up with the demand. Volkswagen’s new car sales were up 23 percent for 2011, and a whopping 31 percent in December. The market grew 10 percent for the year, and 9 percent for December. The Passat, which is built in Chattanooga, is a brisk seller. “Each car that we make is sold on the spot,” says Volkswagen spokesman Guenther Scherelis. He did not want to speculate on January sales, which will be announced tomorrow.

This should create smiles all-around.  Ryan Rose, head of HR in Chattanooga, explains:

“These 200 new positions are all full-time Volkswagen jobs. We will use this opportunity to hire many of our current Aerotek contract employees. So, Aerotek will be recruiting to fill full-time contract production positions that will open up as a result. We will also be hiring additional supervisors and engineers – so there are a lot of opportunities.”

Aerotek provides contract employees to VW. The new full-time jobs will be integrated into Volkswagen’s current two-shift operation. Volkswagen gains experienced team-members, and new openings for contract workers are created. Who will be in-line for full-time jobs when the line will make a few more cars per hour down the road. ..

Currently, the Volkswagen plant in Chattanooga employs more than 2,500 people, about 2,000 by Volkswagen, and an additional 500 by Aerotek. This number will now rise to 2,700.

It’s good that the UAW had hoisted the white flag and gave up on unionizing the South. The UAW already was not welcome in Chattanooga. With 200 new jobs created, the question would even more be:

“1,2,3,4 – what are we paying for?”

In other big news, Volkswagen now is doing something for it’s image when seen from above. Says Bloomberg:

“Volkswagen’s Chattanooga plant will add a big, flat-mounted rooftop sign that can be seen from the air and is so large the plant’s chief executive said it will be visible online on Google Earth.”

 

The website for midwives the voice of union activists Labornotes reports that a South Korean Hyundai Motor worker set himself afire Sunday after management refused his request to slow down the line. The 44-year-old unionist, Shin Sung-hun, is in critical condition. According to the site, Shin poured paint thinner over and set fire to himself .

As a result, union members at the plant refused to work overtime, which crippled production of sport utility vehicles at Hyundai and Kia. Management agreed to make a public apology and to reprimand some supervisors.

That done, Hyundai said it would seek damages caused by the union’s action.

Rough crowd.

A good month after our trek to the South where we checked on the (un-) willingness of transplant workers to join the UAW, the hard-hitting team at the Reuters Detroit bureau did the same.  In a special report, Reuters comes to the same conclusion as we did: It won’t be easy. Bernie Woodall and  Ben Klayman of Reuters did more thorough digging. And they unearthed the secret strategy of the UAW: With the help of the German metalworkers union, they want to talk themselves into Volkswagen and Daimler:

“By appealing to German unions for help and by calling on the companies to do the right thing, King hopes to get VW and Daimler to surrender without a fight and let the union make its case directly to workers.”

If that strategy won’t work, and it is highly unlikely that it will, it could be the end of the UAW:

“It’s a battle the UAW cannot afford to lose. By failing to organize factories run by foreign automakers, the union has been a spectator to the only growth in the U.S. auto industry in the last 30 years. That failure to win new members has compounded a crunch on the UAW’s finances, forcing it to sell assets and dip into its strike fund to pay for its activities.”

The UAW will have a hard time convincing workers. Where the UAW reigns, it’s a killing field for jobs:

“Since 2001, the Detroit Three have slashed over 200,000 jobs, eliminating more than 60 percent of their hourly work force. In the same period, Japanese, South Korean and German automakers have opened eight assembly plants in the United States, creating almost 20,000 factory jobs.”

Money-wise, it does not make a lot of sense to join:

“Newly hired workers earn $14.50 an hour at VW in Chattanooga. That is just below the $14.78 that a new hire would make at a unionized GM plant in Spring Hill, Tennessee. Adjusted for monthly dues at Spring Hill, the VW worker is behind by only about $15 per month.”

Hopes that the German unions will do the heavy lifting for the UAW likely are misplaced. “We will support the UAW, but we will not do the UAW’s work,” said Peter Donath, an IG Metall official. The German unions are interested in themselves. Of course, German makers with troubles in the U.S. could be discouraged to move more work to a unionized plant in the U.S. Wait, what’s wrong with that picture?

Please read the detailed report at Reuters. It will be an eye-opener.

Ever since Steve Girsky an his “merry band of hatchet men” touched down in Rüsselsheim, Bertel has been warning that GM’s European division was about to embark on a serious cutting binge. But our worst fears, namely that Opel could go away entirely, have yet to be realized. Instead it seems that self-destructive mutilation will be attempted first, in order to stem the gushing red ink at Opel where at least €1b in losses are expected next year. Automotive News Europe [sub] reports that the first round of cuts will hit Opel’s Internationalen Technischen Entwicklungszentrum (ITEZ, “International Technical Development Center), as an IG Metall union document foresees some 1,420 product development position cuts (from a staff of some 6,000).

Opel’s spokesfolks insist that the union’s numbers are “factually wrong and excessively high,” but only, in the words of ANE, because they “include people who are not on Opel’s payroll – like employees of service providers and supplier employees.” Furthermore, the automaker has not offered an alternative number for the expected cuts, and given the close cooperation between unions and OEMs in Germany, not to mention the detail of the IG Metall leak (200 employees will be offered severance payments when 550 positions are transferred to the manufacturing engineering department from product engineering), it’s tough not to conclude that the number is fairly close to GM’s actual plans.

And the cuts aren’t limited to workers: a battery-powered version of Opel’s forthcoming “Junior”/”Allegra” city car, as well as a long-rumored Insignia-based Coupe are said to be on the chopping block as well… so let go of any plans to wait for a reborn Buick Riviera. Oh, and don’t hold out any hope for the “production potential” Opel recently touted for its strange, low-cost RAK e Concept. Meanwhile, here are the other measures that Opel admits are coming down the pike:

• Stronger concentration on the carmaker’s core development mission and a reduction in project coordination tasks

• Increased use of modules and construction kits. “For example, we still have too many steering and seating systems. We have to improve significantly here,” the spokesman said.

• Deeper and earlier integration of suppliers. “There are no plans to put a stranglehold on our suppliers — we need to increasingly rely on suppliers’ innovative strengths,” the spokesman said.

In short, it seems that in order to save Opel, GM has to kill off much of what made Opel so valuable to it, namely its ability to develop premium global vehicles for the parent company. Instead it seems Opel will be forced to concentrate on selling into a brutal European market that seems set to contract as the Euro crisis drags on. Perhaps there is some truth to the rumors that Chevrolet will slowly replace Opel after all.

After all, cutting engineer positions is certainly the low-hanging fruit in Opel’s restructuring, but GM will likely have to go after assembly capacity (likely at Bochum and Port Ellesmere) in order to address the overcapacity issues that are at the heart of its (and many European automakers’) woes. That could create problems though, as this latest union leak confirms that Opel’s labor councils are prepared to fight. Opel’s outgoing union leader Klaus Franz has gone so far as to ask GM to sell Opel to its Chinese partner SAIC, a move widely considered a sign that Franz was trying to move back in touch with an increasingly militant union rank-and-file in the face of his own legal problems. While Franz portrays himself as the victim of a media smear campaign and threatens legal action against the Frankfurter Allgemeine Zeitung, his union appears prepared to fight the seemingly inevitable production cuts. And all this as Opel celebrates its 150th birthday.

Without Opel, GM might not be the world’s largest automaker. But it would be a highly profitable automaker. Opel will cost GM approximately € 1 billion ($1.3 billion) in the coming year and will miss its restructuring plan. Reason for the shortfall: Opel will sell only 1.4 million cars next year, 100,000 less than budgeted. How do we know this? We don’t, but it is in an internal forecast of Opel. The document somehow came into the hands of the German magazine Capital.

Capital most likely did not find the document in a Rüsselsheim dumpster. The bad news look like yet another targeted leak, aimed at scaring the unions into compliance with more job cuts.

By the end of January, GM wants to see a business plan that shows how Opel will become profitable. Capital heard that Opel CEO Karl-Friedrich Stracke is working on an austerity program. Included in the plan are cheaper materials, suppliers that make cost concessions, increased outsourcing, serious cuts in R&D expenditures.

The magazine thinks that the days of the Opel plant in Bochum and the Vauxhall site in Ellesmere port are numbered.

The unions, which have it in writing that there will be no firings or plant closures at least until 2014, will fight the plans vigorously.  A strike is possible if Opel breaks the contract. That would be one way to make fewer cars.

The UAW called off the transplant war. It won’t even identify an organizing target among foreign automakers with U.S. operations, UAW President Bob King told Reuters (via Automotive News [sub] ):

“We are not going to announce a target at all. We are not going to create a fight.”

At the beginning of this year, the United Auto Workers pledged that it would launch a campaign to organize the foreign-owned, non-union “transplant” factories in the US. Organizing at least one transplant was branded as a matter of life-and-death for the union.

A week ago, the UAW back pedaled and said it would simply pick an automaker to target by the end of 2011.

Even that isn’t happening.

Instead, King said meekly that the UAW is in talks with all of the German, Japanese and Korean automakers with U.S. factories and expects to continue to make progress toward organizing workers in their operations.

Some day. Maybe.

At the beginning of this year, the United Auto Workers pledged that it would launch a campaign to organize the foreign-owned, non-union “transplant” factories in the US, threatening to tar uncooperative automakers as “human right abusers.” The campaign initially lost steam, but the UAW stuck to its pledge, re-iterating on several occasions that it would organize “at least one” transplant factory by the end of 2011. With one month left to accomplish that goal and no signs of progress in sight, the UAW has officially called off that goal. In fact, the UAW now hopes to simply pick an automaker to target by the end of 2011. Spokeswoman Michelle Martin tells Bloomberg

At this point, our hope is to make a decision about who we’re going to target by the end of the year. But obviously, we won’t have the organizing campaign completed by the end of the year.

This is not too surprising, considering the UAW announced last week that it would be focusing on dealership pickets initially rather than factory organizing. And sure enough, the first dealership picket has begun, targeting Hyundai dealerships. And yet, says Martin

This has nothing to do with the domestic organizing campaign. Hyundai is not the target.

Huh? If the UAW is not committing to organizing Hyundai’s assembly workers, why picket Hyundai dealerships?

The Freep explains that the union is targeting 75 Hyundai dealerships, in order to show international solidarity, a recurring theme in the presidency of UAW boss Bob King. Says King

The UAW has embraced a global vision of social justice and will mobilize its membership to defend labor rights here and in other parts of the world

So, what is the UAW picketing in solidarity with? Martin tells the Freep that Hyundai’s Korean unions are picketing across Korea to protest the firing of a worker whistleblower. According to Martin

The worker, who is employed by a Hyundai subcontractor, was fired after she reported the sexual harassment in 2010 to Korea’s National Human Rights Commission… The commission ruled in the worker’s favor and ordered the subcontractor to pay damages and rehire the worker, but the subcontractor has refused.

A UAW statement adds

Holding banners that read, “Stop Sex Discrimination at Hyundai” and “Reinstate Ms. Park,” UAW members from Los Angeles to New York, at more than 75 different dealerships, informed American auto buyers about an injustice to an autoworker on the other side of the globe.

“Though we may work for different companies and in different countries, as workers, we support each other’s struggles and know that one of the best ways to hold our employers accountable is through consumer action at dealerships,” said Mike O’Rourke, an 33-year employee and president of UAW Local 1853 at General Motors’ Manufacturing Facility in Spring Hill, Tenn.

Hyundai Motor America’s response: the worker was an employee of a subcontractor at Glovis, a Hyundai “affiliate,” therefore

the issue has nothing to do with Hyundai Motor Company

In other words, the UAW will be alienating itself from Hyundai’s US workers and dealers over one person who doesn’t even work for Hyundai. Standing on principle is great, but trying to block sales of cars will not exactly endear Hyundai’s assembly workers to the union. Meanwhile, similarly to the UAW’s last protest against Hyundai, there doesn’t seem to be as much moral clarity on this issue as the UAW would like it to appear. Of course sexual harassment has no place in the workplace, and  the circumstances of this case in particular do not sound good, but by hammering on the treatment of contracted employees, and by associating the contracter “affiliates” with the automakers they work for, the UAW opens itself up to criticism along the same lines.

The Freep is also reporting today that the UAW has called off a protest that was planned at GM’s Orion Assembly plant, over contract negotiations with a supplier at that plant. Workers at the GM affiliate supplier LINC, who organize and deliver parts for the Orion plant, make ten dollars per hour, less even than the “Tier Two” wages that most Orion assembly workers make. And yet, with GM’s stock (which funds part of the UAW’s VEBA account) remaining weak, it seems unlikely that the union will actually protest, let alone strike, over the LINC wages. Which raises a tough question for the union: why are they so concerned about transplant workers making $14.50 per hour and up when they are working alongside folks making $10 per hour? And if workers at a Hyundai supplier are Hyundai’s responsibility, why isn’t the UAW livid at GM for allowing LINC to hire workers for such low wages? And in light of these fundamental contradictions, a single case of apparent injustice half the world away seems even less relevant.

Opel workers and managers are deeply worried: It’s not just cuts that are coming. GM is sending a team of feared slashers. Says the Wall Street Journal:

“Vice Chairman Steve Girsky, GM’s second-highest-ranking executive, will become chairman of the Opel supervisory board. Tim Lee, president of GM’s international operations, and financial chief Daniel Ammann also will join the Opel board, the company said.”

Supposedly, GM was surprised and appalled that the European business hit GM’s bottom line with an operative loss of $292 million in the third quarter, despite increased sales. I am not surprised at all. I have always warned that restructuring Opel and cutting jobs is an expensive exercise. And those costs were mostly delayed into the third quarter.

Now Girsky and his team of handpicked hatchet men are coming. Girsky is a former Morgan Stanley banker who came to GM to assure Wall Street. The drooping chart of the GM stock requires a lot of reassurance. Girsky is one of the men the Occupy movement has on its target list.

What the hit squad from Detroit awaits in Europe shows an article in Automobilwoche [sub]:

“By sending Stepen Girsky as head supervisor of the Adam Opel AG business, GM puts its German daughter on the shortest leash possible. The former Morgan Stanley banker is known as a cost killer and a margin hunter without remorse. GM sends its Number Two to Germany to force a turn-around with American methods.“

„American methods“ are shorthand in Germany for hire and fire, for brutal decisions without finding a consensus with the workforce, for management by buckshot. It doesn’t go down well in a country of codetermination on a basis of parity. I would love to be a fly on the wall in those supervisory board meetings where half of the board is union members who will all claim that they don’t speak English.

The first verbal shot has already been fired. Girsky announced:

“To realize Opel’s full potential, we will continue to optimize its cost structure, improve margins and better leverage GM’s scale.”

That again means plants closures, and possibly Opel production in South Korea. Bochum could be closed.  Which will mean more red ink. Did I mention that firing people and closing plants in Germany does not come cheap?

By the way: Someone should tell GM that the Supervisory Board of a German AG cannot direct. It needs to listen to the recommendations of management, it can deny or approve them, but it cannot tell management what to do. Quite possibly, it is part of those “American methods” to overlook that little detail.

As the world struggles to come to grips with economic uncertainty, Bertel has been reporting that Japanese automakers are abandoning their homeland for lower-cost production centers overseas. Now, with economic turmoil shifting to Europe, it seems that Fiat could possibly be preparing for a pullback from Italy. Two basic factors are driving Fiat towards reconsidering its global manufacturing footprint: first, its struggles in the European market where margins are slim and dropping, second, its battles with Italian unions. Though Marchionne’s latest comments are ambiguous at best, some see these factors pushing the Italian automaker away from the market that gave it birth.

Bloomberg reports that Marchionne is calling Fiat’s 2012 profitability “uncertain,” as the CEO clarifies

More than volumes, the question is whether we can extract the same levels of margins. We are to some degree cautious on what is possible from Europe next year

Chrysler already contributes some 65% percent of Fiat’s overall profit. If the European market weakens, the Italian automaker could become even more dependent upon its American cousin. And if Europe’s economic uncertainty bleeds into the US market, Fiat could be in trouble. Credit Suisse analyst Erich Hauser notes that Fiat’s exposure to a weakened Europe could be a real cause for concern

The real concern is not so much the margin level in Europe next year, but the extent to which Fiat will consume cash in a downturn. If volumes fall further, then Fiat’s liquidity position could become an issue.

Marchionne’s response?

Globally we’ll be fine

And though that may be the case (depending on the US market’s performance), the problems inside Europe are mounting. And because Europe’s sovereign debt crisis is now centered on Italy, Marchionne’s scope for political maneuvering in that market may be compromised. That’s key because Fiat has been in a long confrontation with Italy’s labor unions. That conflict colored Marchionne’s recent optimism about Italy’s political future, as he noted recently on the departure of President Silvio Berlusconi:

Italy has a once-in-a lifetime opportunity to abandon the notion of an entitlement society. I think Italy is on the mend.

And Marchionne, a globally-known battler of union-led “entitlement societies,” is taking his fight to the Italian unions, as the WSJ [sub] reports that Fiat has canceled all of its agreements with Italy’s labor unions. According to the report

The latest decision amplifies special labor concessions made at some factories and applies them to all the productive plants in the country. It also comes as the new government vows to loosen Italy’s traditionally rigid employment laws.

And that move is stirring up political turmoil in the already-tumultuous Italian political system, prompting Antonio Di Pietro of the IDV to complain to AGI

By cancelling all trade-union agreements, FIAT is closing a circle, effectively announcing that the company is leaving Italy, using workers as the scapegoat. Employees are accused of being incapable of manufacturing innovative cars with a high added value and of selling them on the market

Legitimate fear or politically-motivated fearmongering? Only the future will tell whether Fiat can stick it out in Europe. But with its best production taking places in locations like Poland and Brazil, it’s going to be tough for Fiat to hack it out in Italy.

With a tough negotiating session with its traditional employers now complete, the United Auto Workers are turning their focus back to the year’s primary goal: organizing the transplant factories. 2011 was supposed to be the year in which the UAW took down “at least one” foreign-owned auto plant, with the union’s boss even going as far as to say

If we don’t organize the transnationals, I don’t think there is a long-term future for the UAW

But as we found, the UAW is not welcome in the South, where most of the transplant factories are found. And with Honda, Hyundai, Toyota and VW all rejecting the UAW’s advances in some form or another, the union’s options are fairly limited. So instead of taking on the factories directly, the UAW is bringing back a questionable tactic from the days when it was misleadingly bashing Toyota for “abandoning” the NUMMI factory: they are taking the fight to dealerships.

Bloomberg reports

The United Auto Workers union, whose leader has staked its future bargaining power on organizing U.S. plants of Asian and European automakers, plans to start pressuring the companies through dealership campaigns.

Regional UAW representatives trained members about how the campaign will work at UAW Local 2209 on Nov. 19, said Mark Gevaart, president of the local in Roanoke, Indiana. The union hasn’t selected the automaker it will target and didn’t discuss when the drive will begin, he said in a phone interview.

The problem: as mentioned earlier, the UAW has already tried this on Toyota. And at the time, Toyota fired back with a pretty legitimate complaint, arguing

I still don’t understand why they are picketing our dealerships when the dealerships have nothing to do with the workers. Our workers make the ultimate decision if they want to unionize or not and for the past 25 years they have said no… Our team members want to make cars for people to buy. They don’t like it when people try to stop you from buying.

And here’s the funny part: the UAW has admitted that the dealership-picketing tactic didn’t help its cause, as President Bob King put it when he called off the last round of Toyota dealer protests

We said we were going to be the UAW of the 21st century and didn’t feel like that was accomplishing that goal

But hey, why not try it again? What’s the worst that could happen?

PSA Peugeot Citroen is planning an Opel-sized thinning of its French workforce, Reuters says, citing comments of Jean-Pierre Mercier, union representative at Peugeot’s factory in the Paris suburb of Seine-Saint Denis. The union claims that PSA wants cut 5,000 jobs. And guess who’s to blame?

Left Party presidential candidate Jean-Luc Melenchon says credit ratings agencies are behind the decision. Moody’s had recently lowered Peugeot’s credit rating to negative.

“The result: even though the company’s profits rose 18 percent in the first half of 2011, the owner throws thousands of workers into the streets to ‘reassure the markets’,” said Melenchon.

Occuper la Bourse de Paris !

In a newsletter to members of Local 598, an editor revealed an interesting wrinkle in the recently-ratified contract negotiations, writing

With the option of strike off the table and the government still a part of our negotiations (literally sitting in the room with us ‘observing’ our talks), I don’t believe any better agreement could have been reached,

But now, reports Bloomberg [via Automotive News [sub]], local shop committee person Dana Rrouse insists that there was not actually a government official present at union negotiations. He tells the news service

That was a misprint. I didn’t get to proofread it. It went out and then I said ‘Where did you get that from?’ I mean, I talked about us still being under government, but nothing as far as they were sitting there.

The government still owns a large portion of GM’s stock, but it too says it was not involved with negotiations with the UAW. Which is probably the right position to be taking: with so much acrimony generated by the latest round of negotiations, there are few reasons to be associated with them. Still, it’s strange that such an explosive “misprint” should have made its way into a union newsletter. Even if the government were not involved in the slightest, as it insists it was, there’s clearly a perception among UAW members that the government remains a consistent presence in the auto industry.

From his dream of a UAW-represented VW plant in Tennessee (ha!) to his desire for a seat on the boards of the Detroit automakers (double ha!), UAW President Bob King has a way of idealizing the German unions. And no wonder: while the UAW spent decades fostering a radical sense of entitlement, German works councils entwined themselves with their respective employers, earning places of power among the world’s largest automakers. But unions are a delicate balancing act in every country and culture, and even Germany’s unions, widely hailed as the example for the industry, can run into trouble.

Last time it was Volkswagen’s powerhouse works council, which erupted in a scandal over VW-funded sex tourism (with free Viagra and shopping trips for the wives!) back in 2005. With Opel’s union boss, Klaus Franz, becoming caught up in his own (slightly less lurid) scandal, GM’s acknowledgment that more cuts could be coming for Opel could prove just as explosive for the German works council model.

First, some background: GM Europe is not doing all that well, and Opel is big part of the problem. As the chart above (from GM’s Q3 financials release [PDF]) shows, an upward sales trend over the previous three quarters came to an end in the third quarter, and GM downgraded its entire Q4 outlook due to “continued weakness in Europe” and the fact that

ME will not reach target of breakeven EBIT- Adj. before restructuring charges due to declining economic conditions

As a result, GM CFO Dan Amman told the Q3 conference call

We’ve got to get the break-even point lower and the profitability higher… we are not betting on any improvement in the macroeconomic outlook in Europe.

And when asked if “getting the break-even point lower” might involve a few job cuts, Amman answered

We’re not going to rule anything out, we have to look at the whole picture

The Financial Times‘ headline “GM eyes further European cuts” came as something of a rude shock for Opel’s works council boss Klaus Franz, as the Economic Times reports

Opel labor leader Klaus Franz said he was “astonished” by the threat of a potential plant closing, saying GM’s current labor deal barred closures and factory job cuts through 2014.

In fact, GM Europe’s bad news came just as Franz was pushing for more assembly jobs in Europe, telling Reuters

GM would like to have the subcompact (Agila) produced in South Korea. Instead, we will fight to have it built in Gliwice (Poland), starting in late 2014… We are making the case for assembling the next generation of the Antara in Bochum (Germany) together with the Chevrolet Captiva, since it is based on the compact high-roof architecture.

This would be bad news for Franz under any circumstances: more cuts when you’re asking for more jobs is a bitter pill for any union boss. But because he’s under serious fire from within his union’s ranks in the aftermath of  a payola scandal, the prospect of cuts is even more terrifying. The World Socialist Web Site sums up the gist of the problem with a single “coincidence” reported by the Frankfurter Allgemeine:

The monthly allowance for the Opel works council was last increased in the autumn of last year. At that time, the allowance for an “ordinary” works council member was increased from €276 to €300. Shortly before, in August, the council had undersigned a deal for the elimination of the jobs of 20 percent of the workforce in Europe and large wage cuts for those retaining their jobs.

At a time when ordinary Opel workers are expected to accept massive wage reductions, the salaries of their union representatives are hiked. The increase in the subsidy for works council members was a bonus for the successful reduction in wages for the rest of the workforce.

Even with workers being offered $360,000 to leave their positions, headcount reductions at Bochum were painful. With Opel’s works council under investigation, and with Franz losing credibility as a representative of the workers’ interests, the next round of cuts will be twice as painful… especially with the wider European economic drama still unfolding. No wonder Franz recently went as far as to try to goad GM to selling Opel to its Chinese partner, SAIC.

Despite UAW President Bob King’s insistence that the UAW is not riven with divisions, Chrysler’s latest union contract is inflaming intra-union conflict, as the Detroit News reports that the Autoworker’s Caravan splinter group is protesting the union’s decision to approve a contract despite being rejected by Chrysler’s skilled trade workers. According to Autoworkers Caravan’s Alex Wassell,

We voted down the tentative agreement. But they used a procedural loophole to ratify it. We think it’s a very bad agreement and a very bad precedent, and we’re going to do everything we can to overturn it.

King claims that the ignored skilled trade workers’ rejection of the new contract because

  It was overwhelmingly clear that the issues were economic issues and not skilled-trades issues,

And the Autoworkers Caravan seems to be wondering why that would matter: after all, the union isn’t allowed to do anything without membership ratification. In any case, the matter will be determined by the UAW’s public review board… which is exactly what Caravan’s Wassell wants. He tells the DetN

We want to go through a discovery phase and find out exactly how Bob King and the other leaders made that decision. We think it will show that it was just a rubber-stamp.

But regardless of how this particular dispute is resolved, labor issues are likely to drag on at Chrysler. With CEO Sergio Marchionne’s revelation that he wanted a single-tier payscale, and with a flat $22/hour rate proposed for all of Chrysler’s UAW workers, the UAW’s Chrysler reps are hunkering down. Kristin Dziczek of the Center for Automotive Research tells the Detroit News

It’s a very unhappy work force now. They got less, and they basically feel like Chrysler wants to continue to give them less. Chrysler workers are already saying, ‘Save your raises (for a future strike),’ and Mr. Marchionne is already throwing down the gauntlet for 2015.

Even King admits that Chrysler is a troubling bellweather for the health of the union. Though GM and Ford were relatively generous this year, that won’t last as long as Marchionne and Chrysler play hardball with the union. Says King,

They saw their sisters and brothers at GM and Ford getting a lot more money. Is everybody on the floor of the factory happy? Absolutely not. I’m not happy, either.

Nor should he be. On the one hand, he’s got to be responsive to the fact that his Chrysler skilled trade workers are up in arms, and on the other, he’s got to manage a Chrysler leadership team that has the motive and opportunity to break the union’s back entirely. As Chrysler’s VP for communications Gualberto Ranieri puts it

It was not because someone here won the lottery, and it was not generated by the automotive business. The recent history of Chrysler is not comparable to any of the other manufacturers, and you don’t need an MBA to understand this. What the company proposed, what the UAW negotiating team unanimously approved and what the majority of its members voted for is consistent with the situation at Chrysler. It will ensure that Chrysler has the means to grow and not put in danger its future.

In the words of one Chrysler employee, “it’s going to be ugly in ’15.” But the way the tension is building already, the ugliness could well boil over before 2015 negotiations begin. Chrysler is taking the most aggressive line with the union yet seen, and the UAW’s most experienced workers are already digging in their heels. Unless King, who is stuck in the middle, can find a way to keep everyone happy, the union could tear itself apart under the pressure.

Chrysler CEO Sergio Marchionne wants an end of what he called “two classes” of employees represented by the United Auto Workers union. The two-tiered system “creates the kind of environment that doesn’t appear to work in the same direction that we’ve been trying to use to establish the new basis of Chrysler,” Marchionne told Reuters. He continued:

“The whole notion of trying to get this organization to work in unison when you’ve got this kind of economic disparity between the people on the line is not something that can go on forever.”

Marchionne hopes the matter can be settled during the next round of contract talks in 2015.

Knowing Marchionne, his idea of parity won’t be to upgrade everybody to First. He probably wants everybody to fly Economy.

Watch UAW President Bob King on New Contracts: Top Priority Was Creating Jobs on PBS. See more from PBS NewsHour.

Though UAW boss Bob King has said that organizing transplant factories is a life-or-death struggle for the union, but the real make-or-break issue this year was the contract negotiations with the Detroit Automakers. And though King roundly denies that a rift has been formed in his union over two-tier wages, the facts simply don’t back that position up. In the last contract to be ratified (with Chrysler) for example, only 54.8% of the union approved the deal… hardly the “overwhelming support” that King claims. Moreover, 55.6% of the skilled-trades workers at Chrysler rejected the contract, according to the Detroit Free Press. King’s narrative of experienced workers “demanding” higher wages for the Tier Two brothers “in the greatest spirit of solidarity” just doesn’t hold up to scrutiny.

The divide between skilled-trades and other workers at Chrysler was a particular problem for the union because its contract allows the 5,000 skilled-trades workers to reject their own portions of the contract even if the union as a whole approved it… which is precisely what happened. But, after meeting with skilled-trade representatives, King decided to do what the union has often been loath to do: trample the better-paid workers in favor of newer hires. The Freep reports:

On Wednesday, the UAW held two meetings to resolve the split vote. If the skilled-trades workers had voted against the contract because of changes that specifically affect only their work, then the UAW would have tried to renegotiate a portion of the Chrysler agreement, King told reporters Wednesday.

“It was overwhelmingly clear that the issues were economic issues and not skilled-trades issues,” King said.

King said he doesn’t anticipate a major backlash from skilled-trades workers after the decision. “We did not go against what the skilled trades voted for,” King said. “We went with what the majority of members said — that they thought this agreement should be ratified.”

That was probably the right decision to make, and King should be commended for it, but it exposes his rhetoric of solidarity as pure farce. In recent years the union has already created a backlash by approving the “innovative labor practices” that threaten to push Tier 1 workers at the Orion Assembly plant into the lower wage tier without a union vote. Once again, King is going against the rules of engagement, which say that any union decision must be ratified by members. The only difference: now he’s backing lower-paid workers. Again, it’s a commendable stand and it shows King’s commitment to returning to some form of solidarity, but it also demonstrates and exacerbates the union’s internal divisions.

Meanwhile, at Ford, King admits that negotiations were “very rocky,” which is something of an understatement. Even though Ford offered the most generous contract of all the Detroit OEMs, the contract got off to a bad start, as workers at several of the first plants to vote refused to ratify the contract. Only after Ford said it would hire strike breakers if the contract failed did the UAW leadership threaten that the deal wouldn’t get any sweeter for members, and the contract eventually passed. But at the Ford plants where the contract failed, there are still signs of internal pressure at the union. At Local 900, which represents three Ford Detroit-area plants, workers were most troubled that more Tier Two hires would be brought in in lieu of giving established workers more overtime.

Meanwhile, at GM the Orion Plant’s “innovative labor practices” seem set to spread to the soon-to-be-reopened Spring Hill plant, even though GM and the UAW insisted that Orion would be a one-off deal in order to build subcompact cars in the US. Automotive News [sub] reports

About 40 percent of Orion’s 1,500 workers make an entry level wage. Under the new contract, they’ll be paid $16 to $19 an hour, a little more than half of what traditional UAW workers make.

A 100 percent entry level work force won’t happen. Several hundred former Spring Hill workers who are either still laid off or relocated to other GM plants should get first shot at the new jobs.

But it’s likely that the vast majority of the 1,710 new jobs will be filled by new employees – and there’s no restricton on the use of entry level wage earners.

If that doesn’t inflame divisions between the UAW’s tiers, it’s hard to say what will. The Orion agreement inspired picketing of the UAW’s headquarters, even though it was made as GM was going into its bailout-bankruptcy and was sold as a necessary move for survival. With GM making profits again, it’s proving that the dissidents who said that Orion-style rollbacks would spread across the workforce were right. As details emerge from Spring Hill, expect more protests and further breakdowns in UAW solidarity.

“I see no need for union representation,” says Adrian Leslie, line worker at Volkswagen’s Chattanooga plant. “We are being treated fairly here.”

If it would be him alone to decide, then any plans of the UAW to unionize Volkswagen Chattanooga are doomed. Leslie is not alone in his opinion, and the plans are doomed.

Leslie had given up a 7 ½ year job at a distribution company in Chattanooga, because “the job I had before was considered a job, but I was actually looking for was a career.” He is 1 ½ year into his career at Volkswagen and thinks that “the working conditions here are excellent. This company is going a long way.”

Colleague Kristy Hill, who is fitting suspensions of the new Passat with Leslie, would be a tough target for union organizers: ”I haven’t heard a lot about the unions, I’d have to make a lot of research before I would make a decision,” says the resolute lady who held part time jobs before she was hired by Volkswagen 1 ½ years ago. “I love it,” Ms. Hill says. “This is it – this will be my last job.”

The two, randomly interviewed at our visit to Volkswagen’s Chattanooga plant, echo the sentiment at the bright, airy and clean Volkswagen plant in a wooded valley in the outskirts of Chattanooga.  When the two signed on 1 ½ years ago, they were paid $14.50 per hour, even during training. Now they are on their way to $19.50 per hour. A Detroit tier two UAW worker makes $15.50 per hour at Ford. After the labor deal with the UAW, the tier two wage will rise to $19.28, the same as at GM.

After 36 months at Volkswagen, the hourly wage does not only exceed the future tier two wage in Detroit. There is additional shift pay, there are quarterly performance bonuses, a choice of medical plans, and a host of other benefits. Visits to the on-site doctor are free, a gym is open 24/7. A company lease program is so attractive that half of the cars on the employee parking lot are already Volkswagens, coexisting in harmony with Detroit iron.

In July, UAW President Bob King said that organizing foreign auto plants is a matter of life and death of the union. Without a union victory in the south, “I don’t think there’s a long-term future for the UAW, I really don’t,” said King.

After touring transplant plants in the south, we predict that any forays by the UAW will get bogged down in the red mud of Dixie. If it indeed is a matter of life and death as advertised, then the UAW is dead.

Southern workers seem to be largely ambivalent towards the UAW. The management of southern transplants usually does not speak out against the UAW as openly as Honda did. It does not have to, the words and actions of the workers speak for themselves.

The few times the UAW tried to unionize a transplant factory in the south ended in a debacle.

In 2001, Nissan workers in Smyrna rejected U.A.W. representation by a 2-to-1 vote, a result branded as a “devastating defeat” by  the World Socialist Website. Back then, the New York Times called the results “no better than in the union’s failed attempt to organize the same plant in 1989.” Now, the entrance to Nissan’s U.S. HQ is guarded by grim polar bears.

The UAW can’t even count on the solidarity of its union brothers in Germany.

A little later after the life and death announcement, the UAW revealed that it had targeted Volkswagen’s Chattanooga plant, and had meetings with the German metal workers union in order to drum up support. Those meetings were not highly successful. Soon thereafter, Bernd Osterloh, head of Volkswagen’s works council who represents labor of VW’s supervisory board, told Reuters he would not actively promote efforts by the United Auto Workers to broaden its membership in Chattanooga.

Sex and money are known as the world’s biggest motivators. Volkswagen used sex to make its shop stewards cooperative. This ended in a huge scandal. Opel is using money instead. “The system is the same as formerly at Volkswagen – only without sex,” writes Germany’s Frankfurter Allgemeine Zeitung in a long article about “illegal bonus payments” to members of Opel’s works council.

Under German law, the works council, consisting of elected representatives of the employees, is a powerful institution. Without its cooperation, a company grinds to a halt. The works council has to agree to hirings and firings. In a large company, half of the board members are representatives of the employees. At Opel, Über-shop steward Klaus Franz is the deputy chairman of the supervisory board. Great is the temptation to make the works council pliant.

According to the Frankfurter Allgemeine Zeitung, works council member receive up to $2,000 monthly, in addition to their normal pay. The “normal” pay of a shop steward can rise quickly. It also can drop after a failed re-election. The bonus payment for Klaus Franz is a secret.

Opel says the system is kosher. Law professors cited by the FAZ call it a “blatant violation of the law which requires that membership in the works council must be unsalaried.” If the payments are illegal, then they may not be booked as business expenses. The matter could also have tax implications.

“Commonly, what we have here would be called bribes,” says the FAZ.

Usually, these revelations are not the works of enterprising journalists. When the VW scandal broke, it was two months before a general election. The incumbent was Gerhard Schröder, a social democrat. He had been premier of Lower Saxony before, had been a member of VW’s supervisory board. The social democrats and the unions traditionally are close. Hurt the unions, hurt the social democrats.  A few days after the first bits of the scandal became known, the New York Times wrote: “VW affair may hurt Schröder at the polls.” The unions were discredited, the social democrats lost heavily.

The current  Merkel government is still holding a grudge against GM  which had reneged on the Opel deal. The next elections won’t be until 2013.

Considering the United Auto Workers’ VEBA fund is still Chrysler’s second-largest shareholder, CEO Sergio Marchionne is taking an amazingly hard line with the union. With a GM deal long done, and Ford’s deal moving towards approval, Chrysler is the last automaker on the UAW’s to-do list… and Marchionne tells Bloomberg he’s up for a fight if necessary, saying

I sincerely hope that we don’t have to get to arbitration. But if necessary, Chrysler will go there. We and GM are completely different

Marchionne is reportedly pushing the UAW for a number of tough concessions, including a mere $3,500 signing bonus (compared to $5k at GM and a reported $6k at Ford), and the elimination of a planned 2015 cap on entry-level “Tier Two” workers (at 25%). And though both of these are tough asks, he’s using UAW boss Bob King’s concept of union internationalism as a cudgel against the UAW, playing Italian unions off their American counterparts. And as a result, he could earn Chrysler a favored place among America’s unionized autoworkers.

The key to Marchionne’s Italian strategy was to threaten Italian unions with the prospect of Fiat pulling out of its home market and retrenching in lower-cost production centers like Poland and Brazil. That agreement eventually went through, and, as Bloomberg reports

Marchionne reached three labor agreements in less than a year as part of his strategy of raising productivity at Fiat’s domestic plants. The deals at all three factories include measures to limit strikes and curtail absenteeism.

Fiat also won approval to introduce longer shifts and run plants on a six-day workweek. In addition to more hours, workers get shorter breaks and postpone lunch until their shift’s end.

The changes at Mirafiori, Fiat’s oldest plant, in January were won with a 54 percent majority and set a milestone in Italian labor relations.

And to prove how serious he is, Marchionne has even withdrawn Fiat from Confindustria, Italy’s largest business organization, over difficulties in applying those reforms uniformly across its Italian production base. Says Marchionne in his withdrawal letter

Fiat, which is engaged in the creation of a major international group with 181 plants in 30 countries, cannot afford to operate in Italy in an environment of uncertainty that is so incongruous with the conditions that exist elsewhere in the industrialized world

And, having manhandled the Italian unions, Marchionne is not only asking the UAW for tough concessions, but he’s also setting a deadline that could send negotiations into arbitration (since the UAW has a no-strike agreement with Chrysler). Which gives Berkley professor and UAW mouthpiece Harley Shaiken cause to warn Marchionne that

He’s rolling the dice

But with Marchionne approving new products, including a 5-door Alfa-Romeo MiTo, and small Fiat and Jeep SUVs, for the Mirafiori plant, he’s offering carrots as well as sticks. And the longer the UAW waits to get a deal with Chrysler, the more carrots could be distributed around the globe… which means fewer carrots for the UAW. And at this point, the UAW’s Chrysler employees can’t afford to hurt their employer, which has largely funded their benefits with its own stock. Look for Marchionne to come out of this negotiation looking like the smartest guy to ever take on the UAW.

The prospect of a Chinese auto industry growing at insane speed thanks to a booming market and resiliently low wages has long kept auto industry execs up at night, most notably inspiring Sergio Marchionne’s acquisition of Chrysler. But basic economic principles dictate that you can have a high rate of growth or low wages… but not both. Growth inevitably drives inflation, which drives up wages, which in turn slows growth. And according to a report in the Wall Street Journal [sub], that dynamic is already taking hold.

Jae-Man Noh, head of Hyundai’s joint-venture operations in China, said average manufacturing-worker wages in China—about 27,000 yuan ($4,200) a year per worker in 2009—are likely to double by 2015 from current levels.

Auto makers are expected to be affected as much as other industries by the trend, if not more, Mr. Noh said, adding that wage costs for many foreign auto manufacturers already have doubled in less than a decade. He said that a rival foreign auto maker that Hyundai has researched has seen worker wages in China rise to 49,000 yuan a year per worker in 2010, up from 24,500 yuan a year in 2003.

“We need to let go of our perception that the Chinese market is a low-cost production base,” Mr. Noh told a group of reporters at Hyundai’s office in Beijing. He didn’t offer specifics on Hyundai’s wage costs in China.

The BBC’s China editor Shirong Chen says the government has tolerated strikes at foreign-owned plants, which are obliged to respect workers’ rights, but maintains strict control at Chinese-owned factories for fear of widespread social unrest.

But for foreign firms, the protest must have seemed like “widespread unrest.” As LaborNotes documents, in an in-depth study of the strike wave

the events at Honda Nanhai triggered a chain reaction among workers in auto supply and electronics factories throughout the Pearl River Delta. According to the Guangzhou Federation of Trade Unions, more than 100 strikes occurred, of which only a small number were reported in the media. Around Toyota’s ultramodern factory in Guangzhou Nansha, eight of 14 core suppliers had labor conflicts. And action spread to other areas: workers in several electronics factories near Shanghai and at a Toyota supplier in Tianjin struck for several days.

The strike movement not only scared multinational corporations in China, it challenged the system of labor control. Typically, tacit coalitions between capitalists and local government rule over conditions inside the factories. Unions play a role in former state-owned enterprises and flagship joint ventures, but not in most private companies. Often, local governments back up violations of labor law by major investors, as has been documented in many cases for suppliers to multinationals such as Wal-Mart, Apple, and Nike.

But under conditions of rapid growth and highly modern production, the methods of control have become ineffective. Hundreds of labor conflicts occurred in the wake of the global economic crisis, affecting millions of Chinese workers in 2008 and 2009. Following the recovery, workers are seeking a voice. Workers’ wages have been falling continuously as a share of China’s national income since the 1990s, when the shift toward capitalism really took off, and the government is now officially calling for higher wages in order to raise domestic demand.

If underlying economic fundamentals have been pushing China towards wage inflation for some time, the dam broke in last summer’s wave of strikes. Now Hyundai is publicly acknowledging the reality that every foreign auto firm must face: low costs alone aren’t reason enough to be in China. But as the WSJ notes, even though the glory days of cheap Chinese labor may be over, Hyundai (and others) still have plenty of incentive to stick with their Chinese market plans.

China still offers other draws, including strong economic growth, an increasingly affluent population and a quickly growing car culture.

Plus, Hyundai’s average factory labor cost in China is still one-fifth of that in South Korea, Mr. Noh said. What concerns him most is the dramatic rate of increase, he said.

This trend is “inevitable” as the Chinese economy grows and society improves, Mr. Noh said.

Despite rising labor costs, China’s auto exports will continue to increase in part because of excess auto-production capacity in the country, he said. China’s central government will also continue to focus on automotive exports, he said.

The growth of the Chinese car market in recent years has been nothing short of freakish, and was overdue for this kind of correction. But even though costs are increasing, China’s continued growth and still-low costs relative to other manufacturing centers continue to make it an attractive target. Foreign firms just have to work a little harder than they used to, and as Chinese wages rise, workers there and around the world will only benefit from a narrowing assembly cost gap.

One of the legacy costs that GM was not able to reduce in the bailout was pension costs, a whopping $128b obligation as of the end of 2010. And though the plan is “only” underfunded by $10.8b at the end of June according to GM, Kenneth Hackel, president of CT Capital LLC (and author of two textbooks on valuing securities) recently told Bloomberg

The financial risk because of [GM's pension liability] is higher than people understand. The cold reality is if you used a conservative discount rate and you wanted to close out the plans, you would have to raise about $35 billion.

With GM’s market cap sagging into the low-$30b range (currently around $34b), the risk of pension liabilities growing larger than GM’s market capitalization is very real. And as lower interest rates and a weak stock market reduce pension fund returns, the obligations grow, in turn putting pressure on GM’s stock price. And it’s not like nobody saw this coming: a GAO report released in April 2010 issued dire warnings about the state of GM and Chrysler’s pension obligations. Now, according to the ace reporters at Reuters, GM and the UAW have hashed out a buyout deal giving workers the option of being bought out of their pensions. Which has us dying to know: what’s a UAW pension worth in cash?

Details like buyout amounts and the size of dent they’ll leave on “Fortress Balance Sheet” are not specified, as Reuters has only a negotiating letter to go on. The quote in question is posted in its entirety at the factoryrat.com forum, and reads

The parties further discussed the possibility of amending the Plan to provide additional options for certain current retirees that would help GM manage its pension risk and
benefit such retirees that voluntarily agree to participate. To this end, the parties agreed that the National Parties may mutually agree during the term of this Agreement to
amend the Plan to add retirement options for some or all existing retirees that help GM reduce the volatility and risk related to the Plan and benefit existing retirees by providing
an additional voluntary option.

But the union dissidents who leaked the letter seem to be as angry about the possibility of a voluntary buyout offer as mistrustful of any agreement that could be reached without a vote by the union membership. In the words of Greg Shotwell,

the UAW colluded with the company to amend the plan after ratification to reduce the cost for GM… GM not only underfunded the pension, GM took lump sum bonuses and retirement incentives from the pension fund. Now GM and the UAW conspire to further drain the pension by offering retirees buyouts from the pension. Assuming that buyouts would come from the pension, a mass exodus for the buyout door would further erode the pension plan’s feasibility.

LaborNotes puts the paranoia into perspective

Gary Walkowicz, a bargaining committeeperson at Ford, said workers need to look for hidden concessions or loopholes not explained in the union’s “Highlights” handout.

At GM in 2009, for example, a seemingly harmless clause said the parties “will work together…to arrive at innovative ways to staff [small car] operations.” That language was used to justify slashing wages at a Michigan small-car plant, where 40 percent of the workforce was placed on permanent second-tier wages—without a vote.

Though a voluntary buyout seems like the most innocuous option, there are clearly downsides… and by not publicizing the agreement, the UAW is fanning the flames of dissent. In response to the union’s ubiquitous “Contract Highlights” pamphlets, the factoryrat.com forum has created its own Contract Lowlights pamphlet [PDF], detailing the major grievances of mainstream UAW dissent. It can be easy to only look at a business from 40,000 feet, especially on the internet, so reading about the view from the ground level is definitely worth a few minutes of your time. Meanwhile, bailout-strengthened “Fortress Balance Sheet” and vague agreement notwithstanding, GM’s pension situation still looks to be stuck between a rock and a hard place.

Mid sized pickups allegedly were left for dead. Automotive News’ Product Editor Rick Kranz even accused Honda of “abandoning” its Ridgeline pickup. Now, the unloved segment is being resuscitated by – General Motors. And the UAW.

Says Edmunds:

“A variety of moves in the past week indicate General Motors Co. isn’t carving any headstones, after all. GM hasn’t said anything definitive lately about the fate of the midsize Chevrolet Colorado and GMC Canyon nameplates, seeing how their assembly plant in Shreveport, LA is scheduled to close in mid-2012. But GM doesn’t have to, as it’s all but said a new midsize pickup is coming. And it’ll no emerging-market leftover – it looks magnificent and will be built in the U.S.”

Edmunds thinks that a concept version of a new midsize pickup shown at the Frankfurt auto show soon ”is the trial balloon for the next-generation Colorado/Canyon in the U.S.” The source? The UAW labor contract. Edmunds writes:

“The UAW’s summary of the contract provisions said matter-of-factly that GM’s commitments to new products to be built in the U.S. include (at its Wentzville, MO, assembly plant), “full shift added and new mid-size truck program.”

Edmunds calls it a “a notable strategic gamble given the segment’s astounding sales decline.” No kidding, as the graph above vividly illustrates.

My divorce cost me some $50,000 in legal fees alone – not to mention the true price of my freedom. If I would have been an UAW worker, my employer would have picked up the legal bill. For decades, UAW workers enjoyed free legal services, courtesy of the employer funded UAW Legal Services plan. If workers agree to the labor contract hashed out with GM, they better get a divorce quick, because the legal freebies will be phased out in 2014.

Ford and Chrysler workers also better settle their domestic issues in a hurry, because “UAW President Bob King has said he expects to use the agreement reached with GM as a framework for all three companies,” reports the Detroit News.

According to the paper, the legal service program employs about 200 attorneys. Its 65 offices in 20 states handle about 160,000 cases each year.’,

A bloated management, run-away costs, declining market share, imploding volume, a sell-off of assets and investments, headquartered in Detroit – what is it? No, it’s none of the Detroit automakers. It is their former nemesis and current co-owner, the United Auto Workers.

“Two years after the wrenching restructuring of the U.S. auto industry and the bankruptcies that remade General Motors and Chrysler, the UAW is facing its own financial reckoning. America’s richest union has been living beyond its means and running down its savings, an analysis of its financial records shows. Unless King and other officials succeed with a turnaround plan still taking shape, the next financial crisis in Detroit may not be at one of the automakers but at the UAW itself.”

This is the beginning of a special report written by the best in the reporting business, by Deepa Seetharaman and her boss, Kevin Krolicki, Chief of the Detroit Bureau of Reuters, with the help of their team of combat reporters from the Detroit front-lines.

What they wrote may not have been known in public. The Detroit automakers are well aware of the perilous state of the UAW. In the run-up of the contract negotiations with the UAW this summer, one automaker did what one should do before going into battle: Assess the strength or weakness of the adversary. In-house economists of a Detroit company came back with a surprising piece of intelligence: The UAW is hollowed-out and heading for disaster.

“The UAW might have three to five years before its budget difficulties forced a financial crunch, absent changes. The “hand-grenade” math of the projection gave the union less than a five-year window of opportunity to turn things around by winning new membership at foreign-run auto plants, said the person who saw the internal forecast and asked not to be named because of its sensitivity.”

In many ways, the UAW resembles the companies it opposed for so long. The UAW is America’s richest union. One of its biggest assets is its strike fund, which stood at $763 million at the end of 2010. If push comes to shove, a union is as strong as its strike fund. The trouble is: The UAW spends more than it takes in. Increasingly, the union has to dip into the strike fund, the Reuters report says. According to government filings, the UAW liquidated $222 million of investments from 2007 to 2009 to cover the shortfall between expenses and revenue.

Mirroring the U.S. auto industry, the union has seen better days. UAW membership dropped from its peak of 1.5 million in 1979 by 75 percent to under 377,000 workers. Less than a third of the membership works at the Detroit Three.

Membership fees dropped even more. Union workers still pay dues equivalent to two hours of work a month. The two-tier pay deal, negotiated in 2007, may have helped to stop an even larger membership erosion. But the membership fee is only $30 a month now.

Mirroring the U.S. auto industry, the UAW is spending heavily to get sagging volume back up. The union needs new members even more desperately that the Detroit Three need new customers. Says Reuters:

“In 2006, UAW delegates voted to move about $110 million from the strike fund to pay for organizing. In 2010, King went back for an unprecedented double-dip in the fund and won clearance to spend up to another $160 million over four years. “

If that bet goes bust, the union squandered the bargaining power of its members. The odds are not good. “The only luck we’ve had has been bad luck,” UAW boss Bob King said last year. The UAW wants to get members at the transplants in the south. A risky gamble.  Says Reuters:

“Volkswagen AG is paying newly hired workers at its Chattanooga, Tennessee plant $14.50 per hour. That is almost exactly what a second-tier UAW worker would make in Detroit. In a sign of demand for jobs at that pay level, the Chattanooga plant had 85,000 applications for more than 2,000 jobs. VW workers have been promised $19.50 after three years on the job. That is just above the $19.28 per hour maximum that entry-level workers at GM would make over the term of the four-year contract now before workers for ratification.”

Why pay dues if they don’t buy you more?

Gary Chaison, a labor relations professor at Clark University in Worcester, Massachusetts, figures that organizing Chattanooga could cost the UAW up to $3 million, or some $1,500 per worker. It would take the union over four years to recoup its investment – if they win.

If that bet is not successful, then at some point, someone will have to bail out the UAW – again.  No thanks, no UAW deathwatch.

(A PDF version of the special report, with pictures and graphs, suitable for framing, is here.)