Analysis: VEBA, The UAW And The Warren Walkout

The 12-person protest that took place at Chrysler’s Warren, Michgan truck plant got little notice in the automotive news cycle, save for a couple of mentions on the usual aggregators. In truth, it’s not the juiciest story to sell in this click-driven wasteland, though these stories tend to raise the most interesting questions. This example highlights an issue that is going to dog the UAW for some time – how will the UAW control their workers when they are also the owners?

For the sake of context, let’s recap the story. 12 workers decided to protest a recently implemented schedule at the Warren plant, which is building the 2013 Ram 1500. As the Detroit News explains it

The new system — which has already sparked controversy at other Chrysler factories in Michigan — would split the workforce into three shifts, each working four 10-hour days a week. Those shifts would be staggered over six days, meaning that many workers would have to work Saturdays.

Saturdays, of course, means time-and-a-half pay. If you believe the Detroit News, then the rank-and-file are unhappy about the move and are determined to fight it. But the UAW is distancing itself from the protest, noting that the move to the current schedule was first approved a decade ago.

The protest coincided with a report by the Detroit News, citing leaked internal documents that show rampant quality problems with the new Ram 1500, a crucial product for Chrysler that is enjoying a lot of momentum in a very competitive segment.

During the first hour of production Thursday, workers at the Warren truck plant built 58 pickups. But only 16 of those vehicles passed final inspection, according to company documents. Quality improved as the day went on, but just over half of the trucks assembled by the first shift were approved for shipment. A company source told The News that number should be at least 78 percent and higher than that to meet the plant’s quality goals.

Wednesday’s numbers were similar, and many employees were ordered to stay late to repair the defective vehicles, according to the source. But the number of problem pickups in the plant’s lots continued to grow. Though nearly 200 vehicles were repaired overnight, there were still 1,078 trucks parked outside the plant Thursday morning that could not be shipped because of defects, according to a company document.

The same report made sure to preface that “…morale problems sparked by the new shift schedule are only making these problems worse…”, adding another barb to a series that is uncharacteristically critical considering that the Detroit News is the hometown paper for Chrysler.

It would be tempting to ascribe more sinister motives to nefarious factions within Chrysler, the UAW or both, but the reality is that the issues plaguing Warren are really just a perfect storm of bad circumstances. On a base level, human are notoriously bad with change. Having chatted with former union members in domestic auto plants, it’s evident that these sorts of shift changes are often presented in a manner that glosses over the ugly details so that the union bigwigs can get the measure approved. When it comes time for the changes to be implemented, the rank-and-file are inevitably unhappy (though our source notes that the blame cuts both ways; caveat emptor and all that).

So, take a bunch of disgruntled workers adapting to a new shift schedule and throw in a new model launch. What did you expect? Workers and management singing kumbaya around the camp fire? It’s hard to think of a bigger recipie for disaster, save for having Bob King ride into Chattanooga on an organizing drive while piloting a Chinese-built Wrangler with a Romney/Ryan bumper sticker. Combining the shift change with a new model launch and production ramp-up may have been a poorly judged move, but in all likelihood, the defect rate will settle down in a month or two.

Meanwhile, the UAW, through the VEBA health benefits organization, currently owns roughly 41 percent of Chrysler. While Fiat is currently attempting to buy the remaining stake from the VEBA, the retiree health benefits of the union members are largely dependent on auto maker stock as well as the overall financial health of the companies. The two parties are currently locked in tough negotiations over the remaining stake, but this is likely too far removed from quality defects at one plant to have any effect on potential stock prices or the respective bargaining position of either side. What is in the mutual self-interest of both parties is the continued success of Chrysler’s auto sales – and with Ram and Jeep being the two pillars holding Chrysler up right now, the UAW knows which side their bread is butter on.