#Jobs

One of the many defining differences between this year’s contract negotiations between the Detroit automakers and the UAW is a new possible concession on the table: boardroom representation for the union. Inspired by the German system of works councils and union representation on supervisory boards, UAW President Bob King told Bloomberg that

If I had a magic wand, I’d take the German law and put it in the U.S… Workers should have representation on the board

But, in a thoughtful editorial, the Detroit News’s Daniel Howes warns that board representation may be more of a challenge to the union than a benefit. Howes notes

The UAW’s pursuit of board-room seats, to the extent it becomes a key demand in this post-implosion bargaining season, is fraught with potential complications. Among them is the cultural misperception that what is deeply embedded in Germany’s corporate reality is easily transferrable to 21st-century industrial America.

With the Detroit Free Press reporting that combined Q2 profits for the Detroit automakers could hit $4b, the quadrennial negotiations with the UAW which opened today with a meeting between Chrysler and the union could be a tough slog. And because the profit outlook is mixed, with GM and Chrysler likely to improve profitability and Ford likely to see a drop in net takings, the long-standing tradition of “pattern bargaining” could come to an end. Ford currently pays about a dollar more per hour than GM and about $2 per hour more than Chrysler (which is partially owned by the UAW’s VEBA trust fund), and Ford also shoulders more of workers’ health care costs than its cross-town rivals. And UAW president Bob King admits

Being really blunt about it, when you don’t represent the overwhelming majority of an industry, which we don’t any more, then you can’t do pattern bargaining

Already unfairly disadvantaged by the UAW (Ford is the only Detroit-based automaker without a no-strike contract) and facing falling profitability, Ford is telling the union not to expect wage increases. But does that mean the union’s only choice is to bring GM and Chrysler up to Ford’s pay and benefit levels?

After spending much of this year not producing vehicles, Saab is anxious to get to work on its 11,000 vehicle backlog of orders, and production was supposed to start on August 9 after workers return from Summer vacation. But a Saab press release reveals that the troubles aren’t over, with short term financing and supplier agreements still to hammer out, and that production won’t resume until August 29 at the earliest. Gunnar Brunius, Vice President of Production and Purchasing explains:

I am positive about the progress we made on the payment terms with our suppliers and it is good to see that we all want to make it work. What we need now is a full commitment on supply of parts into our factory to be able to restart production and secure a stable manufacturing operation. We are now working hard with our suppliers to nail down these plans, commit to a delivery schedule and start building the close to 11,000 cars that we currently have in our order books. The industry-wide summer break at our suppliers caused certain key suppliers not to be able to supply us in time. Saab Automobile hopes to restart production earliest in week 35 provided that it is able to commit to a delivery schedule with its suppliers.

But wait, there is some good news! Saab’s Communications Manager Eric Geers tells GP.se

I can promise one hundred percent to the salaries paid next week. Where the money comes from is not important, the main thing is that we pay [emphasis added]

That kind of sums up the whole Saab situation nicely, doesn’t it?

It was quite a coincidence when, just last week, Audi restated its interest in US production facilities on the same day that the UAW announced it was in talks to possibly organize VW’s new Chattanooga plant. At the time we noted that

With Audi execs insisting on the need for more US production capacity, a UAW win in a Volkswagen vote could have serious implications for the firm’s future expansion.

Turns out, it didn’t even have to come to a vote. Just over a week after CEO Rupert Stadler insisted that “It is totally clear that we need new production capacity in the U.S,” Audi has suddenly decided that things look nicer in union-free Mexico. Automotive News [sub] reports that Stadler wants a new Mexican plant to build the Q5 SUV, but notes that

it was still unclear if Stadler would have his way in the face of opposition from some of Volkswagen’s top managers, who wanted Audi to make use of the new VW plant in Chattanooga, Tennessee.

Did the UAW’s sudden announcement that it was in talks with VW’s global works council about organizing Chattanooga have anything to do with the decision? AN [sub] won’t say, but the timing can’t be ignored. Audi’s US production may just have been the first victim of the UAW’s transplant organization campaign.

After the UAW threatened to start 2011 with a bang by going after foreign-owned “transplant” factories and accusing uncooperative firms of human rights violations, the union’s campaign suddenly went quiet earlier this year. With the union’s fate apparently hanging in the balance, all we’d heard was a polite “no thanks” from Honda and a more subtle message from Hyundai, and little else. Was the war still on, we wondered? UAW boss Bob King tells Reuters that yes, it definitely is… sort of.

To our pleasant surprise a lot of companies have agreed to confidential discussions with us. What they’ll lead to, I don’t know. Some days I’m worried, some days I’m frustrated. Are we putting too much hope into these discussions? I don’t know, but we’re continuing them and we feel like we’re making some progress

And that’s not all…

Last week I wondered aloud about where the UAW stands on fuel economy, inspired by the union’s apparent flip-flopping between supporting the companies that employ its workers and backing its environmental allies on the left with talk of its commitment to green jobs. And after expressing concern about proposed CAFE increases, it seems the UAW is flopping back towards the environmentalist side of the equation, joining the so-called “Blue-Green Coalition” of labor leaders and environmental groups in expressing its vague support for “strong” emissions standards in a letter to President Obama [ PDF]. But with CAFE negotiations coming down to within 5 MPG or so of a final “number” for the 2052 standard, the letter’s lack of commitment means it’s still not clear where the UAW comes down in the policy debate. So instead of highlighting the union’s commitment to the environment, the letter ends up serving as a window into the UAW’s cynical, yet self-deluding side.

Every time Sergio Marchionne makes the headlines, I half expect him to announce that he is not merely a mild-mannered accountant with a fondness for frump, but a mighty superhero, born to rescue failing automakers and the American and Italian ways of life. Having scored a sizable stake a bankruptcy-rinsed Chrysler for no money down, Marchionne has been ruling his Italian and American empires with resolute authority… and 50 direct reports. But Automotive News [sub] isn’t reporting that Marchionne spends his spare time in tights and a cape fighting Russian bandits and Italian labor unions… the word is that Sergio Marchionne is ready to delegate some authority. According to AN’s sources, Marchionne’s plans includes three basic planks:

• Create four regions — Europe, North America, Latin America and Asia-Pacific — each with a regional boss.
• Require brand bosses, who are powerful in the current organization, to work closely with the new regional bosses.
• Establish a new layer of management, tentatively dubbed the steering committee, that would help run Fiat and Chrysler.

But is this new structure really going to end what AN terms “the one-man Sergio show,” a routine of 18-hour days and “catching catnaps on the plane as he flies constantly between Turin and Detroit”? Will it really “help overworked Chrysler executives catch their breath and adopt a saner work rhythm,” as AN puts it? That question remains to be answered…

Chrysler Auto Workers in Trenton Caught Smoking and Drinking During Lunch Breaks: MyFoxDETROIT.com

Every time Chrysler workers get busted for drinking and smoking pot during their lunch breaks, we tend to get one of two reactions from the B&B: either the lunchtime partying is emblematic of the entitlement of all union workers, or it happens at every plant in the US but Chrysler just got unlucky enough to get caught. But this is the third scandal since last September involving Chrysler workers consuming drugs and alcohol on camera ( twice at Jefferson North, now in Trenton), and (as far as I can tell) no other company has suffered similar embarrassment.

So I want the convenient generalizations put aside for a moment: clearly this is not a union problem or an American worker problem or even an auto workers-in-general problem… at this point it’s a Chrysler problem. But why? Does Chrysler have lower morale, worse union locals, insufficient training and accountability, or is the media simply targeting it? Someone’s got to get to the bottom of this before Chrysler becomes a complete laughing stock… so let’s hear your (constructive) thoughts. Oh, and ideas for actually fixing the problem (Chrysler has already announced suspensions) probably wouldn’t hurt either.

When Fiat and the US government collaborated to bail out and restructure Chrysler, many hailed the news as nothing less than the rescue of the American auto industry. Though Fiat CEO Sergio Marchionne became CEO of the Auburn Hills-based automaker, he maintained much of its management corps on the strength of brief interviews, only relieving a few key members of the old guard. But the debate over whether the rapidly-aligning Fiat-Chrysler is more Fiat or Chrysler is going to be resolved “pretty quickly” according to Marchionne, as Bloomberg reports that a unified management structure is in the works.

Marchionne is working on management changes as he steps up the integration of the two companies. He plans to merge the carmakers to reduce costs and achieve a target of more than 100 billion euros ($140 billion) in combined revenue by 2014. The executive said in May that the timing of a merger hasn’t been decided yet, adding that a combination isn’t likely this year.

But just as there was furor in Italy when Marchionne suggested that the unified Fiat-Chrysler could be headquartered in Detroit, the unified management structure could be yet another source of controversy. It will, after all, be the most direct signal yet as to whether Fiat-Chrysler is an Italian firm with global operations, an Italian-American alliance or a truly global firm. For one thing, unified management should force Marchionne to commit to a single headquarters for the group, reviving a controversy he temporarily cooled by fatuously suggesting there be four Fiat-Chrysler “headquarters,” in Turin, Detroit, Brasil and “Asia.” Having masterfully finessed the PR messaging transition from “rescue of an American automaker” to “wholly owned subsidiary” thus far, a unified management could bring up a lot of unresolved issues. In short, it’s a branding challenge that makes the Chrysler-Lancia transformation look like child’s play…

The United Auto Workers have proven that they’ll come out in support of greenhouse gas regulation when they think it’s in their interests, but what happens now that the union-built green-car future isn’t turning out to be the jobs-loaded utopia they predicted? With CAFE standards of 56.2 MPG by 2025 being proposed, the union has a choice to make: back the government that saved it or the automakers it’s currently negotiating with for jobs? Unless, of course, there’s some kind of principle here…

Saab has reached a deal to sell 50.1% of its real estate holdings to a consortium led by Hemfosa Fastigheter AB, for about $40m, and has also received an order for $18.4m worth of vehicles from an unnamed Chinese firm according to AN [sub], giving the dead-alive Swedish firm the faintest, cruelest glimmer of hope. The real estate deal was for about a third less than the property had previously been valued at, and still needs to be approved by the Swedish Debt Office, the EIB and GM. Meanwhile, the real struggle is ongoing, as a Saab spokesperson tells Reuters that

Today’s news takes us a good way in the right direction, but it is the agreement (with suppliers) that matters and only then will we be able to communicate a date when we can restart production

But suppliers aren’t even the first in line for Saab’s much-needed cash injection: that goes to workers who are promising to take the company into bankruptcy if they aren’t paid soon. These two recent deals should be enough to pay worker salaries through July, but if suppliers aren’t brought back as well to restart production, the bulk sale and an earlier order from PangDa will never be filled. And those suppliers are currently mulling over an offer of ten percent of what they are owed until the Chinese inject more cash later in the year… not the greatest deal ever. Meanwhile, Saab says

There are other initiatives still being pursued. There is not much we can say about that until we have something concrete to communicate

Like what? What could there possibly be to communicate?

Japanese automakers are gearing up in earnest to make up for production lost after the March 11 tsunami. Across the island nation, there are new signs of resurgence. They read “we hire” (or Japanese words to that effect.) Automakers are hiring thousands of contract workers that had been let go after the financial crisis.

It’s not difficult to understand why the UAW has never contemplated agreeing to a wage rate tied to the profitability of its employer firms: simply put, it’s been a long time since big profits were the norm among the union-represented Detroit automakers. But now that Motown is back in the black and handing out record profit-sharing checks, it looks like the UAW could finally tie its own fate to that of the automakers… on certain conditions. UAW boss Bob King tells The WSJ [sub]

It would be an advantage if you can guarantee to the [Detroit] companies certain things on fixed costs so that they would remain competitive. When you’re successful, that’s good. But if you’re sharing more of the risk, you need to have more of the upside

UAW Boss Bob King spoke to Detroit Regional Chamber’s Mackinac Policy Conference about what he calls “The 21st Century Union,” arguing that “the union has changed and we challenge business to change with us.” But while King talks cooperation and mutual benefit, his union is preparing for what promises to be a tough fight with the automakers to create a new contract that deals with the shop floor poison of the two-tier system, securing union representation on automaker boards, and rolling back union concessions without sending automakers back towards bankruptcy. Kings words are worth listening to and considering, but the upcoming contract negotiations will be the ultimate measure of the UAW’s professed changes.

Though the auto bailout is being widely defended in the political realm as a jobs-saving measure, the industry sees the rescue’s value in precisely the opposite light, as industry and supplier execs rate “capacity rationalization” as the most positive effect of the bailout. And, reports Automotive News [sub], Ford and GM could still end up cutting as many as six more plants over the next few years as questions linger about volume recovery in the larger market. Of the three GM plants likely to be shut down, the former Saturn plant at Spring Hill, TN, is the most likely to survive as it includes a paint shop, a small engine plant and associated parts manufacturing facilities. In contrast, analysts note that GM’s Janesville, WI, plant is the firm’s oldest and is therefore far less likely to survive, and its Shreveport, LA, compact truck plant is part of “Old GM” and will likely be liquidated. Similarly, Ford’s Ranger plant in Minnesota, as well as its Avon, OH Econoline plant and its Flat Rock, MI Mustang plant could face shutdowns. Ranger is running out of production, Econoline has been losing share to Ford’s more-efficient Transit Connect, and Mustang has been losing market share to Camaro while facing a Mazda pullout from the Flat Rock plant.

Because GM is adding jobs at other plants, the net job loss from its three likely shutdowns (two of which are currently idle) could be relatively low, but then cost savings aren’t likely to match those accrued by past shutdowns either. Ford, meanwhile, is facing a bit more disruption if Mazda pulls out of Flat Rock, but could accrue more savings than GM as only the Ranger plant is scheduled to lose its production. In any case, the UAW will have to weigh its desire to keep plants open with its desire to mitigate the inequity of the two-tier wage system… as well as its desire to gain board seats. All of which could make the UAW’s upcoming bargaining session (not to mention the political debate about the auto bailout) much more interesting…