In the Cross Hairs UAW Contract

By Staff Report

Dec. 1, 2008

Before voting on aid to ailing automakers, Republicans in the Senate will take aim at the United Auto Workers and some benefits that many Americans find excessive.

Sen. Kit Bond, R-Missouri, a moderate hoping to help Detroit, told Automotive News the UAW will have to join auto executives in making sacrifices. Likely to be targeted by Bond and other Republicans is the Jobs Bank—the UAW equivalent, in the public’s mind, of corporate jets.

“Management, workers and investors are going to have to make sacrifices if they truly want to turn around their companies enough to earn taxpayer help,” Bond told Automotive News last week in an e-mail.

The Jobs Bank requires the Detroit Three to pay nearly full wages to hourly workers who have been laid off. Although the number of workers in the Jobs Bank has dwindled, the concept has become a powerful symbol of U.S. auto industry excess.

General Motors is likely to propose its elimination, says a source familiar with the company’s thinking.

Last week Bond did not spell out precisely which concessions he expects from the UAW. But during the congressional debates, many GOP lawmakers singled out the Jobs Bank as a wasteful Detroit Three practice.

The UAW was notably missing from a list of stakeholders that congressional Democrats expect to make sacrifices in return for emergency loans. Those sacrifices were detailed in a November 21 letter from Senate Majority Leader Harry Reid, D-Nevada, and House Speaker Nancy Pelosi, D-California.

Republicans seem certain to address that oversight in a Thursday, December 4, Senate hearing. The House is scheduled to discuss the bailout Friday, December 5.

The Bush administration supports Bond’s bill, which is co-sponsored by Sen. Carl Levin, D-Michigan. Administration officials said last week that the companies’ viability plans must address “labor, management and legacy costs.”

Democrats control both houses of Congress, but Senate Republicans could block an aid bill with a filibuster. Bond and other Republican Senate moderates—some of whom already have endorsed Bond’s bill—seem certain to be crucial “swing” votes.

And during hearings last month, Republican senators asserted that union givebacks are fundamental to any Detroit Three aid plan.

“The enormous costs in union-required benefits are unsustainable,” said Sen. Elizabeth Dole, R-North Carolina. “Renegotiating these contracts would be essential if there were to be hope of keeping these companies afloat.”

Added Sen. Robert Bennett, R-Utah: “Hourly workers are going to have to have their contracts renegotiated, and some of them are going to lose their jobs.”

Bank shot
The Jobs Bank costs the Detroit Three automakers $478 million a year, estimates Mark Perry, an economics professor at the University of Michigan-Flint. Even if that program is eliminated, the union may be asked to accept additional concessions to fulfill Congress’ notion of shared sacrifice.

Himanshu Patel, an auto industry analyst with JPMorgan, calculated the concessions necessary for General Motors to break even at an annual industry sales rate of 13 million vehicles.

Patel assumed that financial concessions would be split evenly between GM’s unions and creditors. With that in mind, he concluded that average wage-and-benefit costs would have to drop from $60 an hour to $44.

On November 10, GM chief executive Rick Wagoner told Automotive News that he was not inclined to reopen the company’s labor contract. Last week, company spokesman Greg Martin said GM’s plan would reflect “shared sacrifice,” but he declined to comment on labor provisions.

The union did not respond to a request for comment.

‘Only game in town’
Democrats have a 50-49 advantage in the Senate, counting two independents who generally vote with Democrats. Sixty votes are needed to avert a Senate filibuster and pass controversial measures.

Bond told Automotive News that his aid proposal is “the only plan that has a chance to be signed into law.” It would convert a pool of $25 billion already approved for factories to retool for fuel-efficient vehicles into emergency loans for the Detroit Three. The compromise would replenish the retooling program later.

In addition to Bond and Levin, the bill is co-sponsored by Democrats Debbie Stabenow of Michigan, Sherrod Brown of Ohio and Robert Casey Jr. of Pennsylvania, as well as Republicans George Voinovich of Ohio and Arlen Specter of Pennsylvania. Voinovich calls the measure “the only game in town,” an aide told Automotive News last week.

A senior congressional staffer close to the issue predicted the bill would get more than 60 Senate votes. The bill could come to a vote as early as next week.

Democratic congressional leaders object to a diversion of the retooling money. Instead, they want to carve out $25 billion in loans to the Detroit Three out of the $700 billion bailout fund for financial institutions. The Bush administration rejects that approach.

The Senate Banking Committee and the House Financial Services Committee have scheduled hearings this week on the Detroit Three plans. If Congress accepts the plans, lawmakers would consider aid legislation next week.

Filed by Harry Stoffer of Automotive News, a sister publication of Workforce Management. Jamie LaReau contributed to this report. To comment, e-mail editors@workforce com.

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