"It's a Global Game Now"

By Alexander L Taylor III

With an eye to Japan, the U.A.W. and Detroit start serious bargaining

For almost five years, members of the United Auto Workers have given up wage gains and made other sacrifices to help U.S. carmakers survive. Now, mindful of Detroit's record profits and the fat bonuses that auto executives have been paying themselves, U.A.W. leaders are entering the final lap of perhaps the most crucial contract talks in the union's 49-year history. If a new three-year agreement is not reached before the old one expires at midnight on Sept. 14, as many as 465,000 autoworkers may walk out in a strike that could deeply wound the industry's recent prosperity. Says General Motors Vice President Alfred Warren: "The pace is going to have to pick up now. There's not much time left."

Adding to the tension and complexity of the negotiations are continuing fears of Japanese competition. The current U.S. auto boom would not be as robust without so-called voluntary restraints that limit the number of high-quality, attractively priced Japanese autos that Americans can buy. Industry leaders are intent on holding down labor costs to keep their cars competitive with the imports. Says GM Chairman Roger Smith: "Back in the '40s and '50s, the concerns were GM vs. Ford and vs. Chrysler. What happens here now affects GM vs. Toyota, vs. Volkswagen, and vs. everyone else." Ford Chairman Philip Caldwell puts it differently but the message is the same: "It's a global game now. At the end of the day we all have to be competitive. If anyone gets out of line, you have to pay the piper."

But as the pace of the talks quickened last week, the two sides remained far apart. GM and Ford delivered initial proposals that made scant reference to either guaranteed job security or wage hikes, two key worker issues. Complained Stephen Yokich, the U.A.W. chief Ford bargainer: "We're not playing in the same ballpark." In response, the U.A.W. executive board declared both GM and Ford to be potential strike targets, holding open the option of later zeroing in on one firm if bargaining strategy so dictated. Pulling workers off the assembly lines at even a single company could prove costly; when the U.A.W. did so in 1970, it had to mortgage its international headquarters building and lay off 100 staff workers because the strike fund was exhausted.

The union is also taking its case to the public, to argue that it is fighting to save American jobs. Last week it launched a unique $2 million television-advertising campaign in 24 cities. One spot shows a Pontiac Sunbird convertible on a Brooklyn dock, where crates of auto parts from Korea, Japan, Brazil and Mexico are piled so high that they eventually hide the car. Says the narrator: "At the United Auto Workers we know America's future depends on American jobs."

At the heart of the negotiations are basic questions about the survival of both the U.A.W. and the U.S. auto industry. Can Detroit begin to bring its labor costs into line so that it can continue making most of its cars in America and still compete with the rest of the world's automakers? And can the U.A.W. protect the jobs and purchasing power of its members without further eroding the domestic manufacturing capability of their employers? In recent weeks, U.A.W. President Owen Bieber, 54, has been warning his members, "This year is going to be one of the toughest, most complex set of negotiations in the history of our union."

Traditionally a trend setter, the auto talks are now being watched more closely than ever. The U.A.W. contract, which covers 350,000 GM and 115,000 Ford workers (Chrysler's contract, affecting 60,000 employees, does not expire until Oct. 15,1985), could signal a new willingness by workers to consider the long-range health of an industry. "This is a landmark event," says Al Nelson, an auto analyst for the Wall Street firm of Becker Paribas. "What happens in Detroit sets a pattern for other industries and rubs off on important boardroom decisions."

The U.A.W. is negotiating from a peculiar combination of strength and weakness. On the one hand, the U.S. auto industry has never been more prosperous. Profits this year are expected to approach a record $11 billion. In addition, factories are currently working two shifts a day plus Saturdays, and inventories are low. At the end of July, the stocks of cars on hand represented only a 47-day supply at current selling rates vs. 60 days normally. Should the union decide to call a strike, the effect on sales would be felt quickly.

On the other hand, the boom-time atmosphere in Detroit is fragile. Only quotas that restrict imports from Japan to 1.85 million cars a year have kept Toyota, Nissan and the other Japanese manufacturers from grabbing more than their present 21% share of the U.S. market. The Japanese are also a serious problem for the U.A.W. Besides slicing the demand for American autos, their success has led U.S. carmakers to move production overseas where labor is cheaper. This year GM is importing 19,000 subcompacts made by Japan's Suzuki and marketed as the Chevrolet Sprint. At $5,139, the car is a brisk seller in the West. Eventually, GM wants to import 100,000 Sprints annually, as well as 200,000 other compacts made by Isuzu of Japan plus 80,000 vehicles from GM's Korean partner, Daewoo. Ford, which is building a plant in Mexico with Japan's Mazda, is also holding talks with Korean manufacturers, as is Chrysler.

Such moves represent a kind of creeping obsolescence for the U.A.W. Observes Bieber: "U.S. companies are planning to move virtually all of their small-car production to foreign countries. If they do, we're going to lose roughly 500,000 jobs in the next two to five years," including 342,000 among parts suppliers. The union has already seen its total membership fall 20% over the past five years. That decline reflects both the recession and heavy company investments in robots and other labor-saving equipment.

At the bargaining table, the U.A.W. is taking an aggressive stance on job protection. It wants the auto companies to promise that they will limit their purchases of new cars and parts from foreign sources. Furthermore, it wants the right to review the companies' strategic plans and future investment decisions, and is pushing to extend a ban on plant closings that was negotiated in 1982.

The U.A.W. also wants a wage increase, a richer profit-sharing formula and more generous pensions. But moderation on pay issues has so far been the order of the day. The union's own polls show that 40% of Americans believe that autoworkers are already paid more than enough. The average GM worker made $25,000 last year, 35% more than the typical manufacturing employee.

On an international scale, the disparity is even greater. The hourly cost of a U.S. autoworker, including benefits, is almost $23, compared with an estimated $12 in Japan, $2 to $2.50 in Korea, and just $3 to $5 per day in Mexico. Yet, the union is not embarrassed by such comparisons. Citing former U.A.W. President Walter Reuther's axiom that nations paying bicycle wages have bicycle economies, union leaders argue that U.S. auto-industry productivity has increased 143% since 1957, almost three times as fast as labor costs.

In their initial proposals last week, both GM and Ford ignored union demands for higher hourly wages. Instead, GM offered a three-year package worth perhaps $8,000. It includes lump-sum cash payments of $900 that are not part of base salaries, bigger profit-sharing payouts, and cost of living increases. Ford merely reminded workers that they will get an average of $1,600 in profit-sharing this year, compared with $440 in 1983.

The task of U.A.W. negotiators is not made easier by the presence of a vocal minority of members who have adopted the slogan "Restore plus more in '84." Bieber, soft-spoken as union leaders go and a compromise choice for president in 1983, may have a difficult time getting the dissidents to follow his line.

Even without their prompting, many workers remain angry about the $3.5 billion in concessions that the U.A.W. granted to GM and Ford in 1982, as well as the $262 million in bonuses that executives received last year while hourly employees were working under the hardship contract. "I think most people feel they're being taken advantage of," says Roger Lyons, who works at the GM truck-assembly plant in Pontiac, Mich. "They took away from us and gave it to themselves." Don Douglas, co-chairman of the Restore Plus More Committee and president of U.A.W. Local 594 in Pontiac, says the militants have the power to block ratification of any contract. Says he: "We're going to be a factor in this. I guarantee you that."

Such tough talk notwithstanding, neither side wants what could be a long and costly strike. Says Philip Fricke, a veteran Goldman Sachs auto analyst: "Everybody loses in a strike--the companies, the workers and, above all, the consumers." Still, the U.A.W. has amassed a record strike fund of $564 million that could support picketing workers for several months. And auto-industry tradition argues against the prospect of a peaceful settlement. Out of the past eight contract negotiations stretching back to 1961, only two have ended without a walkout.

--By Alexander L Taylor III. Reported by Paul A. Witteman/Detroit

With reporting by Paul A. Witteman