For generations American union labor has seen only increases in its pay and benefits. Today some union workers at General Motors and Ford command total hourly pay and benefits of upwards of $70 per hour. So it is stunning to see management in the automotive industry seeking significant cuts in union workers' hourly rates and benefit packages, cuts that would reduce the pay of some UAW members to retail industry levels.
Consider Delphi. The former GM division is now in bankruptcy and management has asked workers to take pay cuts from the current average of $27 per hour to $22 per hour in July of this year and then to $16.50 per hour in September of 2007. New hires at the country's largest auto parts supplier would start at $12 per hour. Management also is seeking early retirement for almost half of its 34,000 workers.
Bargaining stalled after manage-ment's proposal was unveiled. The UAW considers Delphi management's request "ludicrous" and says a "62% pay cut is insulting." As UAW President Ron Gettelfinger said in late April, "If Delphi is serious about restarting discussions, taking that insulting proposal off the table would be a good place to start."
Delphi management says such cuts are the only way the company can compete in today's global marketplace. They may seem ridiculous to the UAW and its members, but the pressure is on GM and Ford to halt their declining share of the U.S. car market. Toyota is almost certain to overtake GM in a year or less as the world's largest auto producer. And right around the production corner is China, which experts predict will have a sedan in American showrooms within a year for less than $10,000.
This is all new to American unions and their members. Never in living memory has the economic road been anything but up, up, up. GM and Ford and industry suppliers like Delphi are contracting as fast as possible to fit what managers now see as their permanently reduced share of the market.
Seems odd, doesn't it? Rather than trying to fight for more, these companies have decided to settle for less. What that says to me is executives at these two huge, long-time players in the American car market believe millions of American buyers are lost for good.
True, the American automakers are over-burdened with high labor costs, particularly medical costs for present and retired employees. Also true is the fact that the Japanese producers in the domestic market don't have such high burdens.
All of this means the two American car companies and their suppliers are under tremendous pressure to reduce all costs, including labor. Thus the buyouts, increases in premiums for work-ers' health programs, and the extraordinary requests on the part of Delphi management to reduce hourly rates to the level of retail workers.
What we may be seeing here is one more example of the pressure of the global economy on all costs in manufacturing. This is untested territory. Union labor is facing its first major step backward in terms of pay and benefits. There may be more ahead. One final question: should there be a similar pay move in the management ranks?
Should there be a similar pay move in the management ranks?