UAW to Hold Talks With Ford, GM

[BuddyP]

http://biz.yahoo.com/ap/070723/auto_talks.html?.v=2

UAW to Hold Talks With Ford, GM

Monday July 23, 8:03 am ET

By Tom Krisher, AP Auto Writer

Ford, General Motors Hope to Reduce Labor Costs Through Talks With United Auto Workers

DETROIT (AP) -- Ford Motor Co. and General Motors Corp. have more at stake than usual as they begin their traditional talks with United Auto Workers: cutting labor costs may be key to their survival.

The traditional handshake ceremonies with the union were to begin Monday with GM in Detroit and Ford in Dearborn, although talks already have been under way for months. The union formally opened negotiations with Chrysler Group on Friday, and the national contracts with all three expire Sept. 14.

The three automakers lost a combined $15 billion in 2006 and are in the midst of shrinking themselves and rolling out new vehicles to better compete with Japanese companies. Industry analysts have said reducing labor costs is critical.

Ford is in the worst shape of the three, having mortgaged its factories to set up a $23.4 billion line of credit to cover losses and pay operating expenses while it restructures. Ford lost $12.6 billion last year and $282 million in the first quarter of this year, and it doesn't expect to make money again until 2009.

Analysts say Ford likely will seek deeper concessions than the other two automakers, perhaps including temporary wage cuts.

All three say the talks need to bring them into labor cost parity with Japanese automakers, who make about $2,000 per car more in profits.

The Detroit automakers say their hourly labor costs are about $25 more than those of Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. when health care, pension, retiree and other costs are factored in.

The Detroit automakers all have the same problems, said Laurie Harbour-Felax, managing director at Stout Risius Ross Inc., who has done detailed studies of auto manufacturing costs.

"Ford is probably not as well-positioned as GM today ... but they still have the same issues around health care that are crippling them," Harbour-Felax said.

All three must deal with rising health care costs and the "jobs bank," in which companies pay workers most of their salaries when their assembly lines aren't running. She said her studies have shown that the three automakers pay $1,200 to $1,500 per car in health care costs, far more than the Japanese automakers.

The UAW, however, has said that labor costs represent only 10 percent of the price of a new vehicle.

President Ron Gettelfinger said after talks opened with Chrysler that the jobs bank isn't an issue, because so many workers have left the companies under early retirement and buyout deals negotiated with the union.

Harbour-Felax said she agrees with the union that companies must do more to cut costs and become more efficient. All three automakers have said they are moving toward leaner manufacturing and engineering techniques and use of the same architecture globally on multiple models.

[ellives]

"... including temporary wage cuts."

Are they kidding? The UAW is in no position to negotiate or dictate anything. The big 3 should be dictating the terms - no if's, and's or but's. Don't like it? There's the door --->

Come back and see us when you've unionized Toyota.

Edited July 23, 2007 by ellives

[bowtie_dude]

I hope GM takes the UAW to the cleaners.

[red]

The results of these discussions will have a major impact on the future success of the American automakers. I think all of us are hoping that serious concessions are made on behalf of the UAW. Looking forward to good results (optimistically)...

[hyperv6]

I would expect the Delphi pact to be a pattern of what we will see.

Also look to the Goodyear tire strike as the possiblilty of a trust being created to fund future health benifits and relieve the companys of this obligation. The USW chose this for their workers and Goodyear was very happy with the results even after a long strike.

Both the UAW and Auto comapnies have studied it and right now I think both agree to look at it but they still need to agree on how much to fund it. For Goodyear it was over a Billion dollars.

The UAW knows if they don't work this out GM is in a place they could easily make their cars elsewhere and import them. The plants in the states are not a requirement anymore, nicew to have but not required it too expensive to run. Canada, Mexico, Korea, Brazil, Europe, China and Austrailia could all supply the NA market if needed.

Wall Street know how the cars are stack and already list Ford and GM stock overweight [this is good] because they expect big concessions will be worked out.

[Ergoman]

The UAW is not going to roll over and play dead. The Union Leadership understands the economic situation the three domestic manufactures are in. The Union also understands that it is in their best interest to get an agreement with the domestics that keeps them financially sound. However, the reality is the biggest cost difference between them and the imports is in the legacy cost. i.e. the number of retires they have and the medical benefits they have agreed to cover. The Union is not going to let the companies disregard their obligations to those who gave years of service to them. The medical cost issue is one of national importance and won’t be settled here. However, this country, not just the auto industry will not be able compete on the world stage as long as we refuse to address the medical crises in this country.

As far as the contract is concerned, we all expect to see changes come. I would guess that the Jobs Bank will change but probably still exist in some form. I would not be surprised to see current UAW members with a co-pay on more of their medical coverage. You might even see some of the drugs taken of the covered list completely (Viagra??) I believe the UAW skilled trades are in for a rough time. I don’t expect to see wholesale concessions from the Union

ED

[gm4life]

GM needs the Union if they want workers to build their cars and trucks tho. Let em' strike, don't build any cars for a few months. They'll need a job eventually. But don't hire them with the Union.

Edited July 24, 2007 by gm4life

[ellives]

GM needs the Union if they want workers to build their cars and trucks tho. Let em' strike, don't build any cars for a few months. They'll need a job eventually.

Not really. Toyota and Honda get by just fine without a union.

[gm4life]

What I am saying is... Don't come to an agreement. The ball is back in the Unions Court... In the mean time before the contract is up build a ton of early '08 models ship 'em out to lots. Then let the Union strike in b/c they can't find an agreement. Those Union boys will want a job back someday. Hire them back no Union no bull$h! and pay them a fair wage for what they do.

Might sound silly but this what might have to happen. Once the Union is gone trust me many not all of the problems for GM will be gone. This must happen if they can't match and pay no more than the folks working in Toyota, Honda or Nissan plants.

Edited July 24, 2007 by gm4life

[ellives]

The UAW is not going to roll over and play dead. The Union Leadership understands the economic situation the three domestic manufactures are in. The Union also understands that it is in their best interest to get an agreement with the domestics that keeps them financially sound. However, the reality is the biggest cost difference between them and the imports is in the legacy cost. i.e. the number of retires they have and the medical benefits they have agreed to cover. The Union is not going to let the companies disregard their obligations to those who gave years of service to them. The medical cost issue is one of national importance and won’t be settled here. However, this country, not just the auto industry will not be able compete on the world stage as long as we refuse to address the medical crises in this country.

As far as the contract is concerned, we all expect to see changes come. I would guess that the Jobs Bank will change but probably still exist in some form. I would not be surprised to see current UAW members with a co-pay on more of their medical coverage. You might even see some of the drugs taken of the covered list completely (Viagra??) I believe the UAW skilled trades are in for a rough time. I don’t expect to see wholesale concessions from the Union

ED

Keep in mind the Union is at least 50% responsible for the "medical benefits they have AGREED to cover." I love that phrase. It's more union spin trying to shed any blame for the current situation. That words "agreed" and "obligation" I see all the time. Again, the implication is that it's GM's fault for agreeing to the terms of the contract when they had no choice. So now when things are ugly, it's a lot of "they" stuff but when the contract is being negotiated it's all about "we." Well guess what? It's "we" still, and I *do* expect wholesale concessions. In fact I expect the Big 3 to go for the UAW jugular. I am not expecting "parity" with the imports. I'm expecting a competitive labor advantage. This will have to come from somewhere. In fact I'm hoping the negotiations go badly, and GM shifts all their manufacturing elsewhere. It may be the only way they'll be able to survive the current predicament. The only other real option is to file for bankrupcy and use it to get itself out from under the mountain of financial burdens it is currently forced to carry. I'd rather see this than a "death of a thousand cuts" which is what they're doing right now. It's going to take some real balls to get through the next few years and a vision to get them there. I hope they can do it. The Toyota juggernaut doesn't seem to be slowing down or even taking a breather any time soon.

[GXT]

How many hours of labour does it take to build a car?

I recall another thread that talked about how GM was within minutes of Toyota's assembly time at certain plants. As I recall, it was less than two hours to assemble a car. I also believe it was less than an hour to assemble the engine.

So what does it take? 10 hours? If so, taking the $25/hour difference given by management including "health care, pension, retiree and other costs" that is $250 more per vehicle. How does that compare to 0% financing and $4,000+ rebates that are being offered on many models? Even if it takes 20 hours to build, the $500 seems trivial next to the incentives that the domestics are offering to make up for management's horrible execution.

e.g. Honda builds an Odyssey and sells it for $28K. Dodge builds a $28K Caravan for $250-$500(?) extra labour and then offers $4K off. And the labour cost is the problem?

I'd love to see a complete side-by-side breakdown of the costs instead of these random "$25/hour" and "1,200 - 1,500 more in health care costs" numbers.

Edited July 24, 2007 by GXT

[ellives]

How many hours of labour does it take to build a car?

I recall another thread that talked about how GM was within minutes of Toyota's assembly time at certain plants. As I recall, it was less than two hours to assemble a car. I also believe it was less than an hour to assemble the engine.

So what does it take? 10 hours? If so, taking the $25/hour difference given by management including "health care, pension, retiree and other costs" that is $250 more per vehicle. How does that compare to 0% financing and $4,000+ rebates that are being offered on many models? Even if it takes 20 hours to build, the $500 seems trivial next to the incentives that the domestics are offering to make up for management's horrible execution.

e.g. Honda builds an Odyssey and sells it for $28K. Dodge builds a $28K Caravan for $250-$500(?) extra labour and then offers $4K off. And the labour cost is the problem?

I'd love to see a complete side-by-side breakdown of the costs instead of these random "$25/hour" and "1,200 - 1,500 more in health care costs" numbers.

I'd get away from the comparison of 0% financing and $4K rebate numbers to cost numbers. Your trying to compare BS salesman numbers to hard costs. You can give $10K in rebate if you just bump the sticker price up. Not very helpful.

The problem with "being within minutes" in certain plants is this is not overall efficiency. In the overall efficiency numbers Toyota dominates. The resolution to this is to get rid of inefficient plants or make them more efficient by investing in them. GM doesn't have the cash to invest in plants to make them almost as efficient as Toyota. They need to be MORE efficient to gain anything back. I just detest this mentality of being "almost as good as" or "competitive." Even Mark LaNeve did it recently during an interview. When are they going to get it? They need to be somehow better to entice a buyer to plunk down their money on a GM product. No one is going to do it when the salesman says, "it's almost as good as a Toyota." If you tell me that I'm going to ask why shouldn't I just buy a Toyota?

[CaddyXLR-V]

How many hours of labour does it take to build a car?

I recall another thread that talked about how GM was within minutes of Toyota's assembly time at certain plants. As I recall, it was less than two hours to assemble a car. I also believe it was less than an hour to assemble the engine.

So what does it take? 10 hours? If so, taking the $25/hour difference given by management including "health care, pension, retiree and other costs" that is $250 more per vehicle. How does that compare to 0% financing and $4,000+ rebates that are being offered on many models? Even if it takes 20 hours to build, the $500 seems trivial next to the incentives that the domestics are offering to make up for management's horrible execution.

e.g. Honda builds an Odyssey and sells it for $28K. Dodge builds a $28K Caravan for $250-$500(?) extra labour and then offers $4K off. And the labour cost is the problem?

I'd love to see a complete side-by-side breakdown of the costs instead of these random "$25/hour" and "1,200 - 1,500 more in health care costs" numbers.

You seem very selective in what you choose to compare. Do you forget about GM NEEDING to keep plants running, because they will have to pay the same costs whether they are pumping out cars or not? Do you forget about GM's $6 billion per year fixed medical cost? Or how about that GM has like 8 times more workers than Toyota in the US, but they can't lay them off because they would still have to pay them 75% of their salary through the jobs bank?

What good does it do GM to build cars faster when the price is the same either way?

[gm4life]

Fire all the unionized people. Take it in the shorts for a while. Hire people back AND don't let a Union in. Those people that got canned need another job right?

[GXT]

You seem very selective in what you choose to compare. Do you forget about GM NEEDING to keep plants running, because they will have to pay the same costs whether they are pumping out cars or not? Do you forget about GM's $6 billion per year fixed medical cost? Or how about that GM has like 8 times more workers than Toyota in the US, but they can't lay them off because they would still have to pay them 75% of their salary through the jobs bank?

That is one of the reason I would like to see a side by side break down instead of these anecdotal numbers.

The $25/hour difference includes "health care, pension, retiree and other costs", which should cover the "GM's $6 billion per year fixed medical cost". At least that is what is implied.

I would agree that the idle workers and job banks are an issue. They should be the focus of the cuts.

What good does it do GM to build cars faster when the price is the same either way?

I agree. But the price problem is management's fault. And the price problem seems to outweigh the labour cost issues. I am trying to relate the $25/hour wage difference to an actual cost per vehicle. In comparison to the rebates, it seems paltry. However we don't seem to have enough information.

[GXT]

I'd get away from the comparison of 0% financing and $4K rebate numbers to cost numbers. Your trying to compare BS salesman numbers to hard costs. You can give $10K in rebate if you just bump the sticker price up. Not very helpful.

Fair enough on the rebate amounts (but the 0% financing is, at least at some level, real money lost). Let me put it this way instead. Whether GM is selling a car they are making a 1K profit or 3K profit on, the labour costs are relatively the same. It sounds like if they could charge another 0.5 - 1K per vehicle they would make up this <massive> difference that seems to have paralyzed them. It was management's decisions that put GM in this place where the Honda's/Toyota's/etc. seem able to charge that premium and more (at least it wasn't the hourly workers' fault).

"Cheap interiors? Our costs would go down a couple hundred per car? Let's do it!"

[ellives]

[...snipped...]

I would agree that the idle workers and job banks are an issue. They should be the focus of the cuts.

I agree. But the price problem is management's fault. And the price problem seems to outweigh the labour cost issues. I am trying to relate the $25/hour wage difference to an actual cost per vehicle. In comparison to the rebates, it seems paltry. However we don't seem to have enough information.

We don't need any more information. It's none of our business as consumers unless we happen to be stock holders. This is part of the problem with being a public company and trying to fight a union. Too much information is public knowledge and the union will use the numbers to their favor. GM should do what Walmart does only in reverse. When one of Walmart's stores in Canada went union, Walmart closed it down. *POOF* GM should drive a program to de-unionize their plants and when the vote happens, if it's not in GM's favor they should close the plant. Why prolong the agony?

[biff]

GM, Ford, and Chrysler are going to have to take one in the shorts for a while and bust the unions or die a slow death on the way to bankruptcy. I wish they would have addressed this when the Asian competition wasn't as much of a threat. Now they have to deal with another media black eye when the country is already brainwashed into thinking that Toyota and Honda are invincible.

Where I work recently dealt with a USW strike. They had a chance to kill the union because large dealer inventory and production ramp up before the strike in a depressed market. They decided to offer basically the same contract they already had and not bust the union. I hope the domestics can make a similar move, except with a better outcome.

[haypops]

interesting article that discusses domestics future

The above article refers to GM and Toyota as the big two going forward.

Everyone's discussion brings two questions to mind.

1. Job banks -- Doesn't GM's massive buyouts of workers negate job banks as much of an issue for either management or the unions?

2. If the UAW is the problem why is Toyota able to make a profit using UAW workers producing what must be one of Toyota's lowest profit margin vehicles (Corolla) out of an old factory in an expensive area with one of the worst reputations in labor relations in all of GM?

[ellives]

Fair enough on the rebate amounts (but the 0% financing is, at least at some level, real money lost). Let me put it this way instead. Whether GM is selling a car they are making a 1K profit or 3K profit on, the labour costs are relatively the same. It sounds like if they could charge another 0.5 - 1K per vehicle they would make up this <massive> difference that seems to have paralyzed them. It was management's decisions that put GM in this place where the Honda's/Toyota's/etc. seem able to charge that premium and more (at least it wasn't the hourly workers' fault).

"Cheap interiors? Our costs would go down a couple hundred per car? Let's do it!"

People do what they have to do to get the product out, figuring the solution will be over the horizon. Management can be blamed for a lot of things and probably should however I wonder how many are still there. Senior management tends to move around a lot. If they haven't, they should and a good purge would probably help. In the end management is ALWAYS at fault since they're steering the ship. The problem with continuing to harp on the cause of the problem is that it's not helpful in finding a solution. The problem in front of GM is their costs are crippling them. The CURRENT management MUST do something to change the direction of the Company and this means cutting costs somehow. They can't cut their way to prosperity - nobody can.

[gm4life]

interesting article that discusses domestics future

The above article refers to GM and Toyota as the big two going forward.

Everyone's discussion brings two questions to mind.

1. Job banks -- Doesn't GM's massive buyouts of workers negate job banks as much of an issue for either management or the unions?

2. If the UAW is the problem why is Toyota able to make a profit using UAW workers producing what must be one of Toyota's lowest profit margin vehicles (Corolla) out of an old factory in an expensive area with one of the worst reputations in labor relations in all of GM?

How was Toyota able to do that with the Corolla, luck and keep in my mind if it is setup right and fair a Union can survive, but then if it right and fair you don't need a Union. Like the Generals union they have been sucking them for everything they can. They should realize the more the ask for outta GM the less cars they will make and the less jobs they will have. Cause and Effect. They are at the tail of the chain, morons.

Edited July 24, 2007 by gm4life

[ellives]

interesting article that discusses domestics future

2. If the UAW is the problem why is Toyota able to make a profit using UAW workers producing what must be one of Toyota's lowest profit margin vehicles (Corolla) out of an old factory in an expensive area with one of the worst reputations in labor relations in all of GM?

How about sharing the source of this information?

[biff]

2. If the UAW is the problem why is Toyota able to make a profit using UAW workers producing what must be one of Toyota's lowest profit margin vehicles (Corolla) out of an old factory in an expensive area with one of the worst reputations in labor relations in all of GM?

It's only ONE plant. They have many other plants and a big business to spread out the overhead. Irellevent question.

Edited July 24, 2007 by biff

[CaddyXLR-V]

Fair enough on the rebate amounts (but the 0% financing is, at least at some level, real money lost). Let me put it this way instead. Whether GM is selling a car they are making a 1K profit or 3K profit on, the labour costs are relatively the same. It sounds like if they could charge another 0.5 - 1K per vehicle they would make up this <massive> difference that seems to have paralyzed them. It was management's decisions that put GM in this place where the Honda's/Toyota's/etc. seem able to charge that premium and more (at least it wasn't the hourly workers' fault).

"Cheap interiors? Our costs would go down a couple hundred per car? Let's do it!"

The Japanese companies give rebates, but in a different form. They can sell X car with $2000 more equipment(Nav, bluetooth, etc) for the same price as a GM car, and still make more money on it. For GM to do that, they would have to price it out of the market to make a profit. They can't keep the prices the same, because the average consumer is going to take the product with more equipment.

[ellives]

The Japanese companies give rebates, but in a different form. They can sell X car with $2000 more equipment(Nav, bluetooth, etc) for the same price as a GM car, and still make more money on it. For GM to do that, they would have to price it out of the market to make a profit. They can't keep the prices the same, because the average consumer is going to take the product with more equipment.

.... or lower price for the SAME equipment.

[ellives]

It's only ONE plant. They have many other plants and a big business to spread out the overhead. Irellevent question.

I don't agree it's not relevant. It may not be the complete answer but it's certainly relevant and symptomatic of the overall issue the big 3 struggle with... how to regain profitability in the face of daunting financial obligations. Think of it terms of the real estate market... if you bought a house for $300K when the market was high and the market value of the house is now $225 and you owed $250K on the mortgage, you'd give serious consideration to walking away from the house and letting the bank foreclose on it.

[haypops]

It's only ONE plant. They have many other plants and a big business to spread out the overhead. Irellevent question.

It may be just one plant now, but it wasn't that long ago that it was THE North American plant. In no way is this an irrelevant question.

[biff]

Ok, maybe not irrelevant. But, Toyota doesn't face daunting financial obligations at any other plant and could spread the costs. Fight the union at their ONE plant and they get a media black eye. Their margins aren't as large at that plant but they still have large volume needed to profit. If people quit buying Corolla's and Matrix's then I'd expect a change.

[haypops]

How about sharing the source of this information?

1. The Corolla must be a low profit vehicle. Transaction price for reasonably equipped CE is $11800, the upscale LE is just a thousand more. This is exactly the class of car that supposedly can't be produced here at a profit.

2. expensive area: The lowest price home that I could find in Fremont is2 bedroom, 786 sq ft home for $449,888. Surrounding communities are even more expensive. The area has notorious electricity rates, etc.

3. Poor labor relations prior to Toyota taking the plant over? I have read this several times but have no link. It is not an unreasonable assumption though.

[CaddyXLR-V]

interesting article that discusses domestics future

The above article refers to GM and Toyota as the big two going forward.

Everyone's discussion brings two questions to mind.

1. Job banks -- Doesn't GM's massive buyouts of workers negate job banks as much of an issue for either management or the unions?

2. If the UAW is the problem why is Toyota able to make a profit using UAW workers producing what must be one of Toyota's lowest profit margin vehicles (Corolla) out of an old factory in an expensive area with one of the worst reputations in labor relations in all of GM?

This is one plant. It is completely different to look at the overall company, compared to 1 plant. GM has enough workers to build probably double the amount of cars they sell, but is not allowed to cut workers. Due to modernization, less workers are needed to build the same number of cars. The plant doesn't have to pay for 2 retirees per every 1 active worker. The massive buyouts, cost GM massive amounts of money, that could have better spend building better cars.

The union prohibits efficiency. Why modernize plants to where one worker can do the job of 10, when you still have to pay for 10 workers? Why build cars faster, when it costs the same either way? Why does GM sell so many cars to rental agencies, and why did GM have to resort to big incentives? Because GM has to pay for the workers whether they are making cars or not. That's just a recipe for disaster.

[The O.C.]

interesting article that discusses domestics future

2. If the UAW is the problem why is Toyota able to make a profit using UAW workers producing what must be one of Toyota's lowest profit margin vehicles (Corolla) out of an old factory in an expensive area with one of the worst reputations in labor relations in all of GM?

Hmmmmm......do you think it might have something to do with the mindset of a bunch of factory workers that live in a thriving metropolitan area such as the Bay Area nearby one of the world's greatest cities (San Francisco?) As opposed to the "rust-belt" "blue-collar" "old-guard-Detroit Big 3" "sedintary" mind-set of workers from the Midwest?

Also.....is the mindset different because they are working for Toyota....not GM?