LABOR'S FUTURE REALITY: Recent peacemaking with the auto industry is a positive step, but Big Labor still must justify its very existence in the future global economy

While Gov. Jennifer Granholm and challenger Dick DeVos trade barbs and blame, a major part of the wrenching transformation of Michigan’s auto industry is being largely overlooked: The role played by organized labor.

Time was when the mildest term available to describe relations between the United Auto Workers union and the Big Three was “confrontational.” Bargaining sessions were “collective” in form, but not substance. In recent decades, there were few outright walkouts, other than a costly 1998 strike against two General Motors parts factories in Flint.

But morale in the plants was sullen and both labor and management barely tolerated each other. Neither side recognized or was willing to recognize how closely their interests were tied together.

How different things are today!

For half a century, the auto manufacturers and the UAW were linked together in a business model that is now broken beyond repair. It is obsolete for reasons both of high and fixed labor costs, but also because of a legacy of poor product and bad management decisions.

As the industry shrinks, the easy – and suicidal – thing for the UAW to have done would have been to wish a plague on management, dig in its heels and watch the auto industry implode around it. Thanks to far-sighted leadership, nothing like that has happened . . . so far.

Negotiated health care and pension cost reductions and a buyout for 35,000 hourly UAW employees have brought General Motors back from the brink of bankruptcy. Ford Motor Co., which may be in even worse shape, last month offered an expanded buyout program to all of its 75,000 hourly workers. Meanwhile, the Chrysler half of DaimlerChrysler, having cut production schedules by 10 percent, is asking the UAW for health care cost concessions similar to those granted the other domestic manufacturers.

Delphi Corp., which went into Chapter 11 bankruptcy almost exactly a year ago, announced last week that 13,800 UAW-represented workers, more than half its pre-bankrupt labor force of 24,000, have taken early retirement of a buyout. The casualty lists in Delphi’s Michigan operations are even more sobering: Nearly 75 percent of its 6,700 employees signed up to leave.

Not surprisingly, topsiders in both management and labor are nervous. Most workers are in the process of recognizing that a way of life they have enjoyed for years is coming to an end. But there have been no strikes, very little combative posturing. Today, there is mostly clear-eyed recognition that both labor and management are in this hole together.

Both sides now realize they’re going to have to work together if they have any hope of getting out. Without any doubt, bargaining to reach a national master contract will be tough next year. But I’d be now be astonished if it blew up in everybody’s faces. And it has to be admitted that organized labor deserves a big piece of the credit.

That’s the case, regardless of whether the UAW really recognizes how profoundly competition in the auto industry has changed.

That will still be true, even if the union secretly believes that is has agreed to shrink for now in order to survive and fight another day.

Half a century ago, I watched the legendary UAW President, Walter Reuther speak. It was in a big Ford local union hall. The floor was scuffed brown linoleum, the ghostly blue fluorescent lights were buzzing. But Reuther, red hair blazing, brought the crowd to its feet as he talked about social justice. He portrayed the union as the great engine of social progress.

But that was then; this is now.

The UAW and some of the other auto-related unions deserve praise and respect for the way they have behaved during what could have been – and still could be – a catastrophic restructuring of the auto industry.

But let’s assume the domestic auto industry comes out the other side, smaller to be certain but far more efficient, cost effective and productive. The big question that needs to be asked now is what value added will organized labor contribute to the re-invention of American manufacturing?

Conventional labor macroeconomic models suggest that unions bring economic benefits to their members through monopolizing the supply of labor by negotiating contracts that require employers to hire union members. That was perfectly true in 1956. But in today’s globalizing economy, that simply isn’t enough. Organized labor is going to have to figure out what its members can bring to the table to contribute value to any enterprise.

Perhaps the UAW could supply and provide a pool of skilled journeyman workers, the way the building trades have done through their apprenticeship programs. It could find ways to encourage its members to go to community college and qualify for employment on the line at engine plants like the joint Ford-Mazda Auto Alliance plant in Flat Rock.

For labor as well as management, getting through 2007 will be tough enough. But the far harder question over the long run is going to be how labor can contribute to the added value that all employers are going to have to stress if they have any hope of competing in the world economy.

Organized labor has to answer that, if it is to survive.

Phil Power is a longtime observer of politics, economics and education issues in Michigan. He would be pleased to hear from readers at ppower@hcnnet.com. These opinions and others expressed in Phil Power’s columns are individual opinions and do not in any way represent official policy positions of the Center For Michigan.