United Auto Workers, Detroit Carmakers Begin Labor Talks in Tough Economic Climate

DETROIT John Porretto writing for the AP reported that national contract talks between the United Auto Workers and Detroit automakers are expected to begin with handshakes and smiles, but pressure for profits and market share could make negotiations less than congenial.

The UAW and Detroit's Big Three -- General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group -- will spend several weeks after the launch of talks Wednesday hammering out contracts covering wages and benefits for more than 300,000 hourly workers.

The current contracts, negotiated in 1999, expire Sept. 14.

Observers say a strike is unlikely, but talks are expected to be difficult given an industry landscape that includes increasing competition from foreign automakers, unprecedented levels of profit-eroding incentives and rising health care costs.

Union leaders have said they're confident the parties can reach an equitable agreement, but they also have made clear they're not prepared to make concessions on health care benefits and wages.

Meantime, the auto companies are under intense pressure from Wall Street and investors to trim expenses and boost profitability.

"If you look back in history, there have been times when one side or the other has said, `Here's an absolute. We're not going to budge,'" said John Revitte, a professor at Michigan State University's School of Labor and Industrial Relations.

"The union might hold firm on health care," Revitte said. "But there will be some give and take in other areas to make up for it."

UAW president Ron Gettelfinger has said the union's bargaining priorities include preserving, if not enhancing, gains made in previous contracts. The 1999 pacts included 3 percent annual pay hikes, a ban on plant closings and nearly cost-free health care.

But that deal was negotiated in much more lucrative times for automakers. To understand how business has changed in the past few years, look no further than the combined bottom lines at the Big Three in 1999 ($18.3 billion) compared with last year ($1.3 billion).

"If the union is looking for business as usual this time around, they're not going to get it," said David Healy, an analyst with Burnham Securities Inc.

Once negotiations start, no issue looms larger than health care.

GM, Ford and Chrysler have repeatedly said rising health care tabs represent one of their biggest cost disadvantages as they try to compete with foreign automakers, whose comparable U.S. obligations are minuscule.

Last year, GM, the world's largest automaker, spent $4.5 billion on medical care for 1.2 million U.S. employees, retirees and dependents.

Ford chief financial officer Allan Gilmour said recently the automaker spent $2.8 billion last year on health care costs -- more than it spent on steel for cars and trucks.

Some benefits experts say health care expenses will grow by double-digit margins in the next few years if nothing is done.

Gettelfinger insists the UAW will not budge from its position of not accepting more of the financial burden for workers and retirees. "We're not going to pick up premiums, we're not going to pick up copays, we're not going to pick up deductibles," he said last month.