UAW, GM Showdown on Jefferson Street?

Detroit November 22, 2005; USA Today reported that the United Auto Workers union faces a tough dilemma in its next contract negotiations with General Motors (GM), which officially begin in summer 2007, though some say they started Monday when GM said it would lay off 30,000 workers.

The union, angry and demoralized by the job cuts, will need to focus on preserving the jobs and benefits that still exist. That could mean it will be less likely to strike GM, says Harley Shaiken, a professor at the University of California-Berkeley.

Union members "want to see a successful company, but they want a successful company that can sustain middle-class jobs," he says. "It's going to be a tough challenge."

For its part, GM needs to convince UAW members that the job cuts are in their best interest. And the automaker needs to do that quickly if it's going to get the $7 billion in savings it hopes to achieve by the end of next year.

At GM - and Ford Motor and Chrysler Group - names of laid-off workers go onto a jobs-bank waiting list while the workers continue receiving the bulk of their salaries. If the UAW refuses to agree to early retirements and buyouts, GM could be faced with paying many of the 30,000 workers to sit around until the contract ends.

Technically, GM can't close a plant without the union's permission, which is why the automaker's press release announcing the job cuts said the company will "cease operations" at the affected facilities.

Once the contract expires on Sept. 14, 2007, GM can close any plant and terminate any worker it wants.

By announcing the job cuts before getting public support from the union, GM could be headed for a showdown with the UAW, said Brian Johnson, an analyst at Sanford C. Bernstein, in a research note. If the union won't agree to an early-retirement plan, GM could be saddled with a jobs bank that costs $1.1 billion by the end of next year, he said.

"It is possible that GM could release the idled workers without severance when the contract expires in 2007 - provoking a labor war and potentially bankruptcy if an extended strike were to occur at that time," he said.

Over the years, the UAW has seen its membership decline as jobs were lost and the union failed to organize at Asian car plants opening in the USA.

That makes Monday's GM announcement an even bigger blow to the union. The cuts are akin to closing a company bigger than Nissan's U.S. operations.

The union also needs to brace for more battles. Ford Motor CEO Bill Ford said Tuesday that his company will announce job cuts and plant closings in January.

"We're a 102-year-old company, and a lot of structure has grown up around that," the CEO said. "In today's global environment, we know that structure won't serve us going forward."