honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Sunday, April 5, 2009

Obama showing auto workers tough love

By John Lippert and Keith Naughton
Bloomberg News Service

CHICAGO — President Obama, confronting growing public outrage against bailouts, is taking a hard line with the United Auto Workers, the union that supported his election and whose future now hangs in the balance.

The UAW, once a pre-eminent U.S. labor organization, is in retreat along with U.S. automakers. It is a quarter the size it was at its peak of 1.5 million members in 1979, when its political clout helped Chrysler Corp. get a then-unprecedented $1.2 billion federal bailout.

Now Obama is pushing the union, which already has given up job-security programs and some compensation, to take more concessions within 60 days or General Motors Corp. could face bankruptcy. His auto task force warned the cost of GM's pensions and retiree healthcare will "grow to unsustainable levels."

"The president is showing labor a little tough love," said David Cole, chairman of the Center of Automotive Research in Ann Arbor, Mich. "He took away the idea from labor that 'Barack will take care of us, no matter what.'"

Instead, Obama, facing growing public resentment over bailouts, is putting the same pressure on the UAW as he is on GM's bondholders.

A March 23 survey by auto researcher R.L. Polk & Co. found 62 percent of Americans oppose additional government aid for GM and Chrysler LLC. In 1980, Chrysler Corp., as it was known then, was granted more than $1 billion in loan guarantees and paid back the loans in 1983.

"He has no choice but to be equally tough on labor and the bondholders," Cole said. "He's put them both in a cage with the government and said if they don't come up with a deal in 60 days, he'll let the lions in," referring to bankruptcy.

In Chapter 11, a judge could tear up labor contracts with benefits the UAW has built over 73 years.

The pre-arranged bankruptcy the president is said to expect could be used to protect the union, said labor professor Gary Chaison of Clark University in Worcester, Mass.

"Obama will use his influence to protect workers in the way the collective bargaining agreement is rewritten," he said.

At Ford Motor Co., which is not seeking federal aid, the union on March 9 accepted concessions that put labor costs on a path toward parity with Japanese rival Toyota Motor Corp. UAW members once enjoyed wages and benefits that pushed labor costs to $74 an hour. Ford said its new deal brings its labor costs down to $50 an hour by 2011, slightly more than Toyota's $48.

Obama indicated he wants more labor cuts — without giving targets — from GM and Chrysler, which has 30 days to complete an alliance with Italy's Fiat SpA or lose its U.S. government support. GM has received $13.4 billion in aid compared with $4 billion for Chrysler, and the two are seeking as much as $21.6 billion more.

The administration has raised the prospect of putting GM through a so-called quick rinse bankruptcy of as few as 30 days if there aren't more givebacks from labor, lenders and dealers.

The UAW's role in the auto bailout had been seen as pivotal. There are 132,600 active members at GM, Ford and Chrysler. With another 550,000 retirees and surviving spouses, the union has more influence with Obama than the automakers, said Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor. Spokesmen for GM, Ford and Chrysler would not comment.

"We cannot have a strong middle class without a strong labor movement," Obama told an AFL-CIO conference March 3. Unions spent $52 million to help elect Obama, including $5 million from the UAW, according to www.OpenSecrets.org, a Washington-based organization that tracks campaign spending.

On Monday, Obama took a tougher tone in putting the onus on the UAW and the companies to justify further taxpayer support.

"What we are asking is difficult," he said in a speech in the White House. "It will require hard choices by companies. It will require unions and workers who have already made painful concessions to make even more. Only then can we ask American taxpayers who have already put up so much of their hard-earned money to once more invest in a revitalized auto industry."

UAW officials remain supportive of the president. They view his tough talk and bankruptcy threats as posturing to put more pressure on the bondholders to forgive debts, said a person familiar with the view of UAW leadership.

"There's light-years of improvement in terms of Washington's understanding of the importance of manufacturing," compared with the Bush administration, UAW Vice President Bob King said in a March 18 interview. "There is still a problem of discrimination against the blue-collar worker versus the white-collar worker."

Obama, a self-professed friend to labor, has subordinated the interests of the UAW and GM to those of the taxpayer. The future of each institution depends on them meeting the president's new list of difficult demands.

"If Obama gives Detroit the money, the UAW will still have a heartbeat," said McAlinden, a former UAW member. "If he doesn't, he'll bring down the curtain on industrial unionism."