2008 December 14 Sunday
2007 Delphi UAW Agreement Shows What UAW Fears

Why is UAW President Gettelfinger claiming that Republican Senators are in league with foreign car companies to break the UAW? A June 2007 agreement between the United Auto Workers union and Delphi during Delphi's bankruptcy gives an insight into what the UAW is afraid of and why the UAW wants the US Congress to loan money to Chrysler and General Motors. Delphi UAW worker salaries went down by almost a third because bankruptcy gave Delphi leverage to renegotiate with the UAW.

The historic restructuring of the American auto industry cleared another major hurdle Friday with the announcement of a deal covering wage cuts and factory closures between bankrupt Delphi Corp. and the United Auto Workers.

The tentative agreement includes a payout of $105,000 over three years that will be offered to about 4,000 of Delphi's 17,000 UAW workers. In return, the workers' pay will be cut from about $27 an hour to a maximum of $18.50 an hour by Oct. 1.

There's a lot more at stake between the Big Three and the UAW aside from hourly wage rates. Retirement benefits and payment for not working during slow periods are both areas where the UAW doesn't want to give up anything.

If GM and Chrysler do not enter bankruptcy and if the US Congress does not force the UAW to make concessions then high UAW wages and benefits will continue until the Big Three burn thru the US Treasury loans that they and the UAW want them to get.

The Big Three need to get their costs down with a big shaving on their bonds (basically mark down the face values and perhaps exchange some of the debt for equity) and also with big labor union concessions on wages, benefits, and hourly rates. The UAW turned down the Republican Senate offer precisely in order to avoid making any concessions. If the Obama Administration lets them get away with this then the effect will be to delay the bankruptcies, not avoid them.

Share |      By Randall Parker at 2008 December 14 06:54 PM  Economics Labor


Comments
bpjam said at December 14, 2008 8:51 PM:

Bush is a complete mystery. For a guy with an MBA and who believes himself to be a conservative, why would he prevent the free market from working and these Big Three from being forced into the bankrupcties that they so earnestly deserve to allow them to get rid of the junk they have contractually tied themselves down with over the last forty years? Who is Bush helping here? House GOP members aren't for this and neither are Senate GOPers. Only the libs and their union taskmasters want the free-ride package passed.

Either the UAW lets the automakers run their own companies or they should just offer to take over the companies themselves and buy out the shareholder and bondholders.

If that doesn't happen, these companies are doomed and these workers are going to be toast. There is no 'other' way this can work out. We cannot subsidize their existence forever at these inflated levels of compensation. But we could afford to pay them too much for a lot longer if we could gut the stupid restrictions that the UAW has imposed on the automakers in their contracts having nothing to do with workers safety or compensation.

Ned said at December 15, 2008 6:48 AM:

bpjam -

You are correct. Bush II is a mystery. He has sold out the conservative cause and just about destroyed the GOP. Why?

The UAW has spent over $10 million in political donations in recent years, mostly trying to defeat Republican candidates. Now the Republicans won't support their raid on the US Treasury. Well boo-freakin-hoo. What a surprise! Who'da thunk it?

Dan said at December 16, 2008 9:50 AM:

The UAW leadership made the right decision for its membership.
.In negotiating one never takes the first offer on the table always holdout for as long as possible, usually the later deal is the better., If not one can always take the first offer. The UAW knows it will have to make concessions, but also knows it will get a better deal later . the "wage diferential" arguement is specious anyway. Most of it is canceled outby exchange rates which strongly favor the EURO, when you add in the siuthern state subsides the difference is negible. Im sure the UAW despite public posturing knows it will have to make concessions eventually but for now is just holding out for a better deal which is a good strategy.


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