On the UAW and Delphi/GM deal

After two years of rangling, name calling and threats, UAW, Delphi and GM reached a tentative restructuring deal, subject to union member voting and bankruptcy court approval. Here are the details that have been released:

According to paperwork obtained by the AP that the union provided to its members to explain the agreement, the deal would provide three annual payments of $35,000 each to UAW workers who previously had worked at a higher wage at GM before the 1999 Delphi spin-off. It was unclear how many of the 4,000 so-called "legacy workers" would get the payments because skilled trade wages were preserved.

Under the agreement, the legacy workers who are not skilled tradesmen would see their hourly wages cut from around $27 to between $14.50 and $18.50. During the buydown period, those workers also could try to return to GM.

Other incentives include:

• A $140,000 buyout for workers with more than 10 years of service and a $70,000 buyout for those with the company for less than 10 years.
• A $35,000 payment to encourage workers with at least 30 years of service to retire.
• Retirement benefits for workers age 50 and above with at least 10 years of service.
• A program for workers with at least 26 years of service that allows them to stop working but be paid as active workers at the lower rates until they reach 30 years of service and retire.

It always sucks when unions have to take cuts in pay and jobs in negotiations, but the deck was stacked against the UAW negotiators from the start. Look at this scenario:

Refuse to settle and Delphi asks the court to void the contract. Void the contract and the UAW calls a strike. Strike Delphi and you damage the sugar daddy named GM. Without GM, who would honor the financial commitments to the remaining union members or those who've since retired in good faith?

Fact is, Delphi had come in asking for $9 an hour for production workers. UAW got $14.50-$18.50, plus compensation of $105,000 over three years for those who take the pay cuts and had been there prior to 1999. In addition, they helped keep open three extra plants Delphi had planned to close.

Anecdotal evidence early on indicated that UAW workers were mostly happy with the deal:

Even with the concessions, many workers said they were pleased with the way union leaders handled the deal.
"This shows the union still has power and that it still protects its workers," said 20-year Flint East worker Tammy Scofield.
"It would have been a lot worse if it was decided in bankruptcy court," she said.

There's worry that this deal will set a path for other automotive-labor deals, indicating wage cuts and layoffs are inevitable and must be accepted:

But industry observers said the Delphi deal signals that others in Detroit can reach agreements with the union that cut costs, enhance productivity and leave the industry on better footing to compete with Asia-based rivals such as Toyota Motor Corp. That is especially important because Detroit's traditional Big Three kick off labor talks with the UAW in late July.

First of all, this is a special situation: Delphi is in bankruptcy court, and GM has taken larger losses than anyone. Second, this deal is better than anything UAW was expected to get.

But more importantly, that specific paragraph from the Journal highlights a major problem I have with the way this process is being played out. The big three automakers may have less profitability because of worker pay and benefits, but they aren't less competitive than Asian carmakers because of employee commitments. That comes down to a simply inferior product.

After concentrating on huge, gas guzzling SUVs and trucks, fuel efficient Asian cars are in high demand thanks to oil prices and environmentally conscientious consumers. No cut to workers' pay or benefits will all of a sudden start making their inferior product sell better. So in five years, when they still haven't caught up with those carmakers, will unions be forced to bare the brunt of the crappy business decisions made by the suits in charge of the Big Three?

And now the Big Three are wailing over higher CAFE standards, saying it will cost them billions. Was this factored into the new contracts? Will workers have to bear the brunt of those costs, as well?

All in all, it's tough to negotiate with a dinosaur. Despite sacrifices and some members' misgivings, UAW did the best they could. And it's looking like members voted to approve it in elections ending tonight. Full results tomorrow