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Auto industry update.

Auto industry update

There were several major occurrences in the automobile industry in the early months of 1988, led by clashes between Chrysler Corp. and the United Automobile Workers (UAW) over cuts in operations that did not bode well for their contract bargaining later inthe year. In contrast, the bargaining relationship between the UAW and Ford Motor Co. was enhanced when the employees received a sizable profit-sharing distribution.

The controversy at Chrysler erupted when the company announced plans to close its assembly and stamping operations in Kenosha, WI, and later announced plans to sell its Acustar, Inc. parts-making subsidiary. Chrysler claimed that closing of the Kenosha operations was mandated by overcapacity in the industry resulting from "a shrinking U.S. automotive market," and by the fact that plants in the manufacturing complex-some dating back to 1902-were the least efficient in its chain because of their outmoded layout.

Reactions to the closing were bitter. Wisconsin Governor Tommy G. Thompson, voicing the contention of the UAW and local government officials, said Chrysler had made a contractual commitment to continue building vehicles in Kenosha for at least 5 years. The Governor claimed the commitment had been made after Chrysler acquired the complex as part of its August 1987 purchase of American Motors Corp.

The dispute eased somewhat when Chrysler announced that it would divert all of its profits from 1988 vehicle sales in Wisconsin into a fund to aid the 5,500 workers affected by the closing. The allocation was expected to total $20 million. Company chairman Lee Iacocca said tha"time and the marketplace just caught up with an 86-year-old plant," and that Chrysler had not made a legal commitment to keep the plants open.

Despite Chrysler's action, some of the employees to be affected by the closing filed a suit in the Federal courts to block the use of Federal money for the company's new Jefferson Avenue Plant in Detroit, mi. In the suit, the plaintiffs charged that Chrysler was not eligible for a $15 million Federal grant because it was shifting jobs from Kenosha to the detriment of the Kenosha workers. According to the plaintiffs, Federal law prohibits financial aid to companies engaging in such detrimental shifts of operations.

The Acustar controversy turned out better for the UAW, as Chrysler modified its plan to sell all of the 11 parts manufacturing plants, which employ 11,000 members of the union. Under the new plan, only four plants will be sold, or closed, within 18 months. The four targeted facilities are Amplex Van Wert in Ohio and Trenton Chemical, Detroit Forge, and Detroit Trim in Michigan. About 2,000 employees are involved. The displaced employees will be put in a job bank and paid until they are placed in another plant.

When Chrysler first announced that it would close the parts plants, the company said it wanted to get out of parts production and focus on production of "new products and powertrains, rather than components." The UAW'S immediate contention was that Chrysler wanted to divest the operations because of a cash-flow problem and because one of the union's major demands in national bargaining later in 1988 will be adoption of stronger successorship contract clauses similar to those negotiated with Ford and General Motors in 1987. Under such clauses, companies acquiring operations from Ford and General Motors are required to retain all contract provisions as a condition of sale. In recent years, the domestic manufacturers-particularly General Motors-have claimed that parts produced internally are more costly than those purchased from outside suppliers. In the 1987 negotiations, General Motors was unsuccessful in efforts to overcome the claimed cost disparity by adopting pay rates in the parts plants lower than those in engine, transmission, and assembly plants.

Chrysler's decision to continue parts production was apparently influenced by the tactics adopted by the UAW. Immediately after the initial sale announcement, members of local unions began authorizing their leaders to initiate strikes, ostensibly over excessive backlogs of unresolved grievances. The union also indicated that it would delay implementation of six "modern operating agreements" already negotiated at the plant level and refuse to enter into any more such agreements. The agreements are designed to improve quality and efficiency through increased cooperation in revising work rules, the scope of jobs, and other provisions.

In the wake of all the controversy, Chrysler moved to increase the possibility of a peaceful national settlement on wages and benefits by asking the UAW to start the talks "promptly." Based on past practice, negotiations would have started in July on a contract to succeed the current agreement, scheduled to expire on September 14. After considering the proposal, the union agreed to begin the talks in mid-April.

In the talks, the attitude of Chrysler employees was presumably also influenced by the contrast between the flat $500 lump-sum payments they received in March and the average $3,700 profit-sharing distributions Ford workers received. In 1982, Chrysler and the union had replaced a profit-sharing plan with specified wage increases to partly restore the wage cuts the employees had accepted earlier to improve the company's financial condition. In the 1985 settlement, the parties agreed to the $500 payment in March of 1987, 1988, and 1989, in lieu of profit-sharing distributions. They also agreed to re-establish a profit-sharing plan in the contract to be negotiated in 1988, with the $500 payment in March 1989 serving as a guaranteed minimum for the first distribution under the new plan.

The $3,700 distribution to Ford employees was a company record, reflecting Ford's net income of $4.6 billion for 1987. Distributions averaged $2,100 for 1986 and $1,800 for 1985.

General Motors employees did not receive a distribution in March 1988, although their 1987 settlement revised the profit-sharing formula-which had been less liberal than the Ford formula-to make it identical to the improved formula adopted in 1987 at Ford. General Motors employees received an average distribution of $1,800 for 1985 and nothing for 1986.

The UAW'S efforts to organize foreign-owned vehicle and vehicle parts plants in the United States were boosted when the union and Mazda Motor Manufacturing Corp. settled for 2,000 workers in Flat Rock, mi. The developments leading to the settlement began in 1984, when Mazda announced plans to begin producing vehicles in the United States, in cooperation with Ford, which owns 25 percent of the operation.

At that time, the company and the UAW agreed that when the plant opened, workers would be paid at 85 percent of the average of the "Big Three" domestic manufacturers, increasing to full parity after 3 years of production. The union agreed to give Mazda "operating flexibility" by allowing a limited number of job classifications.

When the plant opened in September 1987, employees participated in an election conducted by the American Arbitration Association in which they officially decided to be represented by new UAW Local 3000. Subsequent negotiations led to the settlement for the unit of 2,000 workers, which is expected to grow to more than 3,000.

The UAW reported that the 3-year agreement provides for:

* Movement from the current 85-percent wage parity with Ford employees to full parity by the end of the contract. On the March 3, 1991, contract termination date, the Mazda workers will also receive an increase equal to any first-contract-year specified wage increase resulting from the 1990 settlement at Ford.

* A $750 immediate "settlement bonus" ($250 for probationary employees), followed by payments in April 1989, December 1989, and April 1990, equal to 3 percent of the employee's earnings during the preceding 52 weeks.

* Automatic quarterly cost-of-living adjustments using the same formula as Ford (and General Motors).

* An improved vacation schedule, ranging up to 17 paid days off after 10 years' service.

* A total of 42 paid holidays over the contract term.

* An improved pension plan different from that at Ford and General Motors, but designed to provide equivalent benefit levels at age 65. The benefit levels at Mazda are based on career earnings, subject to increases (no decreases) during working years based on the interest rate paid by a 30-year U.S. Treasury Bill.

* Extensive improvements in health insurance benefits.

* Establishment of a profit-sharing plan during the

contract term, or, if that is not possible, during the succeeding contract.

* Employee discounts on purchases of Mazda vehicles.

* Prohibition of outsourcing (subcontracting) work tra

ditionally performed by members of the bargaining unit.

* A ban on layoffs, except when the company's viability is at stake, and then only after various efforts to avert the layoffs.

Elsewhere in the industry, the UAW was in the midst of an organizing campaign at Nissan Motor Co.'s vehicle plant in Smyrna, TN. The plant, which employs 2,000 hourly workers, opened in 1985. Success at Nissan could lead to renewal of the union's campaign at Honda Motor Co.'s Marysville, OH, plant, the first of the Japaneseowned automobile plants to open in the United States. In 1986, the UAW terminated an organizing drive at the plant but promised to return.

By a vote of 1,915 to 1,668, UAW members at General Motors' Van Nuys, CA, plant approved a work-sharing plan under which workers of each on the two shifts will alternately work 2 weeks while the other shift goes on temporary layoff.

The approval came after an intensive compaign by proponents and opponents of the approach. The plan was earlier rejected by an eight vote margin, apparently because senior employees were concerned that they would suffer a loss of income while on layoff because General Motors' national Supplemental Unemployment Benefit fund was partly depleted. Normally, the company benefit combined with the State unemployment benefit would total nearly 95 percent of job take-home pay.

The unhappy employees also argued that the approach violated one of organized labor's basic tenets: the last employees hired should be the first employees fired.

If the workers had rejected the work-sharing plan, the second shift would have been ended indefinitely. Rejection also would have disrupted the Japanese-type team approach to production that had been adopted in May 1987. This would have occurred because some team members would have been laid off, while others were shifted about under contract seniority provisions permitting senior workers to avoid layoff by "bumping" those with less seniority.

General Motors ended the work sharing 1 month earlier than the expected 2-month duration, saying that a sales increase permitted a resumption of two-shift production. Some workers contended that the resumption was hastened by company concern over alleged morale problems, despite General Motors announcement that it would probably use work sharing again if sales decline. Such a plan has already been used at a General Motors plant in Lansing, MI.
COPYRIGHT 1988 U.S. Bureau of Labor Statistics
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Title Annotation:Developments in Industrial Relations
Author:Ruben, George
Publication:Monthly Labor Review
Date:May 1, 1988
Previous Article:Occupational pay levels in footwear manufacturing.
Next Article:Rubber workers agree on contract provisions.

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