Demands for Labor Givebacks Grow More Aggressive; Union Leaders Increasingly Must Push for Concessions In Wake of GM-UAW Pact

Kris Maher.

Wall Street Journal. (Eastern edition). New York, N.Y.: Oct 27, 2005. pg. A.1

Abstract (Document Summary)

DaimlerChrysler Chief Financial Officer Bodo Uebber, in a conference call with industry analysts and journalists, said the car maker is waiting to see details of GM's agreement with the union before starting its own negotiations. "We'll scrutinize General Motors' deal with the UAW and aim for similar conditions," Mr. Uebber said.

"In years past, we probably would have said: 'It's not our problem, you go and deal with Congress,' " said Mr. [Ralph Maly]. "Today, we look at what is best for the company."

"In heavily unionized sectors that are experiencing global economic competitive pressures, labor leaders are essentially being asked to rethink the formula that was used to compensate workers through fringe benefits," Mr. [Daniel Cornfield] said. "The UAW pioneered the whole package of employer-provided fringe benefits. We're witnessing that being dismantled."

"In years past, we probably would have said: 'It's not our problem, you go and deal with Congress,' " said Mr. [Ralph Maly]. "Today, we look at what is best for the company."

Full Text (1352 words)

The tentative agreement between the United Auto Workers and General Motors Corp. to cut retiree health benefits is sending out ripples well beyond the auto world, potentially affecting labor negotiations in industries ranging from telecommunications to aerospace.

Unions had already taken a sharp blow this year when Northwest Airlines broke a mechanics strike using nonunion workers. The carrier this week aired plans to seek cost concessions from flight attendants, pilots and ground crew as well.

But the UAW-GM deal, which would shatter what is often considered the gold standard of union benefits, underscores not just the sharply waning power of unions but the pressures on both sides of any labor- management negotiation to adapt to tough economic realities. As global competition drives cost-cutting -- especially in health care -- and productivity gains squeeze the labor market, union leaders are increasingly being cast in the role of selling concessions to rank- and-file members, while companies are becoming more aggressive in their demands.

Labor experts believe many nonunion workers in pockets of the labor market that haven't already been forced to share costs for health care also will soon face greater demands to do so. An internal memo at Wal- Mart Stores Inc. explores hiring strategies that might be used to reduce health-care costs. "Big visible contracts cast a shadow over what happens at other companies, union and nonunion alike," says Harley Shaiken, a labor and economics professor at the University of California at Berkeley.

The GM deal in part requires retirees to pay about a fifth of premium costs and raises drug co-payments for active workers. It has already reshaped discussions in the rest of the sprawling U.S. auto sector, with both car makers and parts suppliers watching the negotiations for signals on how their own talks with the UAW might proceed. Yesterday, DaimlerChrysler AG said it intends to lower its U.S. health-care costs by between 25% and 30% through talks with the union.

Similar sentiments are being voiced in a growing number of businesses. Ralph Maly, chief negotiator for the Communications Workers of America, opens up talks with AT&T Corp. next week for a contract that covers 12,000 active workers and 33,000 retirees. He says the GM-UAW deal "will have an impact, because it will have employers believing that if you can get it from the UAW, you can get it from other unions."

Last year, Mr. Maly negotiated a contract with Lucent Technologies Inc. that increased health-care premiums for workers by far less than management initially requested. In that case, the union agreed to work with management to lobby Congress to eliminate constraints on the use of excess pension assets to pay for health care. As part of the contract, a small percentage of retirees' pensions now goes to cover health-care costs.

"In years past, we probably would have said: 'It's not our problem, you go and deal with Congress,' " said Mr. Maly. "Today, we look at what is best for the company."

The more-concessionary approach that unions are taking is a natural outgrowth of the economic reality facing companies that must compete globally, and at the same time stem rising costs for health care and pensions as U.S. workers age. When U.S. unions have taken a hard line and rallied workers to strike, they have often ended up in a far worse position.

Two years ago the California grocery-workers strike against three major supermarket chains ended with about 60,000 workers suffering through a long lockout and winning few contract gains. This summer saw the collapse of the strike by Chicago-area Walgreens pharmacists when half of more than 1,100 pharmacists crossed picket lines to return to work.

In recent months, the striking mechanics at Northwest Airlines watched replacement workers step into their jobs. Labor experts note that even as the machinists union successfully struck Boeing Co. last month to win back some health-care provisions, union leaders were quick to give up general wage increases at a time when the company is prospering.

At Boeing, a local of the engineers union is in the preliminary stages of contract negotiations for about 18,500 engineers and other technical workers. The company had indicated it could seek possible givebacks on health care before the UAW-GM agreement, said Gregory Junemann, president of the International Federation of Professional and Technical Engineers. He now expects added pressure. "I don't want to ruin the spirit of the talks, but it's got to have an influence on their thinking," he said.

The union's future negotiations with a number of other employers, including General Electric Co. and Lockheed Martin Corp., will probably be affected, too, Mr. Junemann believes, adding, "My members are willing to bite the bullet, but they want to see top management's teeth marks on the bullet as well."

Chaz Bickers, a Boeing spokesman, said, "We see every negotiation as different, and we're committed to working with the union to reach an agreement that recognizes the great work that our employees do and balances that with the need to be competitive and support our business plan."

Unions have historically led the way in determining benefits for union and nonunion workers alike, though they have lost that role in recent years as their power has declined. Their diminishing ability to shape those benefits represents a "seismic change," said Daniel Cornfield, a labor sociologist at Vanderbilt University.

"In heavily unionized sectors that are experiencing global economic competitive pressures, labor leaders are essentially being asked to rethink the formula that was used to compensate workers through fringe benefits," Mr. Cornfield said. "The UAW pioneered the whole package of employer-provided fringe benefits. We're witnessing that being dismantled."

The new agreement between the UAW and GM would require union retirees to begin paying monthly premiums and annual deductibles for health coverage. Health-care costs for retirees -- including deductibles, co-payments and premiums -- would total as much as $370 a year for individuals and $752 a year for families. Retirees would pay about 20% of premium costs, and the rest would come from a trust fund set up with $3 billion paid by GM over several years and money from active union workers. Active workers would see a slight increase in drug co-payments and defer $1 an hour in future wage increases. The company said the deal will affect 750,000 active workers, retirees and dependents.

"Does it hurt the unions that are coming up in the next bargaining cycle, with what's going on with the Big Three [auto makers]? Absolutely," says Richard Leebove, a labor consultant to the International Brotherhood of Teamsters.

Mr. Leebove says the Teamsters probably will face a new level of pressure on wages and benefits when the group negotiates its contract with United Parcel Service Inc., where it represents more than 220,000 workers, in 2007. "There's going to be a lot of pressure on us to maintain those benefits," he said.

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Tough Talks?

Some major negotiations ahead on expiring union contracts in the private

sector:

EXPIRATION MONTH: December 2005

COMPANY: AT&T

UNION: Communications Workers

EMPLOYEES: 20,100

EXPIRATION MONTH: December 2005

COMPANY: Boeing

UNION: Society of Professional Engineering Employees in Aerospace

EMPLOYEES: 17,500

EXPIRATION MONTH: May 2006

COMPANY: Alcoa

UNION: Steelworkers

EMPLOYEES: 5,100

EXPIRATION MONTH: May 2006

COMPANY: Avaya Communications

UNION: Communications Workers

EMPLOYEES: 6,200

EXPIRATION MONTH: May 2006

COMPANY: Avaya Communications

UNION: Electrical Workers

EMPLOYEES: 1,150

EXPIRATION MONTH: July 2006

COMPANY: Goodyear Tire & Rubber

UNION: Steelworkers

EMPLOYEES: 19,000

EXPIRATION MONTH: July 2006

COMPANY: Southwest Airlines

UNION: Transport Workers

EMPLOYEES: 5,300

EXPIRATION MONTH: September 2006

COMPANY: Southwest Airlines

UNION: Southwest Airlines Pilots' Association

EMPLOYEES: 4,150

Source: Bureau of National Affairs