September 20, 2003

In Latest Contracts, Labor Uses New Strategy

orporations have often complained that union demands are so outlandish that labor seems ready to drive them out of business. Companies like Bethlehem Steel, Pan Am and Studebaker attributed their demises largely to overambitious union demands.

But this week, amid a burst of major contract agreements, even corporate executives are acknowledging that labor's first concern has changed from demanding more and more to making sure that companies and jobs survive.

In reaching a settlement with General Motors on Thursday and in recent agreements with several other industrial behemoths — Ford, DaimlerChrysler, Goodyear and Verizon — unions have shown a new willingness to rein in their demands. Keeping their employers competitive, they have concluded, is essential to keeping unionized jobs from being lost to nonunion, often lower-wage companies elsewhere in this country or overseas.

General Motors, Ford and Chrysler, for example, have lost market share to foreign competitors, even as they offered ever larger incentives like rebates and interest-free loans. The unions, staring at large-scale layoffs at companies with huge losses and dwindling market share, are discovering that they, like it or not, are in the same boat as management.

At the negotiating table, union leaders are certainly mindful of the 2.7 million manufacturing jobs the nation has lost in the last three years, and they certainly do not want their members thrown onto that heap.

"Unions are more sympathetic, more aware of the competitive problems that employers face," said Paul F. Clark, a professor of labor relations at Pennsylvania State University and the editor of a new book on the state of collective bargaining. "Unions are not going to push employers to the point where they go out of business."

Ron Gettelfinger, president of the United Automobile Workers, declined to discuss the specifics of the tentative agreements he has reached — or how union negotiators reached them — until the union could first communicate with its members. But he did say that "since the start of these negotiations, one of our goals has been to bring this industry together."

To be sure, unions are not seeking to accommodate management in every negotiation. Seeing that General Electric is one of the world's most profitable companies, the electronic workers' union fought against concessions on health coverage and sought to squeeze every last cent it could in wage increases.

And even when unions do moderate their demands, some industrial experts argue, unions are still not giving up enough to make their employers truly competitive in a global market.

As an example of labor's new realism, of its bowing to competitive realities, the unions negotiating with G.M., Ford, Chrysler, Goodyear and Verizon all agreed to some form of wage freeze. These were not weak, doddering unions, but unions like the auto workers and steelworkers, which have traditionally been among the nation's most powerful, most sophisticated labor organizations, although they have suffered painful membership losses in recent years.

Two weeks ago, the Communications Workers of America agreed to a bonus instead of a raise in the first year of a five-year contract for more than 60,000 workers at Verizon, the nation's largest telephone company. And on Monday, members of the United Steelworkers of America ratified a contract with Goodyear, the nation's largest tire maker, that freezes wages for all three years of the contract, although with some modest profit sharing and cost-of-living adjustments. And this week, the United Auto Workers agreed to a two-year wage freeze, also with some bonuses, in reaching four-year settlements with each of Detroit's Big Three.

"The U.A.W.'s strategy of bargaining with all three automakers simultaneously was designed to send a loud message to the rest of the global community that we're here to stay; we're here to work with the corporations to the extent we can to be competitive," said Danny Hoffman, an auto industry and labor specialist at Michigan State University. "They know it's not the situation it was 40 years ago. They know we have global competition, and it's a whole different ballgame."

A wage freeze gives large and lasting savings to management because it holds down the wage base in future years. In negotiating its two-year freeze with the Big Three, people close to the deals said, the U.A.W. obtained a 2 percent raise in the contract's third year and 3 percent in the fourth year.

And at Verizon, after the first-year wage freeze, including a lump-sum payment averaging $1,600, the telephone employees are to receive 2 percent raises in each of the contract's last four years.

"The unions are trying to get as much as they can up to the point where they essentially shoot themselves in the foot where it creates conditions where employers can't be competitive," Dr. Clark of Penn State said. "If the steelworkers could have gotten 6 percent from Goodyear while still allowing Goodyear to be competitive, they would have gotten 6 percent."

To be sure, the settlements reached by these unions included far more than just wage freezes. The unions achieved one of their most important goals by avoiding the major concessions on health coverage that management wanted, agreeing instead to modest increases in medical co-payments.

Demonstrating the increased emphasis that unions are placing on preserving jobs, the Verizon and Goodyear contracts also include unusually sweeping job security provisions. The Goodyear accord, for example, pledges that the company will keep 12 plants open, will not reduce employment at each plant below 85 percent of current levels and will not import tires like those made by the factories unless the domestic plants are running at full capacity.

After his union concluded five months of negotiations with Goodyear, which has lost $1.3 billion over the last two years, Wayne Ranick, a spokesman for the steelworkers, said: "We were dealing with a company that faced very difficult financial conditions. We provided them with some savings and some financial flexibility and in exchange we received some important measures on job security."

But the United Auto Workers, acknowledging the cost pressures and market share losses faced by the Big Three, gave the automakers a green light to shut 12 assembly plants to help them trim costs. That was a bitter pill for union members, but union leaders clearly accepted the automakers' arguments that laying off a few thousands workers at those plants was needed to safeguard hundreds of thousands of other jobs.

At a news conference Thursday alongside the auto workers' president, Rick Wagoner, G.M.'s chairman, said the settlement would "enable us to work together effectively to address what I think is pretty clearly a challenging set of competitors."

Lawrence T. Babbio, Verizon's vice chairman, was even more complimentary to the unions at his company. "I have to give the unions credit here that they were willing to step up and reach some compromises to help us improve our competitive position, long before it's too late," he said after they agreed to a wage freeze and to changes in health coverage that Verizon said would save it $1 billion over five years.

The auto workers made their concessions after sales by foreign automakers reached their highest level ever and after one company based overseas, Toyota, for the first time climbed to third place in American auto sales, pushing Chrysler into fourth place.

"The auto workers gave quite a lot, and I think they had no choice on that," said Gary N. Chaison, a professor of industrial relations at Clark University. "This was very much reality-based bargaining. They knew the problems they had."