Wednesday, November 26, 2008

Are There UAW Concessions Coming?

( – The Big Three automakers are forced to pay 85- to 95-percent of union wages and benefits to members of the United Auto Workers union who aren’t working – even if their plants have been closed.

Industry analysts say union labor agreements that obligate the Big Three to pay millions of dollars to workers who are no longer working are a major reason why the automakers are in trouble – a problem that no short-term bailout can fix.

During hearings last week where the chief executives of Ford, Chrysler and General Motors appeared before the Senate Banking Committee, Sen. Bob Corker (R-Tenn.) raised the issue.

Corker asked Rick Wagoner, CEO of General Motors, why with all of the measures he has taken to prevent a collapse, his company was still not making money.

“Is it because of the (United Auto Workers) union?” Corker asked pointedly.

Wagoner, who demurred from answering directly, said that even at plants that are closing, “85 percent” of union employment benefits still “have to be paid.” He said that GM has had to restructure and reduce the cost of operating in the U.S., but the company still pays for employees that are not currently working at “idle facilities.”

Chrysler Chairman Robert Nardelli, facing a similar question from Corker, confirmed that “agreements are in place” between Chrysler and UAW that, regardless of demand, Chrysler must still operate at a pay rate of 95 percent of wages for employees not currently working at idle facilities.

Peter Morici, a professor at the University of Maryland’s school of business, told that one of the biggest problems the companies face is the UAW’s Jobs Bank – a program established more than two decades ago that guarantees nearly full salary and benefits to out-of-work employees.

“Right now if a plant closes in St. Louis and a new one opens in Kansas City, the workers don’t have to move from St. Louis to Kansas City; they can opt to get a $105,000 payout or go on Jobs Bank where they can collect 95 percent of pay for the rest of their lives,” Morici said.

The Detroit automakers have not released official numbers indicating how much they currently spend on their respective Jobs Banks, but previously released four-year labor contracts signed with the UAW in 2003 revealed “contribution caps” to be implemented by each of the Big Three.....More

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