LABOR RELATIONS IN THE UNIONIZED AUTOMOBILE ASSEMBLY INDUSTRY IN THE UNITED STATES: 1961-2006

1. LABOR RELATIONS IN THE UNIONIZED AUTOMOBILE ASSEMBLY INDUSTRY IN THE UNITED STATES: 1961-2006 Richard N. Block School of Labor and Industrial Relations Michigan State University For presentation at Una Agenda Legislativa Local para el CSIANN, Toluca, Mexico, 19-21 July 2006

2. Three Time Periods • 1946-79: Market Dominance and Prosperity • 1980-2004: Response to Market Competition • 2005-06: Response to Financial Distress

3. 1946-79 • UAW had organized the industry • Major components of labor relations in autos established – still exist today • Corporate control over business decisions unrelated to terms and conditions of employment • Negotiated terms and conditions of employment • Pattern Bargaining over wages and benefits at corporate level • Minimized variations in labor costs among competitors • Objective pay standard for union • Plant/Local Level bargaining

4. 1946-79 (continued) • Wages through a formula • Annual Improvement Factor • COLA • Wage changes highly predictable • Fringe Benefits • 11.1% of hourly compensation in 1948 • 42% of hourly compensation 1982 • Health insurance • Pensions, “30 and Out” • Business cycle-related downturns addressed through Supplemental Unemployment Benefits

5. 1946-79 (continued) • An era of economic dominance of the automobile industry • All competitors organized • Big Three (GM, Ford, Chrysler) profitable • Wages and benefits of UAW-represented workers growing • Collective bargaining outcomes reflected this prosperity

6. 1980-2004 • Era marked by continuing loss of market share of Big Three unionized firms to non-union non-U.S. manufacturers • Currently stands at about 58% • Employment drop 1978-1980 • 1978 – 782,000 • 1980 – 575,000

7. U.S. Vehicle Sales, June, 2006 SOURCE: Automotive News

8. 1980-2004 (continued) • Shift of UAW bargaining priorities • From wage increases to employment security • Health Insurance • Pensions • During the period 1982-99 UAW and “Big Three” consistently negotiated increasing employment protection for workers while moderating wage increases • Complete employment protection • Employees not working went into a “Jobs Bank” (at GM) and paid from a fund • Interplant transfer rights • Plant-level work practices

9. 1980-2004 (continued) • Employment Security Evolution • 1982 • income protection and limits on plant closings • 1984 • employment security negotiated • GM and Ford monetary contributions to employment security funds • 1987 • guaranteed employment levels and increased monetary contributions • 1990 – • 36-week limit on time laid off for sales volume • Increased monetary contributions • 1996 – Chrysler covered • 1999 • adjustments in employment levels • Increased monetary contributions • 2003 • No changes

10. 1980-2004, Wage Moderation • Negotiated Wage Increases • 1961–1980 mean annual increase = 7.2% • 1985-2004 mean annual increase = 3.6% • based on UAW data for GM and Ford • Real Wage Changes – difference between negotiated wage and inflation rate • 1961-1980, mean annual difference = +.018 • 1985-2004, mean annual difference = +.0062 • Employment security contributions to fund added about 4.0% - 4.5% to wages • UAW “purchased” an “employment insurance policy” with about half their pre-1980’s wage increases

11. 1980-2004, Employment Issue

12. Motor Vehicle and Manufacturing Employment, Michigan and United States, 1980-2004 (in 1000’s)

13. 2005-2006 • Bargaining in Financial Distress • Losses for U.S. companies in 2005 • GM - US$10 billion • Ford – US$1.6 billion in North America • Delphi bankruptcy (employees may return to GM) • Health Care – “Legacy Costs” • Active Employees at GM and Ford • Foregoing wage increases • Retirees • Increase cost sharing for retirees with higher pensions • No legacy costs at nonunion firms • Early Retirement at GM • Early retirement incentives of US$35,000 – US$140,000 • Accepted by 35,000 GM workers • Younger workers must sever relationship with GM • No such agreement at Ford

14. North American Free Trade Agreement (NAFTA) • No evidence that problems of U.S.-based automakers are substantially due to NAFTA • Employment security provisions have likely encouraged GM and Ford to invest in U.S. while creating wage moderation • Non-U.S.-based manufacturers continuing to invest in U.S., but not in (unionized) Michigan

15. Conclusions • Labor relations strategies and outcomes in unionized sector of U.S. automotive assembly industry have changed as economic circumstances of product market and firms and representation needs of members have changed • Flexible response of labor relations system • No reason to think that UAW and bargaining will be an impediment to recovery of U.S. firms if companies appropriately involve UAW

16. Lessons for Automotive Unions in Mexico • Company wants right to make business decisions, but does not mean they will make good decisions • Union affected by those decisions • Wisdom of UAW leaving these decisions to company? • Legal issues in U.S. • Be aggressive in influencing government policy • Health care • Industrial policy • Consider a European-style social partnership model