Union's trade-off

Machine operator Larry Alsip knew Metaldyne Corp. wouldn't keep his hourly pay at $26 after it finished buying the DaimlerChrysler AG auto-parts plant where he works. What he didn't expect was that the United Auto Workers union would let the rate fall to $16.

"I've got two kids. I can't take $400 out of my pay every week and not miss it," said Alsip, 52, a five-year employee of the New Castle, Ind., plant that Metaldyne plans to buy in September. He will transfer to a DaimlerChrysler factory 60 miles away to avoid taking the pay cut.

DaimlerChrysler, Metaldyne and the union outlined to 1,200 workers last week a tentative contract that reduces wages in return for Metaldyne letting the union recruit employees without opposition. The union is accepting lower parts-worker wages to save jobs and restore a membership depleted as unionized automakers such as Ford Motor Co. shut U.S. plants while non-union rivals such as Toyota Motor Corp. add factories.

The agreement reflects the largest U.S. industrial union's strategy as it prepares to begin contract talks in July covering 280,000 workers and $30 billion in annual labor costs at DaimlerChrysler, General Motors Corp. and Ford. Union workers make 60 percent of vehicles sold in the United States and Canada, down from 82 percent in 1978, said Sean McAlinden, a labor analyst with research company Altarum. The current contract expires Sept. 14.

"There's been such a blood bath that the UAW now accepts that this is the best they're going to get," says Dan Luria, a labor analyst at the Michigan Manufacturing Technology Center, an industrial research company. The strategy of accepting lower pay for easier recruitment is the latest permutation of a UAW philosophy dating from the union's founding in 1935. The goal was to achieve the same pay for all autoworkers and force companies to compete on the basis of technical innovation instead of holding down workers' wages.

Walter Reuther, the UAW president from 1946 to 1970, believed high wages helped stimulate economic growth. When he saw Japanese autoworkers riding bicycles to work in the early 1960s, he warned his hosts, "You can't build an automobile economy on bicycle wages," according to an AFL-CIO Web site.

In the past 30 years, the UAW's mission has become more difficult as U.S. autoworkers compete with employees in countries such as Mexico and South Korea with lower standards of living and wages.

The portion of U.S. parts workers who belong to unions has dropped from a ratio of 1 in 2 in 1979 to 1 in 7 today as companies abandon northern U.S. cities and open factories in Southern states where unions have less support, and in Mexico.

The agreement with Plymouth, Mich.-based Metaldyne is part of DaimlerChrysler's plan to sell five U.S. parts plants in an attempt to save $240 million in annual labor costs, McAlinden said.

General Motors, for its part, is trying to reduce pension and retiree health expenses that add $1,360 to the Detroit-based automaker's cost of each U.S. vehicle, more than the $107 for Honda Motor Co., said Prudential Securities Inc. analyst Michael Bruynesteyn. Ford, based in Dearborn, Mich., wants the UAW to agree to its plan to close four U.S. factories and eliminate 15,000 jobs, he said.

The UAW is pushing for the right to recruit without automaker opposition after losing two organizing elections at Nissan Motor Co.'s plant in Smyrna, Tenn., and failing to organize two plants in Indiana owned by Toyota and Fuji Heavy Industries Ltd.

Japanese automakers without unions have fought off unionizing efforts by paying about the same wages as unionized rivals, hiring younger workers who aren't as likely to push for pension and health care benefits, and building plants in Southern states such as Tennessee and Alabama with less union support than Northern states.

The union's membership has fallen to 638,722 workers, down from 1.5 million in 1979.

The UAW hasn't lost all its influence. At the New Castle plant, the union negotiated early retirements for some workers and transfer rights that let Alsip and others move to a transmission plant 60 miles away in Kokomo, Ind., to keep their $26 hourly pay.

The Kokomo plant is adding transmission production and jobs.

In return for the pay cut, Metaldyne agreed that its managers won't oppose union recruitment of workers at Metaldyne's 10 non-union factories, letting groups of employees join the union after half sign membership cards rather than force an election.

Unions need such pledges because companies intimidate workers with illegal firings during 1 in every 4 union elections, President Ron Gettelfinger said in a February speech.

The union's strategy proved successful after Johnson Controls Inc., a Milwaukee-based parts supplier, pledged so-called neutrality in 26 factories after the UAW staged a two-day strike in June that caused DaimlerChrysler and General Motors to halt vehicle production. The UAW has since organized workers in nine Johnson Controls factories.

By pushing automakers to encourage more of their suppliers to let the UAW recruit, McAlinden estimates the union may sign up 45,000 parts workers in the next three years, boosting UAW membership 7 percent.

"From the UAW's standpoint, it's a good strategic move," said Dan Poole, a vice president of equity research at National City Bank, which manages $23 billion, including shares of General Motors and Ford. "From the auto companies' perspective, what are they giving up? Not a darn thing."

During the talks, DaimlerChrysler told the UAW that Metaldyne planned to open a non-union factory to compete directly with New Castle unless the union agreed to the pay reduction, said Terry Thurman, director of UAW Region 3 in Indiana.

DaimlerChrysler spokesman Dan Bodene declined to comment.

A test for the UAW will come in talks this year with the world's largest parts company, Delphi Corp., spun off by General Motors in 1999, and third-ranked Visteon Corp., spun off by Ford in 2000.

Both companies agreed in 1999 to match hourly pay of their parents, and subsequently let UAW employment fall 17 percent to 36,645 at Delphi and 12 percent to 20,594 at Visteon.

"We want to talk about all the elements that go into making our business successful, and certainly wages will be a part of that," Delphi spokesman David Bodkin said.

Delphi and Visteon may start increasing production and work forces and encouraging their own suppliers to adopt a neutral stance during UAW organizing drives. The trade-off: The union accepts hourly pay for new workers closer to Metaldyne's $16 hourly rate rather than DaimlerChrysler's $26, McAlinden said.

Thurman wouldn't comment on national talks.

The union may one day win neutrality agreements at all of Johnson Controls' U.S. plants and will seek similar agreements at factories owned by Tower Automotive Inc., Magna International Inc. and ThyssenKrupp AG, Thurman said. Unions help such companies by boosting productivity and safety, and by interceding on their behalf when they seek new work with Detroit automakers, he said.

The New Castle factory is being bought for $233 million by Metaldyne, which is owned by Heartland Industrial Partners LP equity fund led by former Reagan administration budget director David Stockman.

The 97-year-old brick and sheet-metal factory makes gears, control arms and ball joints that DaimlerChrysler's Chrysler unit uses to attach wheels to car and truck bodies. Metaldyne hopes to boost annual revenue 50 percent to $680 million by 2010, Chief Executive Tim Leuliette told investors Thursday in a conference call.

Workers may not vote on the new contract until September. The UAW won't let workers vote unless they promise to stay at Metaldyne and accept the $16 hourly wage and reduced benefits, including out-of-pocket expenses for health care that increases from nothing to as much as $46 a week for families.

Workers may be inclined to vote yes because of a lack of jobs, judging by Eileen Thomas, 32, a three-year employee at New Castle who has four children and lives in the nearby community of Springport, Ind. She may stay with Metaldyne because jobs are in short supply.

"It's not a bad wage compared to what else is open out here," she said.THE ISSUE

U.S. automakers are about to begin negotiations with their unions. And their demands this time are significant:

Ford wants to cut 1,500 jobs and close four factories.

General Motors wants to reduce pension and retiree health benefits that add $1,360 to the cost of each GM vehicle. (Honda's pension and retiree health costs are just $107 per vehicle.)

DaimlerChrysler is offering to save jobs if unions agree to cut wages. The union also would win more freedom to

recruit members.

WHY IT MATTERS

United Auto Workers contracts have often set the pattern for major factory labor agreements throughout the country.

Union workers build 60 percent of the cars and trucks made in the United States and Canada, down from 82 percent in 1978.

WHAT SEATTLEITES SAY

"The eyes of the nation will be on what happens with medical, retirement (benefits). ... It's the big three, medical, pension, wages."

-- Charles Bofferding, executive director of the Society of Professional Engineering Employees in Aerospace

"These are of national significance ... there is no question. ... For us, it's the Boeing negotiations that set the tone in way that those (auto contract talks) do nationally."

-- Steve Williamson, executive secretary of the King County

Labor Council

STRONGHOLD WEAKENED

In one of the strongholds of American labor, union workers in the auto industry are being forced to accept wage concessions some say they can ill afford. Like workers in other industries, many are scared that if they were laid off, they'd not be able to find other work. U.S. unemployment reached 6 percent last month, and the number of "discouraged workers," those who have stopped looking for a job, is at a 20-year high. It was 437,000 in April, up 37 percent from a year ago.

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