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Auto Union Shows Newfound Willingness To Rise And Fall With Profits

Uaw

First Posted: 06/10/11 03:15 PM ET Updated: 08/10/11 06:12 AM ET

A new Wall Street Journal interview with United Auto Workers union president Bob King suggests that when it comes to profit-sharing, the union may be coming around to the corporate view that annual raises shouldn't be guaranteed.

After the near collapse of the American auto industry, General Motors, Ford and Chrysler are profitable again -- with the help of major concessions from the UAW. How those profits will shared with the auto workers is the subject of intense debate for both the companies and the unions, and will be a big subject of discussion when the UAW sits down with the automakers to renegotiate their contract later this summer.

The companies have long preferred a profit-sharing bonus system because it doesn't commit the company to paying more when they are making less, while the union has historically pushed for annual raises to ensure steady improvement to workers livelihood.

Since 2007, the unions have accepted lower wages for new hires and agreed to benefit cuts. During bankruptcy restructuring at GM and Chrysler, the union gave up the right to strike until 2015. UAW workers haven't gotten across-the-board raises since 2006. And although all three companies have already awarded their employees profit-sharing bonuses, the return of annual raises does not appear to be forthcoming.

"It would be an advantage if you can guarantee to the [Detroit] companies certain things on fixed costs so that they would remain competitive," King told the Wall Street Journal. But King also noted that profit-sharing entails more risk for auto workers. "When you're successful, that's good. But if you're sharing more of the risk, you need to have more of the upside."

As to what more of the upside might look like, it's unclear. GM, for example, is pushing to give pay increases based on performance rather than seniority, the Journal reports.

Some auto industry experts say King's acknowledgment is a sign that he understands the difficult economic climate that persists nearly two years after the Great Recession's official end and shows his willingness to cooperate with the automakers to ensure their continued profitability. GM was more profitable last year than any year since 1999; Ford's first quarter this year was its most profitable since 1998.

"It really is a shift for the union, but it's also a recognition that the only job security and help for maintaining the UAW membership is to have healthy, profitable companies," said Kristin Dziczek, director of the Labor and Industry Group at the Center for Automotive Research. "I think that the union is looking for ways to tie the improvements in workers' lives to the fortunes of the company. And that's a situational thing. Here at this particular moment in time -- it's a recognition that a successful company leads to a successful union."

The UAW was once one of the most powerful and influential labor unions in America. In 1979, UAW membership peaked at a little over 1.5 million. In 2010, there were just 376,612 members, according to the UAW.

But, critics say, going into the negotiations with an already compromised stance on profit-sharing is a mistake and could contribute to a continued decline in the rewards tied to car manufacturing.

"A healthy profitable company is no guarantee that workers will get anything -- companies don't automatically share -- it's a question of power," Jane Slaughter, an author who has covered the UAW for decades at Labor Notes, a non-profit magazine that advocates for the revitalization of labor, wrote in an email. "If the union announces its weakness, there's no reason for the company to give anything."

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