Both sides stand to lose from GM strike

For those who believe General Motors Corp is in the midst of spectacular turnaround from its many woes, Monday's walkout by the United Auto Workers union was a dose of reality.

The No 1 US automaker still hasn't resolved the central threat to its future: an acrimonious relationship with GM factory workers in the United States. Workers ought to be a team, united with one another in pursuit of common goals on behalf of the company. Striking workers, instead, are the adversaries of managers, shareholders, dealers and lenders.

For days GM and UAW negotiators seemed to be making progress toward a new labor contract to replace the one set to expire on September 14 and extended since then. The centerpiece of the talks is a proposed multibillion trust funded by GM and run by the UAW, meant to relieve the automaker from further obligations to provide retirees with health-care coverage.

US automakers pay $25 to $30 an hour more for labor than Japanese automakers Toyota Motor Corp and Honda Motor Co at their US plants, with much of the gap due to the cost of retiree healthcare.

US automakers now rue the days they made extravagant promises to the union, even though those promises were made more or less reluctantly, under the threat of strike.

The UAW unfortunately now thinks of GM management's creative solution as something the union is being asked to concede rather than a golden opportunity.

This viewpoint is tragically short-sighted; if GM should file for bankruptcy (no longer a remote possibility) a $50 billion healthcare entitlement covering GM union retirees might go up in smoke.

Instead, the union is demanding job guarantees in return for approving the Voluntary Employees' Benefit Association (VEBA) trust.

The UAW wants GM workers to be allowed to keep their jobs for the life of the contract, as well as a promise that GM won't close US plants without union permission.

GM long ago should have halted the historic pattern of adversarial bargaining with the union. But now no one could blame Rick Wagoner, GM's chief executive officer, if he were devising an accelerated strategy to increase vehicle production in overseas plants while paring back in the US.

If UAW President Ron Gettelfinger wants to keep jobs in the US for UAW members, if he wants to ensure a future for his union, he and Wagoner must find mutually acceptable ways to bring GM's labor costs into line. Instead, what Gettelfinger seems to offer with one hand, a VEBA guarantee, he wants to take back with the other in the form of expensive, non-competitive job commitments.

The UAW in 2004 agreed to two-tier wages for automotive-parts factories so companies can pay new hires wages that are closer to what the market pays in other US factories.

The union ought to think about a similar system for GM final-assembly plants, allowing the automaker to pay competitive wages and maybe keep a few more plants in the US.

GM can ill-afford a repeat of the billions of dollars it lost during a UAW work stoppage in 1998.

Under no circumstances can GM afford to keep building vehicles in the US if it can't find common ground with its workers.

Doron Levin is a Bloomberg News columnist. The opinions expressed are his own.

(China Daily 09/26/2007 page16)