SOLUTIONS/GETTELFINGER: Reviving the domestic auto industry

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By Ron Gettelfinger

While the domestic U.S. auto industry faces an array of complex problems, the path forward is clear. We need to continue the progress that has been made in building top-quality, fuel-efficient cars and trucks. We need to communicate to customers about the world-class value and reliability of domestic vehicles. And we need a broad-based economic recovery, so that consumers have the confidence — and the purchasing power — to start making automotive purchases once again.

That's why members of our union supported President Obama and his newly enacted stimulus plan, which we believe is an important step in getting our economy moving again.

And that's why we've worked as hard as we can in recent weeks — with our employers and other stakeholders — to craft a plan that will put America's auto companies on a viable course for the future.

Members of the United Auto Workers understand the changed circumstances of our industry, and we responded by agreeing to painful sacrifices in 2005 and 2007. By restructuring our negotiated health care plans for active and retired workers, giving up pay raises and cost-of-living allowances, negotiating lower wages for newly hired employees and other measures, we've reduced costs at General Motors, Ford and Chrysler by tens of billions of dollars.

We are also prepared to do our part going forward to ensure that the companies will be competitive.

But it's also important to remember that labor costs represent only about 10 percent of the overall costs of a vehicle. UAW members can't fix all of the auto industry's problems ourselves. All stakeholders — including executives, directors, bondholders, dealers and suppliers — will also need to make sacrifices. Workers and retirees have already stepped up to the plate and made major concessions. The restructuring process can't succeed unless other stakeholders do the same.

A healthy auto industry — which accounts for millions of U.S. jobs and 4 percent of gross domestic product — is essential for the health of our overall economy. So it's important to recognize that at the very same time the industry is undergoing difficult changes, it is also being called on to play a major role in dealing with the challenges posed by energy security and climate change.

With the UAW's support, in 2007 Congress enacted landmark energy legislation that reformed the Corporate Average Fuel Economy (CAFE) standards, requiring a 40 percent increase in fuel economy by 2020. Mr. Obama and congressional leaders are now calling for additional actions to increase fuel economy standards even further and to aggressively expand production of plug-in hybrids and other advanced technology vehicles.

These actions will have important benefits for society as a whole, including savings at the gas pump for consumers, reduced dependence on foreign oil and reductions in greenhouse-gas emissions. But there will be enormous costs for the auto industry, in developing new technologies and retooling plants to produce the vehicles of the future and their key components.

Unfortunately, policymakers must confront the reality that we do not have a level playing field in the auto industry in terms of the financial ability of the companies to meet these challenges. Despite all of the sacrifices made by UAW active and retired members, there continues to be a major difference between the retiree health care costs of U.S.-based and foreign-based automakers.

Foreign-based auto companies began producing vehicles in the United States in the 1980s. As a consequence, they have very few retirees in the U.S. All foreign producers combined pay out benefits to fewer than 1,000 retirees. By contrast, GM, Ford and Chrysler provide health care benefits to almost a million retired workers, surviving spouses and their dependents.

The problem is not the level of benefits provided; it's the number of people they are paid to. Domestic companies should not be unfairly burdened for their long history of operations here in the United States. And retired auto workers — who gave up wages and other forms of compensation in exchange for the promise of continued health care coverage — must not be abandoned at the time of their lives when their health care needs are greatest.

In 2006, Sen. Barack Obama proposed a solution to the twin challenges facing the auto industry. He introduced legislation titled Health Care for Hybrids, which proposed that the federal government assist the domestic automakers in meeting their health care obligations to retirees in exchange for the companies agreeing to reinvest these resources in developing and producing higher-mileage, advanced technology vehicles.

Given the current state of the domestic auto industry, and the urgent need for action on energy and the environment, Mr. Obama's path-breaking idea is even more timely today than it was in 2006. Through this approach, we can ensure that retirees receive the health care they were promised and need, while at the same time facilitating the restructuring process that is necessary to make the U.S.-based companies economically viable for the long-term future.

Equally important, we can ensure that the auto industry will continue to make major progress in developing and producing advanced technology vehicles and meeting higher fuel economy standards. This comprehensive approach will reinvigorate our industry, preserve jobs and businesses in communities throughout the United States and help our country move forward on climate change and energy security.

• Ron Gettelfinger is president of the United Auto Workers.