- The Washington Times - Friday, July 18, 2003

DEARBORN, Mich. — Ford Motor Co. yesterday became the third major automaker in as many days to begin contract talks with the United Auto Workers. Dennis Cirbes, Ford’s lead negotiator and vice president for labor relations, shook hands with UAW President Ron Gettelfinger at the second-largest automaker’s headquarters to formally start the talks.

The contract also will cover UAW workers at auto supplier Visteon Corp., which was spun off from Ford in June 2000.

General Motors Corp. began its talks with the UAW Thursday; DaimlerChrysler AG’s Chrysler division had started negotiations on Wednesday.

The companies and the UAW will spend the next several months hammering out contracts covering wages and benefits for more than 300,000 workers. The pacts also cover pension payments and benefits for another 475,000 retirees and their spouses.

The current contracts, negotiated in 1999, expire Sept. 14.

DaimlerChrysler negotiator John Franciosi said the goal of negotiations should be to craft a “responsible” agreement that works for all involved and helps close the competitive gap between domestic and foreign automakers.

On Thursday, GM bargainer Troy Clarke said talks will be unique because “never before in the history of our industry have we faced such a competitive threat in the marketplace.”

In the past decade, GM’s U.S. market share has declined from nearly 34 percent to about 28 percent. A big reason: Companies such as Toyota, Honda and Nissan continue to add manufacturing capacity and introduce new models in the United States.

Since 1996, foreign automakers have increased their domestic capacity from 1.9 million vehicles to more than 4 million.

The challenge, observers say, will be reaching an agreement at a time when the industry landscape includes an uncertain economic picture, sluggish sales and rising health care costs — far different than when the last contracts were negotiated in 1999, a time of big profits and volume.

“I see it as four weak players,” Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Mich., said of the union and the automakers.

The UAW can’t push too hard, he said, because the Big Three are already struggling against foreign competitors, while the automakers each have their own challenges, from heavy employee benefit costs at GM to excess capacity at Ford.

“It’s going to be very interesting,” he said.

The UAW has said its bargaining priorities include preserving, if not enhancing, gains made in previous contracts. The 1999 pacts included 3 percent annual pay raises, a ban on plant closings and nearly cost-free health care.

Health care costs loom as a major bargaining issue.

Chrysler, the smallest of the Big Three, spent $1.4 billion on health care last year, up from $952 million five years ago. Some benefits experts say health care expenses will grow by double-digit margins in the next few years if nothing is done.

But UAW President Ron Gettelfinger reiterated Wednesday that the union will not budge from its position of not accepting more of the financial burden for workers and retirees.

“We’re not going to go backward in health care,” said Mr. Gettelfinger, who succeeded the late Stephen Yokich as UAW president in June 2002.

Meeting with reporters after the start of talks, Mr. Gettelfinger declined to identify any issue as more important than another.

“When we go into negotiations, we go in and deal with the issues that are there,” he said. “It doesn’t matter if it affects 10 people or if it affects thousands of people. There are always tough issues in any set of negotiations.”

Mr. Franciosi said the labor contract could be critical in preventing the auto industry from following the same path as the battered steel industry.

Two specifically troubling parallels are overcapacity and pricing.

“Certainly a lot of the characteristics are very similar,” said Mr. Franciosi, the Chrysler Group’s senior vice president for employee relations. “Obviously we’re going to work very hard to not come to the same conclusion.”

About three dozen domestic steel companies have filed for bankruptcy since 1998. Steelmakers blamed low-priced imports that flooded the U.S. market.

Among automakers, costly incentives that lower pricing have diminished profits while foreign automakers continue to add more vehicles in North America. Chrysler, in particular, has said it expects to post a $1.2 billion loss in the second quarter in part because of costly incentives.

As Ford’s labor talks got under way yesterday, the company said it plans to cut an unspecified number of white-collar jobs as part of an effort to reduce costs related to its salaried automotive work force by 10 percent by year’s end.

The cost-cutting effort comes as the company tries to keep its restructuring plan, begun 18 months ago, on track. Ford said earlier this week that it slashed expenses by $1.3 billion in the second quarter; its goal is to reduce costs by $2.5 billion by the end of 2003.

Ford declined to say how many white-collar jobs would be cut or what the total cost savings would be. Chief Operating Officer Nick Scheele alerted Ford workers worldwide in an e-mail message yesterday morning.

“Despite this excellent work, we still face uncertain economies around the globe and a fiercely competitive marketplace,” he said in his e-mail.

“As a result, it’s imperative that we continue looking at all of our costs globally to achieve even higher levels of efficiency and cost competitiveness.”

Ford has about 79,000 salaried automotive workers worldwide.

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