LABOR RELATIONS IN THE
UNIONIZED AUTOMOBILE
ASSEMBLY INDUSTRY IN THE
UNITED STATES: 1961-2006
Richard N. Block
School of Labor and Industrial
Relations
Michigan State University
For presentation at Una Agenda Legislativa Local
para el CSIANN, Toluca, Mexico, 19-21 July 2006
1
Three Time Periods
• 1946-79: Market Dominance and
Prosperity
• 1980-2004: Response to Market
Competition
• 2005-06: Response to Financial Distress
2
1946-79
• UAW had organized the industry
• Major components of labor relations in autos
established – still exist today
– Corporate control over business decisions
unrelated to terms and conditions of employment
– Negotiated terms and conditions of employment
• Pattern Bargaining over wages and benefits at corporate
level
– Minimized variations in labor costs among competitors
– Objective pay standard for union
• Plant/Local Level bargaining
3
1946-79 (continued)
• Wages through a formula
– Annual Improvement Factor
– COLA
• Wage changes highly predictable
• Fringe Benefits
– 11.1% of hourly compensation in 1948
– 42% of hourly compensation 1982
• Health insurance
• Pensions, “30 and Out”
• Business cycle-related downturns addressed
through Supplemental Unemployment
Benefits
4
1946-79 (continued)
• An era of economic dominance of the
automobile industry
– All competitors organized
– Big Three (GM, Ford, Chrysler) profitable
– Wages and benefits of UAW-represented
workers growing
• Collective bargaining outcomes reflected
this prosperity
5
1980-2004
• Era marked by continuing loss of market
share of Big Three unionized firms to nonunion non-U.S. manufacturers
– Currently stands at about 58%
• Employment drop 1978-1980
– 1978 – 782,000
– 1980 – 575,000
6
U.S. Vehicle Sales, June, 2006
BMW*
DaimlerChrysler**
Ford Motor Co. ***
General Motors ****
American Honda+
Hyundai Group++
Isuzu
Mazda
Mitsubishi
Nissan+++
Porsche
Subaru
Suzuki
Toyota^
VW^^
Other (estimate)
TOTAL
Jun-06
27,763
206,773
267,862
407,513
126,449
71,951
745
23,727
10,004
75,154
2,871
18,476
9,516
223,018
28,430
585
1,500,837
Big Three Sales
Big Three Share
Big Three sales change
from '05
882,148
58.8%
GM and
GM and
GM and
Change
675,375
45.0%
Ford Sales
Ford Share
Ford, Pct. Sales
from '05
Jun-05 Pct. chng. 6 mos. 2006 6 mos. 2005 Pct. chng.
27,030
2.7%
157,414
145,029
8.5%
238,302
-13.2%
1,244,631
1,286,687
-3.3%
288,356
-7.1%
1,542,823
1,609,059
-4.1%
550,829
-26.0%
2,036,037
2,320,621
-12.3%
126,416
0.0%
741,227
692,364
7.1%
70,146
2.6%
380,613
367,523
3.6%
1,289
-42.2%
4,718
7,599
-37.9%
22,063
7.5%
140,704
134,988
4.2%
10,621
-5.8%
58,361
65,753
-11.2%
92,781
-19.0%
511,768
542,724
-5.7%
2,551
12.5%
18,601
16,126
15.3%
17,946
3.0%
96,026
93,303
2.9%
7,449
27.7%
56,959
42,014
35.6%
194,875
14.4%
1,223,542
1,114,070
9.8%
26,500
7.3%
158,490
136,115
16.4%
592
-1.2%
3,400
3,170
7.3%
1,677,746
-10.5%
8,375,314
8,577,145
-2.4%
1,077,487
64.2%
-18.1%
SOURCE: Automotive News
-19.5%
4,823,491
57.6%
5,216,367
60.8%
-7.5%
839,185
50.0%
3,578,860
42.7%
3,929,680
45.8%
-8.9%
7
1980-2004 (continued)
• Shift of UAW bargaining priorities
– From wage increases to employment security
• Health Insurance
• Pensions
• During the period 1982-99 UAW and “Big Three”
consistently negotiated increasing employment
protection for workers while moderating wage
increases
– Complete employment protection
• Employees not working went into a “Jobs Bank” (at GM) and
paid from a fund
– Interplant transfer rights
– Plant-level work practices
8
1980-2004 (continued)
• Employment Security Evolution
– 1982
• income protection and limits on plant closings
– 1984
• employment security negotiated
• GM and Ford monetary contributions to employment security
funds
– 1987
• guaranteed employment levels and increased monetary
contributions
– 1990 –
• 36-week limit on time laid off for sales volume
• Increased monetary contributions
– 1996 – Chrysler covered
– 1999
• adjustments in employment levels
• Increased monetary contributions
– 2003
• No changes
9
1980-2004, Wage Moderation
• Negotiated Wage Increases
– 1961–1980 mean annual increase = 7.2%
– 1985-2004 mean annual increase = 3.6%
– based on UAW data for GM and Ford
• Real Wage Changes – difference between
negotiated wage and inflation rate
– 1961-1980, mean annual difference = +.018
– 1985-2004, mean annual difference = +.0062
• Employment security contributions to fund
added about 4.0% - 4.5% to wages
– UAW “purchased” an “employment insurance
policy” with about half their pre-1980’s wage
increases
10
1980-2004, Employment Issue
FIGURE 1
Michigan Motor Vehicle Manufacturing Employment, 1990-2005 (in 1000's)
120
100
Employment
80
60
S
40
20
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Year
Source: U.S. Bureau of Labor Statistics
11
Motor Vehicle and Manufacturing
Employment, Michigan and United States,
1980-2004 (in 1000’s)
Year
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Absolute
Change, 19902004
Percentage
Change, 19902004
United
States
United
States
Excluding
Michigan
Percentage
in
Michigan
271.4
258.4
259.9
263.7
281.5
294.7
285.3
286.8
283.6
291.3
291.4
278.7
265.4
264.6
255.9
172.9
173.3
170.4
179.3
193.3
206.7
204.4
202.1
193.2
200.6
197.1
189.7
183.3
189.2
185.1
36.3%
32.9%
34.4%
32.0%
31.3%
29.9%
28.4%
29.5%
31.9%
31.1%
32.4%
31.9%
30.9%
28.5%
27.7%
-27.7
-15.5
12.2
-28.1%
-5.7%
7.1%
Michigan
98.5
85.1
89.5
84.4
88.2
88.0
80.9
84.7
90.4
90.7
94.3
89.0
82.1
75.4
70.8
SOURCE: United States Bureau of Labor Statistics
-23.8%
12
2005-2006
• Bargaining in Financial Distress
– Losses for U.S. companies in 2005
• GM - US$10 billion
• Ford – US$1.6 billion in North America
• Delphi bankruptcy (employees may return to GM)
– Health Care – “Legacy Costs”
• Active Employees at GM and Ford
– Foregoing wage increases
• Retirees
– Increase cost sharing for retirees with higher pensions
• No legacy costs at nonunion firms
– Early Retirement at GM
• Early retirement incentives of US$35,000 – US$140,000
– Accepted by 35,000 GM workers
– Younger workers must sever relationship with GM
• No such agreement at Ford
13
North American Free Trade
Agreement (NAFTA)
• No evidence that problems of U.S.-based
automakers are substantially due to
NAFTA
• Employment security provisions have
likely encouraged GM and Ford to invest
in U.S. while creating wage moderation
• Non-U.S.-based manufacturers continuing
to invest in U.S., but not in (unionized)
Michigan
14
Conclusions
• Labor relations strategies and outcomes in
unionized sector of U.S. automotive assembly
industry have changed as economic
circumstances of product market and firms and
representation needs of members have changed
• Flexible response of labor relations system
• No reason to think that UAW and bargaining will
be an impediment to recovery of U.S. firms if
companies appropriately involve UAW
15
Lessons for Automotive Unions
in Mexico
• Company wants right to make business
decisions, but does not mean they will make
good decisions
– Union affected by those decisions
– Wisdom of UAW leaving these decisions to company?
• Legal issues in U.S.
• Be aggressive in influencing government policy
– Health care
– Industrial policy
• Consider a European-style social partnership
model
16