As its ranks have declined with the reshaping of the domestic auto industry over the last few decades, the United Auto Workers union has displayed a remarkable — and largely underrated — ability to adapt to changing market conditions.

In innovative and very pragmatic new contracts with Ford, Chrysler and leading suppliers Delphi Corp. and Visteon Corp., the UAW finally consented to different levels of compensation for members who previously were entitled to the same, famously rich packages.

When insurgent Japanese competition and a recession hit with full force in the early 1980s, the union under the leadership of the savvy Douglas Fraser agreed to unprecedented wage and benefit concessions to benefit the struggling Chrysler Corp. When General Motors Corp. and Ford Motor Co. were also hit hard by foreign competition over the ensuing decade, Fraser’s successor Owen Bieber displayed more flexibility than some expected.

What the UAW has done recently is another major change that deserves perhaps even more credit than those earlier strategic shifts, because the union finally agreed to slay one of its most sacred cows: a prohibition against so-called “two-tier” wages. Current UAW President Ron Gettelfinger was painfully reluctant to breach the integrity of a wage-and-benefits structure that had made his members some of the best-compensated in the industrialized world. But in innovative and very pragmatic new contracts with Ford, Chrysler and leading suppliers Delphi Corp. and Visteon Corp., the UAW finally consented to different levels of compensation for members who previously were entitled to the same, famously rich packages.

So at Delphi and Visteon, new hourly workers represented by the union now receive a wage and benefits package that is about 65 percent less than existing workers get, though it’s comparable to what unionized workers at other Tier One suppliers earn. At Chrysler’s new Jeep Wrangler assembly operation in Toledo, Ohio, several hundred UAW members now will work for a supplier that is doing the chassis work on an outsourced basis, at a wage of about $15 an hour — about three-fifths of what previous chassis-line workers at the Chrysler plant received, but comparable to supplier wages. And at Ford’s South Side Chicago assembly complex where the company is putting together the new Five Hundred sedan and related models, the UAW is willing to allow subassembly suppliers and their cheaper wages to function right next door to Ford’s assembly line and its $22-per-hour jobs.

Of course, there's still a lot of foot-dragging within the union, especially among the rank-and-file. That's why, after months of haggling with local UAW chapters across the country, Chrysler had to back away from its proposal to implement more flexible, Japanese-style work rules at several plants. The company will probably have to buy short-term labor peace at the expense of its long-term drive to become as efficient as Asian rivals in the United States.

But UAW leadership has recognized for some time now that the jig is up. Their membership has fallen by about half from its peak of a generation ago. The swelling workforces at foreign-owned “transplant” auto factories in the United States have proven stubbornly resistant to UAW entreaties. And the relentlessness of worldwide competition continues to force American companies to find significant new cost cuts. Delphi, for example, has sold or closed 128 businesses since 1992. By the end of this year, the former GM parts-making subsidiary will have reduced its overall U.S. high-wage workforce from nearly 60,000 employees five years ago to fewer than 30,000.

It was only several years ago that the UAW revolted against a GM plan to turn a large chunk of its small-car assembly operations over to suppliers to provide major parts modules – exactly what the union now is allowing the Big Three to do.

Nowadays, only a seriously delusional unionist scoffs at auto executives’ claims that economics dictates further significant moderation in labor costs and work rules. Helping the companies’ cause have been enlightened leaders, including Delphi’s CEO, J.T. Battenberg, whose transparency over the years about Delphi’s books gradually helped persuade union bosses.

Now that they’re seeing one another less and less as the enemy, a more closely cooperating cohort of union and company officials still faces at least two daunting tasks. The first and most immediate is in trying to ensure good relations between new, lower-paid workers and the higher-paid colleagues they are joining — sometimes on the same assembly line.

The second assignment — beating back foreign competition — stands a better chance of being achieved with progress on the first one.

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Dale D. Buss is an adjunct scholar with the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Michigan. Permission to reprint in whole or in part is hereby granted, provided the author and the Center are cited.

Summary

The United Autoworkers Union has adapted to increased global competition with savvy and flexible arrangements like its recent acceptance of a “two-tier” wage structure. This is a more realistic approach than UAW local chapters took in this year’s Chrysler Corp. negotiations and is the UAW’s best hope in helping U.S. auto companies succeed against foreign competition.

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