Union concessions may improve prospects for auto bailout

McClatchy NewspapersDecember 3, 2008 

WASHINGTON — On the eve of congressional hearings, union leaders agreed to concessions on Wednesday, removing a roadblock to a proposed rescue of the U.S. auto industry as Congress weighs whether to give carmakers $34 billion in emergency aid or allow them to face bankruptcy.

At a Detroit news conference, United Auto Workers President Ron Gettelfinger announced that the union would allow automakers more time to meet funding obligations for retiree benefits and would suspend a program that allows laid off workers to receive most of their original salary.

The concessions are designed to show wary lawmakers that labor is a willing partner in what amounts to a taxpayer-financed effort to help one or more of the Big Three avoid a bankruptcy that would send shockwaves across an economy already battered by recession.

"Bottom line — the jury's still out," said Sen. Jon Tester, D-Mont., who's on the Senate Banking Committee, which holds its hearing on the proposed bailout on Thursday.

A Republican Senate leadership aide, who asked not to be identified in order to speak candidly, said the union moves were "a step in the right direction for some members," but it was unclear how many.

Republican lawmakers and the Bush administration blame union contracts for many of U.S. carmakers' problems. On Wednesday, the White House remained non-committal about the bailout.

"Let us take a look at the plans and let them have their testimony and see if we can help them," said spokeswoman Dana Perino. "We don't want anybody to be negatively affected by a bankruptcy, but sometimes companies do fail. That's just the way it is in our system."

The UAW fears that a bankruptcy would hurt not only union employees at General Motors or Chrysler, but also unionized suppliers. Ford's position, though not great, is less imminently dire.

Answering a question about serious union concessions in the last two contract negotiations, Gettelfinger suggested that future union members should expect fewer perks than their predecessors.

"But the word concessions — I used to cringe at that word. But now why hide from it, that's what we did," he conceded, according to a transcript of his remarks, following an unusual emergency meeting that gathered union leaders from the shops of the Big Three.

Specifically, Gettelfinger recommended Wednesday that UAW members allow the Big Three more time before they begin paying into a special health and welfare trust — called a voluntary employees' beneficiary association, or VEBA. Under last year's labor contract, carmakers were to begin paying into the union-administered VEBA on Jan. 1, 2010.

In addition, the UAW will look at suspending the jobs bank, a controversial program that guarantees laid-off workers most of their salary. Gettelfinger said only 3,500 or so workers remain in this program, which once numbered more than 80,000.

The union's legislative director, Alan Reuther, hoped lawmakers would see the union moves as a good-faith effort to share the pain.

"I think this indicates that UAW members are willing to do their part in terms of sacrifices to help in any restructuring. Obviously, the other stakeholders have to be at the table too," he told McClatchy. "I would hope members would see this as positive, and as proof that a restructuring can succeed and lead to viable businesses in the future.

Collectively, the Big Three presented viability plans to Congress on Tuesday that ask for $34 billion in direct loans and stand-by lines of credit. In exchange, they promised to cut costs, trim their dealership networks, curb executive pay and move more swiftly to build hybrid vehicles and cars with better fuel economy.

That same day, they reported dismal November sales that amounted to the biggest collective monthly drop in a quarter century.

Against that backdrop, Congress on Thursday begins two days of hearings on the bailout request.

"The Big Three plans help," Tester said. "But there are still questions, like why was it $25 billion two weeks ago and $34 billion today?"

Senate Majority Leader Harry Reid, D-Nev., said on Wednesday that he isn't committed to bringing any aid plan to the full Senate and that he and key committee chairmen will determine "at the end of the week the best course to pursue," including "whether to move forward with legislation to provide emergency funds."

Senate Banking Committee Chairman Christopher Dodd, D-Conn., who'll preside over Thursday's hearing, also was noncommittal. His first witness on Thursday will be Acting Comptroller General Gene Dodaro, who heads the Government Accountability Office.

By putting Dodaro first, it assures that senators and the American public will hear from an objective source before carmakers testify. Dodaro will discuss alternative methods of government support to boost the struggling auto manufacturers.

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