Big Three: Finding the Right Balance

by : Anthony Fontanelle

The future of the American automotive industry lies in the hands of today's auto executives. Amid the series of hardships, auto execs are expected to be tough and clever to find the right balance in making decisions and affirming deals for the betterment of the industry that they are in.

Detroit's Big Three seems to be enduring a limp as they walk towards the bargaining table. The once-influential clout appears blurry. As such, workers are worried about the forthcoming United Auto Workers (UAW) talks. Would the result be detrimental to them?

A sense of urgency is making Big Three's nerves rattle. This time around, the General Motors Corp., the Ford Motor Co. and the Chrysler Group have to grab the best deal for everyone. Since 2003, when the last national contracts were signed, tens of thousands of auto jobs in the United States have vanished. This is the aftermath of the automakers turnaround plan amid escalating losses. Moreover, increasing health care expenses have widened the significant difference in labor costs between the Big Three and their fast-rising foreign rivals led by the Toyota Motor Corp.

A hot debate likened to a delivering tens of thousand volts of electricity is anticipated to occur. "There's no question these talks are critical to the competitiveness of American manufacturing," said John Snow, the chairman of Cerberus Capital Management, the New York private-equity firm that is buying Chrysler from its German parent DaimlerChrysler AG.

Experts in the industry believe this round of contract talks will determine whether GM, Ford and Chrysler get back in the black, or tilt further toward financial catastrophe. Overall, the Big Three lost more than $16 billion in the previous year, with Ford alone accounting for $12.6 billion in losses.

For the UAW, the stakes are nothing less than the survival of a union and the preservation of jobs, wages and benefits dependent on the shaky health of the Big Three. While UAW President Ron Gettelfinger has said the union was not entering the talks in a "concessionary mode," there is little uncertainty that the Big Three will push hard for relief from growing health costs.

With their combined obligations estimated at over $100 billion, the Big Three hopes for a pact that could create a union-controlled fund to administer the health care of two million current and retired employees as well as their families.

By eliminating future health care costs off their responsibilities, the Big Three would have an aggressive opportunity to become profitable again. But without a dramatic slash on labor costs, Detroit automakers will continue losing cash in the race to compete with flourishing foreign auto manufacturers.

"Going back in history, these companies have financially been the rock of Gibraltar," said David Cole, the director of the Center for Automotive Research in Ann Arbor. "That's not true anymore. The rock of Gibraltar has turned into a sandbar."

Some workers say the rivers of red ink are as much the fault of management blunders as the cost of union labor. "The corporations are crying poor," said Gary Walkowicz, a worker at Ford's Dearborn truck plant. "The big majority of workers in my plant feel we've given too many concessions and don't want to give any more."

On the other hand, the Big Three execs privately said that the critical decisions are in the hands of Gettelfinger, the pragmatic UAW president. "We have nothing but accolades for Ron and the way he runs the union," intimated one executive. "But it's incumbent on all of us - the companies and the union - to fix our broken business model."