The Wall Street Journal-20080118-UAW Sees Big 3 Saving --36-1-000 a Car
Return to: The_Wall_Street_Journal-20080118
UAW Sees Big 3 Saving $1,000 a Car
United Auto Workers President Ron Gettelfinger said the union's new labor contract with Detroit's Big Three auto makers should save the trio about $1,000 a car built in the U.S.
Mr. Gettelfinger, giving one of his first public speeches since signing the pact last fall, said the UAW has proven it can be flexible in helping U.S. auto makers better compete with foreign rivals. He specifically referenced General Motors Corp., which has seen its UAW work force dwindle to about 70,000 from hundreds of thousands of people in recent decades. The downsizing at GM, Mr. Gettelfinger insisted, proves the UAW can't simply seek "status quo."
The UAW leader, speaking at a labor organization's dinner in Southfield, Mich., said the union is discussing further cuts with Chrysler LLC, which was purchased last year by private-equity firm Cerberus Capital Management LP. He didn't quantify the size of the cuts, and he didn't indicate whether the UAW will agree to what Chrysler is seeking.
Each of the Big Three auto makers is cutting costs in the face of slumping U.S. auto sales and a consistent loss of market share. The situation at Chrysler has been particularly dire, leaving Cerberus with potentially a bigger restructuring project than it had expected.
When asked if Chrysler has adequate capital to execute a massive restructuring, Mr. Gettelfinger said, "I think they do, I'm confident they do."
Mr. Gettelfinger, who describes himself as having a "decent relationship" with Cerberus founder Stephen Feinberg, told reporters that the firm "got caught off guard" by the government's move to tighten legislation on fuel-economy standards. The tightening of standards known as Corporate Average Fuel Economy, or CAFE, is expected to cost auto makers billions of dollars and force them to significantly revamp their product portfolios.
Mr. Gettelfinger said one of the next major frontiers for the UAW is getting one of the auto makers to build a so-called B-segment car, or subcompact car, in the U.S. He said the UAW has helped each of the companies lower the cost of building cars to the point where "I think it's time for them to take this into consideration."
Even though U.S. demand is growing for subcompact cars, not one U.S. or foreign auto maker builds such vehicles in the country. GM ships its B-segment cars from South Korea, while Chrysler has a deal with a Chinese auto maker to start shipping B-segment cars to the U.S. in the near future.
Chrysler Chief Executive Robert Nardelli and Vice Chairman Jim Press, both brought in by Cerberus, have made catching up in hybrids, electric vehicles and other fuel-saving technologies a major part of the strategy they are planning.
At the North American International Auto Show in Detroit earlier this week, Chrysler unveiled concepts for three battery-powered vehicles the company could produce in the future.
But in internal meetings, Mr. Nardelli has made clear Chrysler faces a tough task. Building hybrids and electric cars will require "new power trains, new transmissions, new axles," he said in a meeting with engineers in December, according to two people who were there. "And it's going to cost billions -- billions of dollars."
