I don't know how many times I heard it during those dark moments of early 2009, when it looked like the entire American auto industry was about to go down the tubes:
It doesn't matter if the automakers recover, because the union will just sink them again.
As Ford (NYSE: F) and General Motors (NYSE: GM) prepare to report their most profitable year in ages, should shareholders be worried about the United Auto Workers?
Part of the problem, part of the solution?
There's no question that the UAW deserves some of the blame for the near-demise of the three Detroit automakers. The union's leadership, like many in the automakers' executive suites, struggled to adjust their expectations to a drastically changed world. In a nutshell, Detroit could no longer afford the lifestyle to which it had become accustomed.
But even before the acute crisis that drove GM and Chrysler into bankruptcy court, there were signs that the UAW, like the automakers, was beginning to come to terms with reality. A landmark set of labor contracts signed in 2007 allowed the automakers to get billions of dollars in liabilities off of their balance sheets and brought their running costs into rough parity with the Asian automakers' U.S. operations.
Pushing, but not threatening
And now? While UAW leader Bob King has recently insisted that workers receive "their fair share of the upside" of the automakers' newfound profitability, he has also signaled that the union would maintain an open mind as to the specifics, acknowledging that a simple return to the bloated past isn't in the cards. King is clearly mindful of the recent past, as well as of the value of the equity stakes in GM and Chrysler that the union received during the bailouts.
On the other side, Ford CEO Alan Mulally, like leaders at GM, has sounded conciliatory notes, regularly referring to the union as a "partner" and including UAW leadership in key events. Both companies have hinted that an expanded profit-sharing arrangement might be on the table when contract negotiations commence later this year, and Chrysler is likely to follow suit.
I think when all is said and done, the UAW and the automakers will agree on a contract that acknowledges the cyclicality of the industry, rewarding workers when times are good and limiting costs to the automakers when times are bad. Some sort of broad profit-sharing plan, perhaps tied to indicators like vehicle quality, as a GM executive recently suggested, seems the most likely route forward. Put another way, I don't think Ford and GM shareholders need to worry too much about the upcoming labor negotiations, though obviously they will bear close watching.
Toyota (NYSE: TM) and Honda (NYSE: HMC) shareholders, on the other hand, might have something to worry about.
The real threat posed by the UAW
The reasonable, even conciliatory, tone of the UAW leadership's relationships with the Detroit automakers might lead a casual observer to think that the union has gone soft, content to lobby for incremental improvements to its much-diminished status quo.
But the truth is, it just has a new target: The UAW is seeking to organize the so-called "transplants," the U.S. manufacturing operations of foreign automakers. Toyota, Honda, Nissan, Hyundai, and BMW all have significant manufacturing here, and none of those factories are union shops -- a situation the union sees as a threat to its existing members.
That may soon change. The UAW recently fired a warning shot, demanding that those automakers agree to a set of "fair bargaining" principles that will allow it to try to organize workers at those plants. So far none have, but the union is upping the pressure, planning a series of protests at automaker facilities around the world, at dealerships, and in places like Washington and Wall Street.
Soon -- within 90 days, according to King -- the union will name its "target," the automaker that will be the focus of its organizing efforts in the near term. That lucky automaker can expect all manner of pickets, harassment, and media pressure as the UAW seeks to flex its muscles for the first time in years.
And that is unlikely to hurt the union's relationship with its newfound "partners" in Detroit.
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