Detroit: Behind the UAW's Striking Ways

After two strikes in three weeks, it's beginning to feel like throwback days here in Detroit. With workers once again streaming out of plant gates and hoisting picket signs, it's like Walter Reuther and Jimmy Hoffa are back at the bargaining table, flexing their muscle to get companies to bend to their will. The reality, though, is that the United Auto Workers, like Detroit's automakers, is fighting for its life.

UAW President Ron Gettelfinger, with his bachelor's in business and his Wall Street advisors, knows just how sick the automakers are. That's why he's willing to give them a break on benefits and wages this year. But to convince his restive and hidebound union to go along, he must make a show of strength to demonstrate he squeezed everything he could out of three companies that lost a combined $15 billion last year. "This is a delicate balancing act for Ron Gettelfinger because he's got to have all three of these companies make it," says auto analyst Dave Cole. "The union's future depends on it."

Wednesday's walkout at Chrysler ended up looking more like a lunch break. An hour after hitting the picket lines at 11 a.m., Gettelfinger had a deal. Chrysler's 1-hour strike made GM's two-day labor stoppage last month look like an epic confrontation. Yet while Chrysler's 45,000 workers went through its demi-drama, 74,000 GM workers across the country were lining up to ratify a contract full of concessions, like lower pay for new workers, no raises for four years and cutbacks on health care. The GM workers went for the deal by as much as two-to-one, in no small measure because of Gettelfinger's skillful stage management of that two-day strike—the first national walkout at GM in nearly four decades.

Chrysler workers are getting roughly the same deal, according to the company, including shifting retiree health care benefits to a special trust controlled by the union, which saves the company billions. Another swift ratification is expected. "This gamesmanship is a very important step to let him do the tough bargaining," says Cole. "It gets the deal done."

Gettelfinger's mini-strikes, though, are not just meant to give him street cred with his members. He's also trying to scare the hell out of the companies, who confront their own mortality each day that they can't build a car while Toyota can. Chrysler, though, now run by the private equity sharpies at Cerberus Capital Management, took a pre-emptive strike against Gettelfinger. Before he could pull the trigger on his "strike," Chrysler temporarily shut down five factories this week. It's hard to hurt a factory that isn't building cars.

Of course, Chrysler has the flexibility to take such an action because its sales are so abysmal. It has more than three month's worth of inventory sitting on dealers' lots—more than enough to tide it over through any of the union's picket-line posturing. Perhaps that's what brought this strike to such a speedy conclusion. What's the point of striking a company that can't sell what it's building?

As details emerge on the Chrysler deal, though, it's likely they won't have made the kind of future product commitments to the UAW that GM did. GM shocked Detroit by laying out its hand on future models through 2011—including such finite details as where it will build cars like the Chevy Volt plug-in electric car (Detroit) and an unnamed small car (Lordstown, Ohio). Future product plans are usually a zealously guarded secret in the car business, but GM felt it had to make those promises public to get Gettelfinger to accept a concessionary deal. Chrysler's new owners, by their very nature as a private company, are less inclined to make their playbook public.

In fact, they haven't even written it yet, as new Chrysler President Jim Press <> made clear to me last week in an interview. Press and new CEO Bob Nardelli are overhauling Chrysler's product line, with an eye toward cutting many overlapping models (especially SUVs). "Instead of two of our vehicles competing against each other, we should have a broader range where they compliment each other and compete with vehicles from companies outside of Chrysler," Press said. "That's the analysis and study we're going through right now."

What weakened Cerberus' hand, though, is the fact that Chrysler is Detroit's only pure domestic play. Chrysler depends almost entirely on its home market for its sales, while GM and Ford have vast overseas operations. (GM makes more money and sells more Buicks in China than it does in the United States.) And those foreign outposts give GM and Ford a bargaining chip with the UAW: Play ball or we'll outsource production overseas. Chrysler, though, has nowhere to turn outside of North America. It is working on a deal with a Chinese automaker to produce the tiny Dodge Hornet car, which the UAW undoubtedly brought up at the bargaining table. Ultimately, though, most analysts expect Cerberus to eventually sell Chrysler to an international automaker to give Detroit's small fry a global footprint.

Next up in the UAW's sights is Ford, which is Motown's sickest patient. Ford lost $12.6 billion last year and it still has too many guzzlers and not enough sippers in its lineup. Ford' s U.S. sales dropped a breathtaking 21 percent last month. The early word from the Ford bargaining table is that it could get the swiftest settlement yet. To accomplish that, though, Ford's strike would have to last less than one hour. That could mean Gettelfinger won't strike Ford at all. But that wouldn't follow the pattern of brinksmanship bargaining he's established this year. In this delicate dance to avert disaster in Detroit, Gettelfinger appears to have concluded that any deal must first pass through defiance.

Detroit: Behind the UAW's Striking Ways | Business