Auto Industry Update

By Ruben, George | Monthly Labor Review, May 1988 | Go to article overview

Auto Industry Update


Ruben, George, Monthly Labor Review


Auto industry update

There were several major occurrences in the automobile industry in the early months of 1988, led by clashes between Chrysler Corp. and the United Automobile Workers (UAW) over cuts in operations that did not bode well for their contract bargaining later inthe year. In contrast, the bargaining relationship between the UAW and Ford Motor Co. was enhanced when the employees received a sizable profit-sharing distribution.

The controversy at Chrysler erupted when the company announced plans to close its assembly and stamping operations in Kenosha, WI, and later announced plans to sell its Acustar, Inc. parts-making subsidiary. Chrysler claimed that closing of the Kenosha operations was mandated by overcapacity in the industry resulting from "a shrinking U.S. automotive market," and by the fact that plants in the manufacturing complex-some dating back to 1902-were the least efficient in its chain because of their outmoded layout.

Reactions to the closing were bitter. Wisconsin Governor Tommy G. Thompson, voicing the contention of the UAW and local government officials, said Chrysler had made a contractual commitment to continue building vehicles in Kenosha for at least 5 years. The Governor claimed the commitment had been made after Chrysler acquired the complex as part of its August 1987 purchase of American Motors Corp.

The dispute eased somewhat when Chrysler announced that it would divert all of its profits from 1988 vehicle sales in Wisconsin into a fund to aid the 5,500 workers affected by the closing. The allocation was expected to total $20 million. Company chairman Lee Iacocca said tha"time and the marketplace just caught up with an 86-year-old plant," and that Chrysler had not made a legal commitment to keep the plants open.

Despite Chrysler's action, some of the employees to be affected by the closing filed a suit in the Federal courts to block the use of Federal money for the company's new Jefferson Avenue Plant in Detroit, mi. In the suit, the plaintiffs charged that Chrysler was not eligible for a $15 million Federal grant because it was shifting jobs from Kenosha to the detriment of the Kenosha workers. According to the plaintiffs, Federal law prohibits financial aid to companies engaging in such detrimental shifts of operations.

The Acustar controversy turned out better for the UAW, as Chrysler modified its plan to sell all of the 11 parts manufacturing plants, which employ 11,000 members of the union. Under the new plan, only four plants will be sold, or closed, within 18 months. The four targeted facilities are Amplex Van Wert in Ohio and Trenton Chemical, Detroit Forge, and Detroit Trim in Michigan. About 2,000 employees are involved. The displaced employees will be put in a job bank and paid until they are placed in another plant.

When Chrysler first announced that it would close the parts plants, the company said it wanted to get out of parts production and focus on production of "new products and powertrains, rather than components." The UAW'S immediate contention was that Chrysler wanted to divest the operations because of a cash-flow problem and because one of the union's major demands in national bargaining later in 1988 will be adoption of stronger successorship contract clauses similar to those negotiated with Ford and General Motors in 1987. Under such clauses, companies acquiring operations from Ford and General Motors are required to retain all contract provisions as a condition of sale. In recent years, the domestic manufacturers-particularly General Motors-have claimed that parts produced internally are more costly than those purchased from outside suppliers. In the 1987 negotiations, General Motors was unsuccessful in efforts to overcome the claimed cost disparity by adopting pay rates in the parts plants lower than those in engine, transmission, and assembly plants.

Chrysler's decision to continue parts production was apparently influenced by the tactics adopted by the UAW. …

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