As men, Rick Wagoner and Ron Gettelfinger couldn’t be more different.
As leaders, they’re painfully similar. The institutions they lead – Wagoner’s General Motors Corp. and Gettelfinger’s United Auto Workers – are facing perhaps the most serious challenges of their mutual existence. Monday’s tentative deal to cut GM’s health-care costs by $1 billion per year underscores that they need each other to survive.
This is grim. Yes, both sides delivered a landmark deal that gives Wagoner a temporary reprieve from the wrath of investors. And, yes, Gettelfinger averted the likelihood that Wagoner would unilaterally impose cuts on UAW members and retirees, forcing the union into an ugly two- front battle with a financially strapped GM and a bankrupt Delphi Corp.
But these two giants – GM and the UAW – did what they did because both are weak, not because either is strong. A strong union doesn’t set precedent by undoing decades of gains at the bargaining table unless it concludes it has no choice, and a strong company purported to have impressive financial muscle doesn’t put its most valuable asset on the block.
Yet here was the 70-year-old UAW, despite a growing U.S. economy and strong car sales, agreeing to substantial rollbacks in health-care benefits in the middle of a four-year contract that its leaders said it would not reopen but effectively did because the deal is subject to ratification. The union’s actions, more than GM’s words, stand as the best indication yet that GM’s health is not good.
And here was the 98-year-old GM, having lost $4.1 billion in North America so far this year, announcing plans to sell a controlling stake in its finance company, GMAC, to a “strategic partner” because the automaker’s dismal credit ratings are damaging GMAC’s profitability. GM is effectively throwing its favorite son out of the house to save the son and save the house.
“It’s a survival thing,” says Patrick Anderson, principal in the Anderson Economic Group of East Lansing, Mich. “It’s no longer workers versus management. It’s your team versus the other teams that just keep getting better.”
The bottom line for the UAW and Detroit’s automakers – particularly GM and Ford Motor Co. – is that their collective problems, born of decades of expedient but economically indefensible actions, can be solved only together.
The UAW and Ford did it in the bailout of Visteon Corp.; GM and the UAW are doing it now with health care; all of them will be doing it again in the 2007 contract talks.
A “cooperative approach to problem- solving clearly gets the best results,” Wagoner told GM employees Monday morning. “We’re trying to address the issues we face very proactively. We’re not just relying on cost cuts. We’re confident … we’ll arrive back at a profitable position.”
Here’s hoping, but we’ve heard that before. Many times.
