Auto Industry's Flat Tire

IN A RARE DISPLAY of rank and file truculence, members of the United Automobile Workers (UAW) this week overwhelmingly rejected a contract negotiated for them by their leaders and the federally subsidized Chrysler Corporation. Chrysler workers had a simple reason for their resounding "no" vote: After working three years under a 1979 "bailout" contract-- which saved the company over $1 billion in wage reductions--the 50,000 men and women still employed by the shrunken auto maker feel entitled to more money.

The proposed agreement, however, would have continued UAW wage restraints aimed at restoring Chrysler's long-term corporate viability. Although the pact did reinstate the Cost-of-Living-Allowances that the workers gave up in 1979, it offered no immediate wage increases, and would have made future raises contingent on increases in Chrysler profits.

The contract rejection is a major defeat for retiring UAW president Douglas Fraser. Fraser, who under the terms of the 1979 deal became a member of Chrysler's board of directors, labored vigorously to persuade workers that the company was still shaky and needed more relief in labor costs. With almost 40,000 Chrysler assemblers on layoff, that job-saving plea should have made sense to the men and women still at work.

But Fraser's pitch ran into conflicting arguments from an unlikely source--Chrysler Chairman Lee A. lacocca. During the Chrysler UAW negotiations, the former Ford executive apparently developed what one local president called "terminal diarrhea of the month," and boasted that rising sales and the recent sale of Chrysler defense factories had left the corporation rolling in the dough. Iacocca's claims may have stoked investor faith in Chrysler stock, but they in turn raised if the company was in such great shape--they weren't reaping the economic benefits rather than being asked to sacrifice even more.

Not only was this union-company role reversal ironic, but failure of UAW leaders to push through more concessions also dashed hoped that an era of "new cooperation" between companies and unions had begun with the 1979 "bailout" contract. Unions in the import-battered industrial mainstays of the U.S. economy--steel, autos, and rubber--seemed about ready to hold down labor costs in exchange for job security and more voice in corporate decisions. Such "cooperation" has been a central theme of recent "re-industrialization" plans designed to arrest the desperate decline of the U.S. economy, Sen. Gary Hart (D-Col.), for instance, has proposed breaks for companies and unions that agree to hold down labor costs. And investment banker Felix Rohatyn, an advisor to Sen. Edward M. Kennedy '54 (D-Mass.), has proposed government-sponsored wage restraint pacts modeled on the New York City rescue deal he helped to negotiate.

But the workers' decision at Chrysler has reminded would be re-industrializes that the success of their labor-management scheme may ultimately depend on their credibility with the workers who will be asked to shoulder much of the cost for "retooling" American industry. Enen the most disciplined union will have a difficult time keeping its workers in line if they believe that they're not getting a fair share of the higher profits--or that companies aren't creating enough new jobs with the surplus money. And that is the lesson of the Chrysler contract rejection; in democratic unions like the UAW, rank and file discontent inevitably comes boiling to the surface.

This potential predicament poses two alternatives to the "new cooperation," neither of which the apostles of re-industrialization are yet willing to contemplate openly. Heavily unionized industries can simply be left to with eyen more drastically than they already have, with companies transferring their production facilities to low wage countries abroad. Or corporations, in league with friendly elected officials, could push for new restraints on union democracy--and maybe even labor unionism itself.