It doesn’t mean there will be a strike, but the United Auto Workers union has scheduled strike authorization votes for this week at all of its Chrysler locals. The first will be held this Wednesday at the local representing employees at the Chrysler Technical Center in Auburn Hills, Michigan. All locals will have completed their votes by this Sunday.

The strike vote is a typical union preparation for contract negotiations with an automaker. It’s sort of like being pre-approved for a loan. The negotiators go into the talks knowing that the union’s executive board has the power to call a strike whenever it chooses, and so does the automaker. The tactic is designed to give the UAW the maximum bargaining clout.

Though it has been commonly assumed that the UAW and the automakers each have so much to lose in a strike that there won’t be one this year, that calculus has not taken full account of comments made by the President of the UAW, Ron Gettelfinger. Gettelfinger has pointedly stated that labor costs are only about one-eighth of the cost of manufacturing an automobile and that union workers are as efficient as any in the world. He’s also made it clear that the union considers it important to preserve the gains they’ve made in past years.

Many analysts believe that the purchase of Chrysler by Cerberus Financial was predicated on an underlying assumption that the upcoming contract talks would result in substantial cuts in labor costs. Gettelfinger has said that he expects the UAW will get essentially the same contract at GM, Ford, and Chrysler. 

If both of those propositions are accurate, the chances of a strike at Chrysler may be very real.

Both General Motors and Ford have bought out substantial numbers of their union workers, significantly reducing the size of their union work forces. Chrysler has not. Both GM and Ford have foreign operations which bring in substantial revenue and have been subsidizing the domestic operations for years. Chrysler has none. Both GM and Ford have much more money than Chrysler: Ford’s credit line is more than double the amount of capital that Cerberus injected into Chrysler. 

In short, GM and Ford, if they have to, can live with a more expensive union contract than can Chrysler.

Add to this the perception by Chyrsler’s workers of the company’s management and the situation becomes very unpredictable.

Interviews with UAW members across the country, as reported in their local newspapers, make it abundantly clear that the union’s membership is in no mood to give anything back to the automakers. Members believe they have earned their current pay and benefits and, further, that the plight of the automakers is the product of management mistakes, mistakes for which the workers should not be obliged to pay.

Gettelfinger has, in fact, very little latitude in negotiating with the automakers. The common assumption is that the membership will do whatever its leaders tell it to do. But that assumption is almost certainly wrong. When the UAW agreed to relatively minor health care give-backs at Ford two years ago, the margin in the ratification vote was only two percent, 51% for to 49% against. That was after a heavy sales pitch from union leaders.

Chrysler’s selection of Robert Nardelli may turn out to be the one most important mistake the company could have made as it goes into contract negotiations. He earned a reputation as anti-worker when he was CEO of Home Depot, where he cut costs by firing higher paid employees and replacing them with lower paid workers. Chrysler workers are unlikely to trust current Chrysler management. Had Chrysler selected a trustworthy figure as its new president, or stuck with the old one – Tom LaSorda – at least through contract negotiations, this negative could have been avoided.

Then there’s the threat of Chapter Eleven bankruptcy. In Chapter Eleven, a company is restructured to continue operations by eliminating some of its liabilities. Among those liabilities are union contracts, which can be voided by the bankruptcy court. Some believe that the debt structure in the Cerberus buy-out was designed to allow the company to file Chapter Eleven, should it decide to do so. Most of the money Cerberus/Chrysler borrowed to fund the buy-out is secured by Chrysler’s assets. Those loans have first claim on the company assets in bankruptcy, which means that the holders of those loans have the most say in determining a restructuring plan during the Chapter Eleven cleansing process. 

While it is commonly assumed that a Chapter Eleven filing would be a death knell for a car company, most of the major airlines have survived Chapter Eleven and the possibility exists that, at least in Chrysler’s case, consumer confidence in the future of the company is already so low that it might actually increase if customers believed that bankruptcy court supervision would keep the company afloat.

Add to these suspicions the fact that major cuts in labor costs for Chrysler mean major cuts in lifestyle for the UAW members and the possibility that the union’s members may conclude they’re better off fighting now, rather than later, becomes very real. 

Moreover, striking Chrysler now could be the UAW’s smartest move.

Many of the Cerberus calculations were based on the assumption that their investment bankers could sell all of the bonds, i.e., debt, necessary to fund the purchase. But that didn’t happen. The New York investment banks brokering the debt deal are still holding $12 billion of Chrysler debt which they were unable to sell. To recoup, they are going to have to unload that debt over time. Anything that makes that debt less attractive is going to make it just that much harder for them to sell the securities and get their money back.

Striking Chrysler now would effectively eliminate the company’s income stream. A strike would devalue Chrysler’s debt instantly, making the debt unsaleable until the strike is resolved. The investment bankers are unlikely stand by and allow that to happen. They will want a strike settled quickly and in a manner that makes it clear that the company’s labor situation is stable and viable for the long-term. But, mostly, they’ll want it settled fast.

Moreover, as long as those banks hold that much Chrysler debt, they’re not going to tolerate a Chapter Eleven filing, either. That would probably wipe out most of the value of the Chrysler bonds they’re holding. Even were Chrysler later to file for Chapter Eleven, after a contract would be negotiated, the chances that the bankruptcy court would void the union contract (it doesn’t have to) diminish markedly. Since voiding the contract allows the union to strike again, a bankruptcy judge could well conclude that honoring a recently negotiated contract is in the company’s best interests because voiding it could so poison the company’s labor relations that restructuring could become an impossibility.

The loyalty of a union is to its members. Even if the UAW’s leadership were to forget that, its membership is not likely to do so.

Don’t bet against a strike at Chrysler.

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