INTERVIEW

EXPERT: WAGE SHIFT SAVED JOBS IN DAYTON

* An automotive expert says the foresight of the IUE led to the acceptance of tiered wages, and kept jobs in Dayton.

David Cole, 61, is a leading automotive expert and a regular consultant to General Motors and many other automakers. His father was president of GM from 1968 to 1974. Currently Cole is director of the Office for the Study of Automotive Transportation at the University of Michigan.

The Dayton Daily News interviewed Cole about tiered wage contracts and the future of the auto industry. The following is a transcript of that interview.

Q: When tiered contracts were first introduced by GM in labor negotiations, what was your reaction to the potential short-term and long-term effects?

A: I think GM came to realize some of the competitive realities in its industry, particularly in the challenges facing automotive suppliers. They just couldn't continue paying workers $20 an hour and stay competitive. Long-term, that high wage rate has caused more unemployment, and we have seen that with Delphi, which hasn't expanded its operations at all. With a more permanently tiered wage structure, you would see Delphi expanding and adding jobs much more.

Q: Would Dayton still have 20,000 GM workers if local unions hadn't accepted tiered contracts?

A: I don't think Dayton would have a fraction of its jobs. Tiering has been the key factor in Dayton keeping its high employment level.

Q: More than half the Miami Valley's GM plants are working under two- or three-tier wage contracts. Why is it that Dayton unions have been more accepting of these contracts than any other GM town?

A: It's partly the IUE's (International Union of Electronic Workers) presence in Dayton. The IUE has a better understanding of the broader business picture than the United Auto Workers. The IUE's role is a lot smaller than the UAW in the automotive industry and tiering is a union-to-union way for the IUE to gain competitive advantage.

Q: Many of the tiered contracts start new workers around $8 an hour. Do you consider that to be both a competitive wage for the company and a fair wage for the employee?

A: For someone with modest skills, that's a good wage. I don't think wages are a Mexico-versus-United States issue any more. The low-labor-rate jobs are largely already in Mexico. I don't think the (tiered contract) issue comes down to a comparison with Mexico. It has more to do with the wage structure in parts plants within the Big Three automakers versus parts plants outside of the Big Three. In UAW plants, workers reach (top scale) so quickly that companies don't get much benefit from the lower wage rate. And that's where the competition kills companies like GM.

Q: Would more GM towns like Saginaw, Mich., have salvaged thousands of lost jobs if they had adopted tiered contracts?

A: A lot of jobs could have been saved. The lack of wage flexibility by unions has been a real curse on jobs. Auto parts suppliers down the street are paying $10 an hour while Delphi is paying its people $18 or $19 an hour.

Q: Some corporate executives have said they regret implementing tiered contracts because morale among their work force is severely damaged over time. Is bad morale something more companies should worry about once they implement tiering?

A: It's a huge issue to worry about for both company and union. Historically, the UAW has been dead-set against permanent tiered wage structure because it creates first- and second-class citizens. And that's a very valid concern. The reality for companies is that if we don't do this, we'll have to outsource or cut back on jobs. Delphi and other companies can't continue to survive when they are spotting their competition such a significant cost advantage in wages. It's really simple. If you're paying your people $20 and your competition is paying people $12, you are in trouble.

Q: Are tiered contracts something companies use to intentionally cause turmoil among workers and the union?

A: I think the companies would like to pay a uniform wage rate, if they could. I don't think they want to destroy unions; that kind of thinking has passed. The dominant issue today is how can we be competitive. How can we do the jobs we are doing and be profitable? Union versus non-union is irrelevant to companies today. Some companies have a young labor force and don't have to pay the health care costs that a GM does. And the newer automotive companies like Honda or Toyota can be much more selective in the people they choose for jobs. Honda hires no one that had a poor attendance record at other jobs, and they have certain skills the company is looking for. And a younger work force is more flexible and not as set in its ways like the labor force GM has. That's a huge advantage when it comes to productivity and ultimately making a profit.

Q: Do you believe companies will eventually face massive labor unrest when young workers at the bottom tier of these contracts become the majority on the shop floors?

A: It depends on how well companies select, treat and train the employees they have. If they don't treat people well - that will lead to unrest. I think there will be great unrest within unions because of tiers. Unions are more political organizations that are much slower to change than companies. Unions are going to have a real hard time keeping their younger members on the path. They tend to be more independent and associated less with the labor movement. Unions will have a lot tougher time dealing with the younger workers than the companies.

Q: Who is the villain when it comes to tiered contracts? The company? The union? A competitive global economy?

A: All the above. None of the above. It's mainly the global economy demands being made on companies. There are tremendous demands on cost reduction, technology, and quality. Whether it's management not doing a good job at running the operation or unions resisting change, both are the culprits. We live in the most competitive world industries have ever faced. Human beings and companies both resist change with passion.