Views > November 13, 2007

Treaty of Detroit Repealed

The new contracts demonstrate that companies without unions, global labor markets and corporate power are dictating the future for American autoworkers—even for those who are in a union

By David Moberg

In 1950, General Motors and the United Auto Workers (UAW) signed the “Treaty of Detroit.” The landmark contract helped create mass prosperity and growing equality in America over the next two decades by setting a standard for other unions that even many non-union employers felt pressure to approximate. Workers shared in rising productivity, and unions shifted to employers many of the risks that come from life in a capitalist economy. The UAW won comprehensive health insurance, pensions, cost-of-living adjustments and income protection during economic downturns.

But the new contracts that the Big Three—GM, Chrysler and Ford—negotiated this fall effectively repeal that treaty. For more than three decades, auto executives, driven by the consequences of globalization and their own bumbling mismanagement, have attacked the treaty’s principles. The new contracts demonstrate that companies without unions, global labor markets and corporate power are dictating the future for American autoworkers—even for those who are in a union. The result will be greater insecurity and inequality for all workers, not just for the dwindling ranks of UAW members.

Two provisions stand out. First, the Big Three shifted their responsibility for retiree health insurance to a union-administered Voluntary Employee Beneficiary Association. That will likely shift future healthcare costs to retirees, given the unrealistic assumptions about its financing.

Second, companies will also pay newly hired workers in “non-core” jobs—which may account for as many as one-third of all jobs—approximately half of what current employees earn. What’s more, all new hires will have inferior pension and health plans.

The contract thus undermines the Treaty of Detroit’s principle of solidarity among workers, who all shared in the industry’s productivity increases. In exchange, the UAW won provisions for new investment in many plants. Important as they are, these provisions do not guarantee jobs, as Chrysler and GM demonstrated by announcing plans to layoff thousands shortly after workers ratified the contracts.

This sad outcome reflects historic failures of Big Three management, public policy and the UAW leadership. Management, mired in a short-term strategy that believes big vehicles mean big profits, failed to produce the efficient and high-quality vehicles that consumers increasingly demand.

Public policy failed on many counts. The auto companies resisted legislation requiring higher fuel efficiency standards that would have helped them transition to a more secure future. Despite former UAW President Walter Reuther’s prescient call in the ’50s for a small, efficient car, the union sided with management on efficiency standards.

Meanwhile, our dysfunctional healthcare system also hurt the Big Three’s ability to compete against imports and the foreign-owned nonunion factories in the United States. Yet the auto companies never threw their weight behind a single-payer public health insurance system, even though they knew from their operations in Canada that it is efficient. And organized labor failed to lead in building a united health care reform movement.

Critically, the UAW did not organize the new auto parts and assembly factories, making it harder to maintain union standards. The UAW’s task was made harder by labor’s historic failure to organize the South, where many of the new factories operate. The government, too, hindered those efforts by not protecting workers’ rights to organize.

Ultimately, the government and the UAW did not challenge corporate mismanagement enough to steer the companies toward the national interest. Now the new contract simply strenghthen worrisome trends: fewer good jobs, more inequality and greater insecurity for workers—in the auto industry and beyond.

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• Reader Comments

  It is business as usual in Detroit.The CEO’s get golden parachutes,even when they are inept and or just plain corrupt and the workers get no guarantees of healthcare or even of jobs.These people ,in the leadership of automobile making are so short sighted that Japan and Korea can easily out manuever U.S. automakers and take control of sales in this country and the world.We are in desperate times in this country and we are on the verge of much worse times,financially,environmentally,and politically. We need to make radical changes to our way of life and develope more mass transit,smaller mor efficient cars and the use of renewable energy to power those cars.We have done wonderful things in the past and we MUST start now to change our way of living.

  Posted by eddiemyboy1 on Nov 14, 2007 at 6:41 AM

  Leftists in eastern Connecticut find it disheartening that The Treaty of Detroit is not honored by a sovereignty attributable to treaties pre-dating the colonial revolution. The Mashantucket Pequots, federally-sanctioned operators of the monstrously profitable Foxwoods Casino, now face an organizing drive by the UAW focusing on the casino’s dealers. Earlier this week, the casino’s management purchased a full-page ad in local newspapers that purpoted to factually explain the UAW’s intent and purpose with this organizing drive. Sadly, Mr. Moberg’s on-point analysis, as evidenced by this report, was not available to the newspapers’ readership. Even more sadly, it very probably will not be made available to the highschool-aged children of working-class parents who are attending public schools, where curriculums continue to portray personal intiative and enterprise as honorable, self-indulgent egomaniacal behaviors unrelated to obligatory redemptions of social responsibility.  Will our children ever be taught that it is unconscionable to proffer employment that does not provide a living wage and democratic threshholds of personal security? More likely they will learn that employing illegal immigrants is good business, unions are evil, and chambers of commerce are social-service agencies. So it goes.

  Posted by Bud Wizer on Nov 14, 2007 at 7:56 AM

  We have exactly what we produce.  No more, no less. 

  The distribution of our products depends exactly on the attractiveness of those products: style, comfort, price, whatever.  The fact that the automobile producers have achieved some degree success and prosperity is an exact measurement of their customers satisfaction with those products. 

  No discussion of the auto industry after WWII is valid unless you understand the role of Robert Strange McNamara and W. Edwards Deming. 

  You know Robert Strange McNamara.  He was the one who brought you the Edsel and Vietnam. 

  Who the hell was W. Edwards Deming?  If you are an American, you probably do not know.  If you are Japanese, you definitely do know.  The Deming Prize is an annual industrial award for the greatest contribution to Japanese quality and productivity. 

  After WWII, old Strange preached cheapness and mass production.

  Old Edwards could not find support for his views on quality in the USA, and went to Japan and taught them quality control.

  Now Toyota is the biggest automotive company in the world, and the signatories of the Treaty of Detroit are sucking wind.  Whose fault is that?

  Quality sells.  Edwards and Toyota understand that.  McNamara and Detroit do not understand that.  So sad.

  Posted by scorp on Nov 14, 2007 at 11:22 AM

  Good point scorp, but I would add that the McNamarra model was not so much a production model as a social and political model, one that ensured a particular versoin of the US post war social settlement. It’s time is indeed over, but the casues of that go much further than the fact that Detroit refuses to produce vehicles that people want to buy. it is as much an outcome that the 1950’s and 60’s are long over, and that the model McNamara and the rest of the cold war liberals strived go cement in the US is one that the US establishemnt no longer has a use for, much in the way that US motorists no longer have a use for big clunky gas guzzling cars.

  Let’s face it, the US is now entering the end time of the post war, post cold war period, and the settling up is going to be painful for everybody except those at the top of the tree.

  Posted by Jane Doe on Nov 18, 2007 at 11:59 PM

  Jane -

  ... but I would add that the McNamarra (sic) model was not so much a production model as a social and political model, one that ensured a particular versoin (sic) of the US post war social settlement.

  Well, no.  You would be entirely mistaken. McNamara was numerical-analytical (and anal retentive), and showed no awareness of social factors at all.  His engagement in politics was incidental to his fearsome reputation as an analyst, and his catastrophic political failures were a direct result of the inapplicability of his analytical methods to political and social problems.  But he had JFK and LBJ snowed, just as he had previously snowed the entire American automobile industry.

  McNamara’s reputation at Ford was such that, when he made a mistake, the entire industry followed him.  Thus McNamara determined that a car with five minor defects was acceptable, in that it was more cost effective to correct those defects at the dealer or the maintenance level, or leave them uncorrected as the case might be, rather than to pay the cost of quality. 

  This, of course, was exactly opposite what Demings was teaching the Japanese.  Consequently, the Japanese went in a very few short years from a reputation for cheap low-tech stuff to extremely hi-tech, quality products.  When Detroit realized what was happening in Japan, they had to struggle to play catch-up while saddled with unions that were more interested in building their bureaucracy than in building cars.  Just as educators are more interested in building their bureaucracies than in teaching children. 

  ... It’s time is indeed over, but the casues (sic) of that go much further than the fact that Detroit refuses to produce vehicles that people want to buy.

  Well, no.  That is a politically correct statement.  Like all politically correct statements, it is patently absurd, if not dim-witted. 

  You can buy an electrical vehicle if you wish.  You can buy a hybrid vehicle if you wish.  You can buy a Mo-Ped or a pair of roller skates.  The law of supply and demand is as absolute as the law of gravity, until the government starts to interfere.  You can tell exactly “what people want ot buy” by where they put their money.

  Let’s face it, the US is now entering the end time of the post war, post cold war period, and the settling up is going to be painful for everybody except those at the top of the tree.

  Well, no.  That is a politically correct socialist statement.  Like all politically correct socialist statements, it is patently dim-witted, if not insane.

  Posted by scorp on Nov 19, 2007 at 4:03 AM

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