Maybe the UAW should take note of the SEIU’s belated recognition of the economic situation in California.  After blowing up a potential compromise on the auto bailout last night by refusing to compromise on concessions, the union all but guaranteed that one or more of the Big Three will declare bankruptcy and potentially void their labor agreements.  SEIU California has begun to show more flexibility:

Has California’s growing budget mess pushed public employee unions into retreat?

Take Service Employees International Union Local 1000, which represents 95,000 state workers in a wide variety of jobs. Last week local President Yvonne Walker told The State Worker, “There are going to have to be cuts. We’re going to have to raise taxes” to address the state’s cash crunch.

This was the same union leader who last month, after Gov. Arnold Schwarzenegger proposed furloughs and other measures to trim the budget deficit, said, “We’ll fight back with everything that we have.”

Between Walker’s two quotes, the governor threatened to detonate the labor equivalent of a nuclear bomb: layoffs. It’s one thing a California governor can unleash without negotiating with unions or legislators.

Last night, Bob Corker (R-TN) had $15 billion lined up for the UAW’s employers if only the union would agree to renegotiate their contracts to get pay equity with other autoworkers in the country by a date certain.  The UAW refused to make that commitment, which any lender or creditor would consider a key point for resolution before restructuring or giving additional loans.  The lack of those three words, “by date certain”, showed that the UAW either didn’t understand the stake they had in these negotiations or figured that no one would defy them in the end.

The Big Three won’t compete effectively until they lower their labor costs and produce better management.  As Tom Coburn told the Senate, GM and Toyota sold roughly the same number of vehicles over the last year, but Toyota turned a $1.7 billion profit while GM lost around $9 billion.  That doesn’t happen by accident.  Until these automakers and their unions resolve the structural problems that creates this kind of unprofitability, they are a terrible credit risk and a lousy investment — and neither management nor labor shows much willingness to change for the taxpayer subsidies they now demand.

What happens now to the UAW?  GM at least will have to file for Chapter 11 quickly for protection from its creditors, and that means that they can start from scratch on a labor agreement.  Ford will probably follow suit, and Chrysler may have to entertain thoughts of a lockout to get enough concessions to remain competitive.  The UAW will have almost no choice but to make significant concessions or wind up losing the jobs of two million members in the process.  The UAW may well go out of business otherwise — which was the conclusion the California SEIU seems to have finally reached a little sooner in the process than their UAW brothers.

Tags: California