The MacNeil/Lehrer Report; The Ford and UAW Pact

[Tease]

ROBERT MacNEIL [voice-over]: The United Auto Workers and the Ford Motor Company have negotiated a revolutionary new approach to labor relations in Detroit. Tonight, the men who made the deal discuss what it means.

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MacNEIL: Good evening. At midnight Saturday the United Auto Workers and the Ford Motor Company ended two weeks of hard negotiating with a tentative agreement on an historic deal. Tentative because the Auto Workers rank and file must still ratify the deal; historic because, for the first time, the union that's been called the nation's blue-collar elite has agreed to give up some previously negotiated wages and benefits. In exchange, Ford agreed to greater job security and profit-sharing. With Ford showing a billion-dollar loss last year and a third of its work force laid off, job security has become a major issue. Last month, talks about similar concessions at General Motors broke down, but UAW President Douglas Fraser said today he hasn't ruled out the possibility of resuming them. Commenting on the Ford agreement, Fraser said, "We have started down a new road." Tonight, the men who led his negotiating team and Ford's describe where that new road will lead. Jim?

JIM LEHRER: Robin, Ford, a company in trouble, needed to save money. The UAW, a unionin trouble, needed to save jobs. Under the agreement, the company saves its money because the union agreed to eliminate a 3% annual pay increase for production workers, to freeze cost-of-living increases for nine months, to forego a series of paid personal holidays, and to reduce the pay for beginning employees. The union got its job saving through the company's agreeing to put a two-year moratorium on plant closings related to doing business with outside suppliers and subcontractors, to reduce the work force through attrition rather than layoffs, to experiment with a lifetime employment idea, to institute a guaranteed-income program for senior employees laid off, and a profit-sharing plan for blue-collar workers. The two-year-plus agreement, if ratified, replaces the current contract, set to expire in September. It was Ford's dire financial condition that caused the company to push for negotiations now and the union to agree to the early opening. The man who did most of the agreeing and the talking for the UAW the last two weeks in Detroit was Donald Ephlin, the UAW international vice president in charge of the union's Ford department. Mr. Ephlin, was Ford's financial condition such that you felt you had to reach an agreement or else everything was lost?

DONALD EPHLIN: No, that was a consideration, but we were concerned with reaching an agreement that would stop the out-sourcing of our jobs. So we were interested in solving our problems. Of course, we knew we would have to help solve Ford's problems to do that.

LEHRER: As Robin said, G.M. and your union had negotiations that failed along these same lines. Was it the difference in the financial condition of the two companies, do you think, caused yours not to fail as G.M.'s did?

Mr. EPHLIN: Well, there's no question but that Ford's financial condition is much poorer than General Motors'. Where last year G.M. had a profit of $300 million, Ford will lose in excess of a billion dollars again. And we have had several plants closed in the Ford system, and there were more plants in jeopardy. The situation at G.M. has not been quite as bad although of late they are now getting into that circumstance. Beyond that, our members in Ford, because of these circumstances -- we have talked about the problem a great deal more, and I think they were conditioned a little bit more for this.

LEHRER: What I was getting at was this, Mr. Ephlin, in terms of when you sat down at the table in Detroit two weeks ago or so, did you sit down -- in your mind were you thinking, "We have got to come out of here with something because if we don't this company and all our jobs are really going to be in serious jeopardy?"

Mr. EPHLIN: Well, we mutually agreed to sit down and, as we described it, it was a problem-solving exercise, not negotiations in the true sense. We had problems that we wanted solved -- the loss of jobs and the lack of security that our members have at the moment. The sub-plan had gone broke and we stopped paying benefits. So we had a lot of problems.

LEHRER: The sub-plan?

Mr. EPHLIN: Supplemental unemployment plan.

LEHRER: When people are laid off they get some of their income for a certain period of time.

Mr. EPHLIN: Yes, that fund had been exhausted and -- so we had a number of problems that we wanted solved. And, of course, Ford Motor Company had been talking to us about their problems dealing with the hourly labor cost and so forth.

LEHRER: So there was a good atmosphere for agreement when you set out?

Mr. EPHLIN: Well, it's one of the unique things about these negotiations. There was no strike deadline or termination point to them. If we failed, we'd have just gone about our business, both of us. And we never did set any deadline. By mutual agreement we set a target and we made it.

LEHRER: How many jobs do you believe you have saved through this agreement? That was your number-one goal.

Mr. EPHLIN: Well, there are two pieces to it. First, we hope we have successfully stopped further loss of jobs through out-sourcing, and if we --

LEHRER: When you say "out-sourcing," you mean --

Mr. EPHLIN: Contracting out.

LEHRER: I see.

Mr. EPHLIN: Purchasing components outside the company or outside the country rather than making them in-house with our members doing the work. And, secondly, if we are successful in helping to get the company turned around, hopefully we can get some of our members on layoff recalled, and that's obviously a goal, too.

LEHRER: But there's nothing in the agreement itself that speaks to the problem of the 55,000 employees that have already been laid off. Is that correct?

Mr. EPHLIN: There are features of the agreement that go to benefit those people. The sub-plan receives an infusion of $70 million immediately on ratification so that it can start paying benefits again to those people. We extended their seniority recall rights so that they will remain attached to the company for a longer period of time. And in this fashion we hope to ease the burden of their unemployment, but it doesn't specify that they will be called back. We can't solve all the economic problems of the country at the bargaining table.

LEHRER: Sure. How much money in reduced pay and benefits is this going to cost your UAW-Ford workers through the term of the contract, assuming the contract runs through September, 1984?

Mr. EPHLIN: Well, our current agreement only ran to September, and there were no wage increases left in it other than cost-of-living. If you assume that we would have bargained for cost-of-living -- for annual-improvement factor, as in the past, the 3% that normally would have been in September with a new contract, and September of '83, would be skipped. There will be no general wage increase. The only other benefit that is gone is the paid personal holiday plan which we introduced at Ford, incidentally, in 1976 as a measure to reduce work time because we had high unemployment and boom time in the industry. So it was, I think, an ingenious scheme to reduce work time and to share the work among more people. We could afford it in 1976. We have now cancelled those holidays for the life of this agreement. Beyond that we have delayed some cost-of-living payments, but all the cost-of-living money will be restored before the end of the agreement. That which we do not receive in March of this year we will get back starting in December of '83. And before the contract expires we'll have it all back.

LEHRER: The figure that I read today, which was this was going to save Ford $1 billion over the 31 months of the contract, is that figure ballpark?

Mr. EPHLIN: Well, it depends on what assumptions you want to make about what would have been in the new agreement, how many employees will be working, and so forth. There's no question it will reduce their hourly labor cost and we recognize that; we did that with our eyes wide open, but we have made no effort to put any price on it.

LEHRER: I see. Are you concerned at all about the rank and file's willingness to ratify this agreement, Mr. Ephlin?

Mr. EPHLIN: Well, I'm always apprehensive going into a ratification. I have a council meeting in Chicago on Wednesday, but from the past action of the --

LEHRER: That's the national council of the union?

Mr. EPHLIN: Of the Ford workers.

LEHRER: Ford workers.

Mr. EPHLIN: Yes. It's about 200 people, the leadership of all the local unions around the country from Ford. They must vote on it first and if they approve, then we'll go to a rank-and-file ratification. But based on the way they have acted in the meetings we've held recently -- we had a 13-man local union committee meeting with us, and we think they are truly representative of the rank and file, so I'm very confident that the overwhelming majority will vote in favor of the agreement.

LEHRER: Thank you. Robin?

MacNEIL: The man who worked out the deal for Ford with the UAW is not a life-long auto industry man but an expert labor negotiator. He is Peter Pestillo, who was hired by Ford as vice president for labor relations two years ago. He previously worked at Goodrich and General Electric. Mr. Pestillo, what do the savings add up to for Ford? Is a billion dollars the right figure over 31 months?

PETER PESTILLO: Well, it's very interesting. We've agreed, as Mr. Ephlin suggested, that it's impossible to put a precise cost on it because of the variables yet to be introduced, so I wouldn't want to stand on a solid figure.

MacNEIL: What would have happened to the Ford Motor Company if you had not reached an agreement like this?

Mr. PESTILLO: Well, we'd have had, as we've both indicated, business as usual. Our contract doesn't expire until September. We would have continued producing as we have and made every effort to achieve what savings we could in and out of the labor agreement.

MacNEIL: But with losses projected from, as I read today, the January figures of a billion or more for 1982, was Ford seriously faced with the prospect of going out of business if you didn't achieve some cost savings like this?

Mr. PESTILLO: Well, the figures you read are the 1981, I believe. It's pretty hard to lose that much money in any one month no matter how big you are.

MacNEIL: No, I meant projected for a year.

Mr. PESTILLO: I think that's probably out of line. But we were not at risk of going out of business. We made no such claim to the union. We have indicated throughout that we had every intention of being a major auto producer both in and out of this country. This obviously gives us a very significant boost toward going forward to repair the damage done to our North American market.

MacNEIL: What can American car buyers expect in the way of savings from these concessions?

Mr. PESTILLO: Well, I think the consumer always benefits by the moderation of any cost. We obviously are in business to please the consumer. That's the way we're measured. We've got a number of marketing programs in place already. We have had since the beginning of the year. We've got 10 new car programs coming out over the next 30 months -- really, the major restructuring of our marketing is going to take place in that time. And surely the consumer is going to benefit by the savings we've achieved at this table.

MacNEIL: Are you considering resorting to anything like what General Motors was in its discussions with the UAW of price reductions directly connected with the wage concessions --

Mr. PESTILLO: Well, we've got a number of cars out there that are hundreds of dollars below their competing General Motors model. So we effectively have, in many cases, advanced the consumers the savings we are making under this agreement.

MacNEIL: I see. And what about the prices of cars yet to appear?

Mr. PESTILLO: Well, as I indicated, the consumer has got to benefit by any reduction in our cost structure.

MacNEIL: Yeah. Last fall you said that a plant in Alabama would close -- a Ford plant in Alabama -- after the workers there refused to accept Ford's suggestion of a 50% cut in their wages and benefits. Is that plant going to continue to close following this agreement?

Mr. PESTILLO: Well, that was the casting plant at Sheffield, Alabama, and I characterized it at the time as an act in isolation. It was in no way an effort to lure or threaten the UAW to come to the table; it was a single business event, if you will. Under this agreement we have agreed to study the decision to close the Sheffield, Alabama, plant as well as one other plant, a smaller valve plant in Northville, Michigan. We will undertake complete, comprehensive, good-faith reviews of each plant and have an agreement with the UAW that if we find that the plants cannot operate competitively we will not either revive the Northville plant or continue to operate the Sheffield plant.

MacNEIL: And does this agreement mean that for the 31 months no other Ford plants in this country will close?

Mr. PESTILLO: We've made a commitment to the UAW that except for volume problems, which we might suffer and don't expect to, that we will close none of our plants -- that's about 94 bargaining units -- through a 24-month period beginning with the ratification of the contract.

MacNEIL: I see. And you have been a negotiator in other major industries. Can you predict now whether this kind of agreement could possibly set a trend in industries outside the auto industry?

Mr. PESTILLO: Well, there are a number of features in it which we hope will set trends. We make a great effort in this agreement to work toward greater participation by our work force in the business process, and I think that's the wave of the future. We use the word deep in the agreement that's simply called "governance." I think if we learn to manage the change that's going to beset us if we don't manage it, we'll have a great advance. I look upon this to give us a significant competitive advantage, not in labor cost, but in labor-force motivation.

MacNEIL: How would that be felt by the average worker in your work force?

Mr. PESTILLO: Well, we're trying to improve workplace conditions and, with Don's leadership, we've done a great deal of that in what we call our employee-involvement programs. The payoff to the company is in a motivated worker, and we know that by the fact that our quality has been improving at a very rapid rate to the point that we have made a 48% improvement over the past two years, largely as a result of the concern and efforts of our workers.

MacNEIL: Well, thank you. Jim?

LEHRER: Mr. Ephlin, did you ask Ford to pass on the savings they were going to get by your wage and benefit concessions to the consumer through a lower price car, which I think that was the UAW request on the G.M. negotiations?

Mr. EPHLIN: During the period of time that that six-point framework was on the table at General Motors, we had made a proposal to Ford Motor Company, the same, identical proposal. Then the Ford Motor Company made their initial proposal to us and by common agreement, we went into a holding pattern until the General Motors negotiations were completed. If that agreement had been finalized at General Motors, it would have caused us to do totally different things at Ford than we were able to do under these circumstances.

LEHRER: In other words, when Ford came back -- in other words, you all never even considered that as a specific thing. Is that right, Mr. Pestillo?

Mr. PESTILLO: Sure, we considered it, but the thing I'd like to point out as the principal difference between the General Motors proposal and the Ford proposal, is the General Motors proposal is still only that, and the Ford proposal resulted in a labor agreement.We ought not to lose sight of that.

LEHRER: Sure. Do you think the UAW now will go back to G.M. and do you think, as a result of what you all have done at Ford, there could be a G.M. agreement similar to this?

Mr. EPHLIN: Well, I don't know what the timetable will be. There is no question that some of the things that we have achieved in this agreement will appear on other bargaining tables. As a matter of fact, during the General Motors talks, one of the features -- the guaranteed-income stream -- that we have in this new Ford package, was placed on the table over at General Motors.We have achieved not only that but several other innovative features which I expect will show up in other places.

Mr. PESTILLO: But neither Mr. Ephlin nor I make labor policy at General Motors.

LEHRER: Okay, right. Did the guaranteed-income part of this -- was that a hard one for you all at Ford to swallow?

Mr. PESTILLO: No, in fact, in large part we designed it. As I pointed out, we ran into a couple of world-class negotiators who improved it a little bit, but the proposal was one we'd been working on for more than a year because I have felt, as a number of our senior management felt, that if we're going to grow, this company, and get the kind of product we want, we've got to make as much of a commitment to our work force as they make to us.

LEHRER: And of course, you were, were you not, influenced by the fact that this is the pattern in the Japanese automobile industry?

Mr. PESTILLO: Well, as Don indicated, we studied Japan and we tried to take some features of their employment activity. I think the significant thing we've done in this is to take the Japanese method of having their labor relations policy be driven by their personnel system and not their legal system. So they do --

LEHRER: Explain that to me, will you?

Mr. PESTILLO: Well, they do a great deal more in terms of consultation with the hourly force in terms of flexibility and in terms of willing to operate in good faith. We heretofore have operated in large part on legal restriction, legal language. There is a trend toward changing that in this agreement. Which I hope is the wave of the future.

LEHRER: What was the situation going into these negotiations in terms of how the average worker at Ford felt in terms of the way the company treated them and communications and all that sort of thing? Was that a big problem?

Mr. EPHLIN: No, and in fact it had been improving. Obviously, a company as large as Ford is not even across the country, and we have situations where a relationship is not as good as we would like it to be, but overall it's not too bad, and we have been working for the past couple of years on improving not only the relationship but the sharing of information so that hourly employees have an opportunity to know what's happening in the company and to participate in the decision-making process in the program we call employee involvement. We did together go to Japan last summer with six hourly, local union leaders with us and some of Mr. Pestillo's staff and others. And so we have been sharing experiences and discussing common problems for a long period of time now.

LEHRER: Are you concerned at all, Mr. Ephlin, that some of your colleagues in the organized labor movement might come and say, "Hey, fellas, look what you have done. This giveback -- " -- that's what it's called in the labor management field: giving back something that you've already won -- " -- could start something that could have a ripple effect and we're all going to be confronted with this because such a big union negotiated this"?

Mr. EPHLIN: Well, we obviously are concerned, and would have preferred to be able to do different things at the bargaining table than we were. However, the items that we did remove from this new agreement -- as I mentioned: paid personal holiday plan -- does not exist in any other large industry in our country, so that no one need worry about that one. Our wage rates have gone up at a reasonably good clip over the years, and we have protection against inflation through our cost-of-living arrangement, even in this new agreement. Our wage rates, while we don't make any apologies for what happened in the past, got out of line in recent years a little bit because of the high inflation in our country. We are doing what we're doing to try to stimulate the auto industry. Among other things we hope not only that we help the Ford Motor Company, but it might have some influence on Washington to do what must be done to save this industry. We didn't save it with this agreement. We know that.

LEHRER: Yeah, Mr. Pestillo, Ford is still not out of the woods, is it, as a result of this agreement?

Mr. PESTILLO: No. We're coming out of the woods. We think we know the way out and --

LEHRER: What is the way out?

Mr. PESTILLO: Well, we've got new products coming in places. I've indicated we'll have 10 new products coming out over the next 30 months. We've introduced a new car every six months for a year-plus now, and we'll continue that. So we've got the product program in place or in the market. Beyond that this industry -- not just this company -- can't prosper without volume, and we can't have volume in a sagging economy.

LEHRER: And as long as the recession and high interest rates continue, you can negotiate all kinds of great deals with Mr. Ephlin here, and it isn't going to work. Isn't that right?

Mr. PESTILLO: Oh, it's going to work. It's not going to eliminate the pain for this industry and this country.

LEHRER: You're a pro in this business of negotiating contracts from the management side.What are you going to tell people out there in industry who are now going to come to you and say, "Okay, Pestillo. Tell us how you did it. How did you get Ephlin and UAW to agree to this incredible thing? We'd love to do the same thing."

Mr. PESTILLO: Well, I'll do no book on it. I'll at least say that.

LEHRER: You promise? There's not going to be a Pestillo "how-I-did-it" book?

Mr. PESTILLO: Absolutely not. Perhaps I can't explain. No, I think that the opening day of negotiations we probably put that issue to rest when we both made assertions across the table that we intended true collective bargaining, and that's what resulted. We gave a little bit and got a little bit, and we both did something. I think we did some creative things, and I would urge upon some of my colleagues in management a little more imagination. But this wasn't done with style or mirrors, it was done with professionalism.

Mr. EPHLIN: When people concern themselves with our giveaway, we made some sacrifices, but we think that the scales were pretty well balanced. Not only did we getsome control over the out-sourcing and plant closing, we do have profit-sharing in the event the industry comes back to --

LEHRER: Assume that it makes a profit. Right, yeah.

Mr. EPHLIN: We also have a contract reopener, if volume reaches a certain level, so that we can go back to the table and talk about things again under better circumstances.

LEHRER: I didn't mention that as one of the things, that if the industry and Ford in particular takes off, then you can come back and negotiate a new contract to try to get back some of these things that you've given up.

Mr. EPHLIN: Oh, we'd be back for more.

LEHRER: I see.

Mr. PESTILLO: They're not shy, even though we've done well so far.

Mr. EPHLIN: In addition we have the guaranteed-income stream which, aside from giving a measure of security to workers who know if they get laid off they would receive this benefit -- that's very helpful to them -- this is a beginning of changing the way management makes decisions. It's costly for them to close plants. If the Northville decision were being made under this new agreement, it might come out differently.

LEHRER: Do you agree with that?

Mr. PESTILLO: Oh, sure. Our president the other day told the union committee this motivates us to find work for people. It clearly does.

LEHRER: Robin?

MacNEIL: Mr. Ephlin, why is the guaranteed-income experimental to two plants? Could you tell us how that's going to work and why it's experimental?

Mr. EPHLIN: No, the guaranteed-income stream applies to all plants. All Ford workers who are at work on the effective date of the contract that have 15 years of --

MacNEIL: I guess what I mean is the lifetime --

Mr. EPHLIN: The lifetime employment -- the company and the union have together said that it's our goal to, as soon as possible, arrive at that happy day when all our members would have lifetime employment. In order to get there, we have said that we will start with at least two plants on an attrition-only basis, to 80% of the people, and the reason we must do it on an experimental basis, you can't just walk in and say that. It will require some modification of local practices and so forth. If the normal system were working, and something went astray, these people would be laid off; if they're going to be guaranteed employment, they may have to do different things and so forth. So we just have to get some experience on how to make it work and then hopefully we'll spread it to other plants.

MacNEIL: Mr. Pestillo, can the union choose the plants that you experiment with?How does that work?

Mr. PESTILLO: Well, we try to do most of our things together, and the two plants will be selected by mutual agreement, both at the national level and at the local level.

MacNEIL: What will lifetime employment really mean? I mean, if a kid coming out of high school goes and works for Ford, what does lifetime employment mean for him?

Mr. PESTILLO: Well, we would hope it would mean that he'd have a job as long as he wants to work for the Ford Motor Company, until retirement, obviously. As structured in this proposal, we will take the top 80% seniority level in the plant, so we will have a 20% force that will not have that assurance, but anyone in the upper 80% will be assured of employment and the only reductions will be by virtue of attrition.

Mr. EPHLIN: There has been a great deal of talk about improving productivity lately, and we have even convinced the president of the Ford Motor Company, Mr. Peterson, that you can't ask a worker to tell you how to improve productivity if theresult of it is that he loses his job. One of the benefits that the Japanese enjoy is that workers know they're going to be employed even if they do improve productivity. Maybe this will help in that regard.

MacNEIL: Mr. Pestillo, how do the workers -- how are they under this agreement going to have more say in the running of the company?

Mr. PESTILLO: Well, we've put a couple of things in place that are somewhat different. We have had, as we have indicated earlier, this employee-involvement program which is really group decision making. But we've got two formal programs in place at one of the local or national -- which we call forums, whereby there will be meetings and presentations by senior Ford management and opportunities for the union to present issues to the company in a fairly clear structure. Also, we have agreed that Mr. Ephlin will have the opportunity to make two presentations a year to our board reflecting problems of the auto worker.

MacNEIL: This doesn't go nearly as far as the Chrysler bail-out deal where the UAW in the person of Mr. Fraser is actually on the board?

Mr. PESTILLO: Well, I mean, Mr. Fraser is outnumbered about 19 to one so I think that the mere fact of a seat doesn't give him power; I think it's the persuasiveness that he brings to that seat. And Don has that and has, as well, that opportunity.

Mr. EPHLIN: There are two great benefits to the union in Mr. Fraser's being on the Chrysler board. One is the input that he has to them before they make decisions. I will have that at Ford although to a little bit limited degree. And the other is the sharing of information that he gets by being a board member. Over the past couple of years at Ford and the UAW, we have developed the involvement process to where we now receive a great deal of material from the company that we would not had before. By the addition of these forums, we will do even more of that. And an informed work force is a better work force because they feel more a part of the company knowing what the future holds. They can contribute suggestions as to how to improve the operations and so forth.

MacNEIL: Mr. Pestillo, are you able -- you've guaranteed not to close plants under the circumstances you described to us under this deal. Are you also able to assure the union that Ford will not, in effect, transfer any jobs abroad under the terms of this agreement -- that you're not going to have parts made in other countries?

Mr. PESTILLO: No, that's not a condition that was sought. We've indicated a clear intention to balance production to the extent we can. This is a very dynamic business and parts flow in and out on a virtual daily basis so no one can guarantee that any product will be in one place for good and ever. We don't do that. We have promised, and will indeed perform, an act that we'll say we will make every effort to balance production so that the workers will not face prospective displacement.

MacNEIL: Well, Mr. Pestillo and Mr. Ephlin, thank you very much for joining us this evening. Good night, Jim.

LEHRER: Good night, Robin.

MacNEIL: That's all for tonight. We will be back tomorrow night. I'm Robert MacNeil. Good night.