UAW demands would make Detroit 3 uncompetitive, ex-car czar Rattner says

The UAW is on strike against the Detroit 3 in large part to win back benefits it lost during the Great Recession and subsequent bankruptcies of General Motors and Chrysler.

Steven Rattner played a key role in those bailouts as counselor to the Secretary of the Treasury and head of the Obama administration's auto task force. He said the union's demands are excessive and would threaten the automakers' survival in a competitive industry.

"Some of these demands are just ridiculous, and nobody seriously thinks they'll come to pass," Rattner said in an interview. "The workers are not going to get paid for 40 hours and work for 32 hours. We're not going to go back to defined benefit pension plans. The union has to be careful that they don't kill the goose that lays the golden egg, so to speak, by asking for too much."

Still, Rattner said, the Detroit 3's hourly workers deserve significant raises.

"There's a number there that can be met," he told Automotive News. "If you look at the average wage of all auto workers in the U.S. over the last 15 years, after inflation, they've had no pay raise. This has been a really tough industry to be in as a worker."

While UAW President Shawn Fain has argued that record-level profits mean the companies can afford to return benefits the union once enjoyed, Rattner said the industry is fundamentally different today.

"They could afford to have these gold-plated benefits, the jobs bank and all the stuff they had because there wasn't as much competition," Rattner said. "Unfortunately, or fortunately, depending on your perspective, we live in a different world today. It's a question: Do you want to have the jobs or do you want to have the compensation? Unfortunately, I don't think in the modern world you can have both."

Rattner, an investment banker, stepped in as President Barack Obama's "car czar" in 2009. The UAW already had agreed to many concessions in its 2007 contracts, such as a two-tier wage structure and no pensions for new hires. The union and automakers reopened the contracts in 2009 for further givebacks, such as health care cuts and the elimination of the jobs bank, which paid workers while on layoff.

Rattner said his conversations around that time with the UAW's then-president, Ron Gettelfinger, were "unbelievably constructive." He remains impressed with his first visit to the union's Solidarity House headquarters, where Gettelfinger presented a "thoughtful PowerPoint presentation" on the challenges the union faced.

"Ron Gettelfinger knew there had to be some sacrifice by the UAW to keep these companies from disappearing," Rattner said.

While some in the union have argued the concessions made then always were meant to be temporary, Rattner disagrees.

"I don't think there was ever that promise or suggestion," he said. "Our goal was to right-size the companies from a cost point of view so they could make money, and hopefully the workers would participate [in the companies' success]. In terms of average wages, I don't know that they've participated as much as I would have hoped, but there has been fairly substantial profit-sharing bonuses over this period of time, and I think there is an outcome here that would be very much in the spirit of what we were thinking about back in 2009."

He said the ongoing strike could be damaging, especially to local economies in places such as Michigan, but that he still believes the two sides can reach an agreement.

"I don't think what's on the table now from the auto companies is their last word," said Rattner, the CEO of billionaire Michael Bloomberg's firm Willett Advisors in New York. "The union started out with such an extreme position that it isn't going to be meeting in the middle, if you want to use that as some kind of goal post. But I think by every indication, the union is going to come out of this in a better position than when they went in. But like anything of this sort, it's not going to be all they hoped for."