State of Business: The Detroit Drama

Leaning across a broad burled walnut table in Detroit’s cavernous General Motors Building last week, a pair of short, stocky men shook hands like anxious boxers in response to shouted directions from a battery of photographers. With this ritual over, talks began between United Auto Workers’ President Walter Reuther and G.M. Vice President Louis Seaton.

They are 1961’s most fateful labor negotiations. On them, and the negotiations at Ford and Chrysler that began later in the week, will depend in large part whether the nation will be able to stave off an other wave of inflation.

For the first time since World War II, prices in the U.S. are generally holding steady during a period of recovery. In some cases (food, specialized steel products, paper), prices are even falling—enough so that last week the Labor Department announced that the Consumer Price Index had dropped one-tenth of 1% in May. But the price line would not hold for long in the face of major wage hikes. With an eye on Detroit, President Kennedy and his economic advisers have emphasized that the Administration would look unkindly on inflationary labor settlements. And a month ago, Labor Secretary Arthur Goldberg hinted that the Administration might intervene in the auto negotiations rather than tolerate a strike.

The New Flexibility. Auto companies dread Government intervention more than Reuther does. But Reuther, too, is under pressure. He badly needs a favorable settlement to strengthen his hand in the A.F.L.-C.I.O. (see THE NATION), yet cannot afford to antagonize either the Administration or the general public. Equally important, his own union—whose membership has fallen as the cost of auto labor has increased (see chart)—has been hard hit by layoffs in recent months and is in no mood for a strike. Result: for the first time since 1937, Reuther last week walked into the bargaining room with no headline-catching specific demands.

Reuther talks about a “bold new approach” designed to promote job security and opportunity. Actually, his bag contains a wide assortment of general proposals, and once he has felt the companies out, he will surely inflate one of his goals into a major issue. Though he has mentioned no specific wage hikes, he talks of creating new jobs through earlier retirement or a shorter work week. He wants to improve pension and unemployment-benefit plans, wants production workers to be paid salaries instead of hourly wages, wants the companies to pay all of hospital insurance premiums. He also wants the U.A.W. to share in “the fruits of automation”—but says he is willing to listen to the companies’ ideas about how this can be achieved.

Hell to Pay. The auto companies insist that they are prepared to grant only such benefits as can be paid for out of the industry’s average 2½% increase in productivity each year. This would amount to about 7¢ more an hour, a settlement the industry would consider noninflationary. The automen are dead set against a shorter work week and against putting all workers on salaries. The industry opposes continuance of the annual “improvement-factor” automatic wage increases and the escalator clause that adjusts auto wages to rises in the Consumer Price Index. Snaps Reuther: “I have made it clear that both clauses are basic.”

If past patterns hold, the negotiations will drag on almost up to the expiration of the current Big Three contracts on Aug. 31. One auto executive described the probable course of bargaining: 1) the “once-over-lightly” stage; 2) the “hell-to-pay and no-bread-in-the-house” stage, in which, for a month or more, both company and union will indignantly denounce each other’s proposals; 3) the “clutch” stage, in which, with the contract about to expire, both sides will abandon histrionics and coolly decide what they can afford to give or take.

What will come out of the “clutch” stage this year? Most Detroiters bet on no auto strike in 1961. Most of them also agree that, with the public eye focused sharply on the negotiations, prospects are good for a final settlement that will not touch off a new wage-price takeoff.