Treaty of Detroit Repealed

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.