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Monday, February 16, 2009

The President, the UAW, the Automakers and the Art of Negotiations

Negotiation is in most ways an art of perception. Often that perception is embedded in reality but ultimately the side that wins is the side that is perceived to hold all the power. The one perceived with less to lose is the one that ultimately gains the most. Right now, we have a very sophisticated negotiation going on between the UAW and the automakers, and both with the government. That which is perceived with the least to lose is the one that will gain the most. In many ways, negotiations is a very high stakes game of poker. The side that shows just how much they have to lose first is the side that does lose. It is in that context that I bring you the words of Senior White House Advisor David Axelrod.

WALLACE: Before we get to the stimulus package, General Motors and Chrysler must submit recovery plans to the government by Tuesday.

G.M. says it needs billions more in federal money or it's going to go into bankruptcy, and yesterday concession talks with the auto workers collapsed. Is the president committed to keeping the Big Three in business and not going into bankruptcy?

AXELROD: Well, we need a thriving auto industry in this country. There are millions of jobs that rely on it, not just in the auto industry itself, not just at the Big Three, but in all kinds of related spinoff businesses. So we have a vested interest in seeing the auto industry continue.But as the president has said many times, that's going to involve significant restructuring of the industry so that they're looking forward and not back in producing the kind of cars that people are going to buy in the future. And that's going to involve concessions on the part of everyone, not just the auto workers, but shareholders, creditors and, of course, the executives who run the company. And
that's what we're going to have to see.

WALLACE: So how do you view the fact that the UAW talks collapsed?

AXELROD: Well, you know, obviously, this is a difficult situation, and we're -- everyone's going to have to continue to work toward a solution. We're going to wait and see what the automakers have to say on Tuesday and we'll go from there.
We have a working group within the Treasury on this issue. And we're prepared to hear what they have to say and work with them toward a solution.

WALLACE: But when you say a solution, it sounds like you are not going to let them go into bankruptcy, at least at this point.

AXELROD: I'm not going to prejudge anything. I think that there is going to have to be a restructuring of those companies. I'm not going to get into the mode of how that happens. We'll wait and see what they have to say on Tuesday.

Now, Axelrod play things somewhat close to the vest and that is vital in negotiations. Yet, Axelrod makes it clear that failure is not an option. Those are cards that can't ever be shown. It's also not the first time that the Obama administration has made this claim. The President made this same sort of statement in December.

The Obama administration has committed to a hands on approach to guide the auto industry out of its abyss.

President Barack Obama plans to appoint senior administration officials -- rather than a single "car czar," as had been discussed -- to oversee a restructuring of the auto industry.

Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers will oversee the across-the-government panel, a senior administration official said Sunday on the condition of anonymity because no announcement had been made.

"The president understands the importance of this issue and also understands that the auto industry affects and is affected by a broad range of economic policies," the official said.

What the Obama administration has done is shown its cards. They are going to do everything they can to make sure that the auto industry continues. By showing this hand, they also allow both the automakers and the union not to have to make any difficult decisions. This disposition has lead directly to a reticence on both the part of the unions and management of the automakers.

Talks between the United Auto Workers and General Motors Corp central to a turnaround plan for the struggling automaker have broken down over the issue of retiree healthcare costs, a person briefed on the talks said on Saturday.

A parallel set of talks between Chrysler LLC and the UAW over similar concessions were continuing over the weekend but little progress had been made, a person briefed on those negotiations said.

The breakdown of talks at GM and the stalled negotiations at Chrysler come with just three days remaining until both automakers must submit new restructuring plans to the U.S. government as a condition of the $17.4 billion in federal aid that has kept them both operating since the start of the year.

Neither side needs to make the difficult decision. The unions need not make any concession on salary or other related matters. Management doesn't need to file for bankruptcy. That's because they both know that they will be propped up with government money while they play a high stakes financial game of chicken with each other. Neither has blinked in that, while the government long ago blinked.

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