General Motors-United Auto Workers Landmark Contracts

United States 1948, 1950

Synopsis

The collective bargaining agreements between General Motors (GM) and the United Automobile Workers union (UAW) in 1948 and 1950 established the framework that characterized U.S. labor relations through the 1980s. Although the UAW had previously tried to gain a voice in production and investment decisions in its negotiations with GM, the 1948 and 1950 agreements limited its collective bargaining demands to wage and benefits issues in contract talks. The resulting arrangement, labeled the "Treaty of Detroit" by Fortune magazine in 1950, linked wage hikes to the rate of inflation through cost-of-living adjustments and increases in productivity and established a pension plan and health insurance plan for workers. Although this collective bargaining achievement created a stable atmosphere of industrial relations from the early 1950s onward, it fell apart in the corporate restructuring and antiunion efforts of the federal government in the 1980s.

Timeline

• 1928: At the first Academy Awards ceremony, best picture is the silent Wings.
• 1933: Newly inaugurated U.S. president Franklin D. Roose velt launches the first phase of his New Deal to put de pression-era America back to work.
• 1938: The U.S. Fair Labor Standards Act establishes a minimum wage.
• 1943: At the Casablanca Conference in January, Winston Churchill and Franklin Roosevelt agree on the demand of unconditional surrender for the Axis powers.
• 1948: Israel becomes a nation and is immediately attacked by a coalition of Arab countries. Despite being outnumbered, Israel will win the war in the following year.
• 1948: Stalin places a blockade on areas of Berlin controlled by the United States, Great Britain, and France. The Allies respond with an airlift of supplies, which, like the blockade itself, lasts into late 1949.
• 1949: North Atlantic Treaty Organization (NATO) is established.
• 1949: People's Republic of China under the leadership of Mao Zedong is established.
• 1950: North Korean troops pour into South Korea, starting the Korean War. Initially the communists make impressive gains, but in September the U.S. Marines land at Inchon and liberate Seoul. China responds by sending in its troops.
• 1950: Senator Joseph McCarthy launches his campaign to root out communist infiltrators.
• 1955: African and Asian nations meet at the Bandung Conference in Indonesia, inaugurating the "non-aligned" movement of Third World countries.
• 1960: An American U-2 spy plane piloted by Francis Gary Powers is shot down over Soviet skies brings an end to a short period of warming relations between the two superpowers. By the end of the year, Khrushchev makes a scene at the United Nations, banging his shoe on a desk. As for Powers, he will be freed in a 1962 prisoner exchange.

Event and Its Context

The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America—commonly known as the United Auto Workers (UAW)—was the leading industrial union in North America from the time of its founding in 1935. The fastest-growing union in the 1930s and 1940s, the UAW had about a quarter million active members in 1940, about a third of whom worked for General Motors, the Ford Motor Company, or the Chrysler Corporation. The UAW reached an early peak of 1.5 million members during World War II.

The UAW's initial success depended on its ability to use the collective bargaining framework established by such New Deal measures as the Wagner Act, Fair Labor Standards Act, and the National Labor Relations Board (NRLB). While labor union membership expanded greatly during World War II, however, the UAW's leadership juggled the competing demands of a restive rank-and-file and its no-strike pledge that it had offered the federal government during the war. Power struggles within the union between its political left and right wings also characterized the UAW's wartime experience. Although both wings generally followed a liberal social agenda and advocated greater government oversight of the economy, the right wing had taken an anticommunist stance that angered the left wing. The right-wing caucus under Walter P. Reuther finally gained control of the UAW when he was elected to office in 1946. Reuther soon purged the UAW of any official who refused to disavow his or her communist ties—a step mandated by the Taft-Hartley Act of 1947—and he remained international president of the UAW until his death in a plane accident in 1970.

Reuther faced a number of challenges when he assumed the leadership of the UAW. Although its membership had declined from its wartime high as the nation's industries reconverted to the production of consumer goods, the UAW included approximately 900,000 members in the immediate postwar era. With the mountain of shop-floor grievances and fears of unemployment, concerns over inflation added to the tense atmosphere between the UAW and its collective bargaining counterparts.

Labor Relations in the Auto Industry

The UAW's most important round of postwar negotiations came with the largest of the Big Three auto makers, General Motors (GM), headed by President Charles E. Wilson and Chairman of the Board Alfred P. Sloan, Jr. President of General Motors from 1923 to 1937 and chairman of the board from 1937 to 1946, Sloan had been responsible for rationalizing the administration and production schedule of the company in the 1920s. GM had been chaotically managed under its founder, William C. Durant, who incorporated the company in 1908. After Durant's final ouster in 1920, Sloan implemented unyielding financial and administrative controls that led the company to produce a then-record corporate profit of $235 million in 1927. Like that of its competitors, GM's sales plummeted during the initial years of the Great Depression. Yet it managed to increase its overall market share to become the nation's largest auto maker after 1930, a position it still held at the start of the twenty-first century.

One legacy of Durant that survived his ouster was his vision of GM fostering an age of mass consumerism through installment buying and credit programs for car buyers. With a range of cars from the economic Chevrolet to the luxurious Cadillac and annual style changes to keep consumers eager for new cars, GM's approach set the standard for mass marketing of consumer items. Having survived a fall in sales between 1929 and 1933, the company took a tough stance in the face of a labor force that was being courted by the fledgling UAW. The union finally organized GM, but only after a bitter series of sit-down strikes during 1936 and 1937. Although World War II brought a truce in labor relations, many expected a new wave of strikes to rock the automobile industry as they had after World War I. The largest and most profitable of the Big Three auto makers, GM wanted to move aggressively to reconvert its factories from military to consumer production in 1945. One major obstacle to GMs postwar expansion plans, then, was the uncertainty of its labor contracts with the UAW.

Mass Production, Mass Consumption

Just as GM had reshaped American society along mass consumption lines, so too did the UAW have ambitious plans for remaking the country after the war. Chief among the union's desires was to achieve greater economic security for its members through collective bargaining. Although the most obvious goal under this agenda was to gain higher wages for workers, a slew of other proposals joined its collective bargaining priorities in the 1940s. As indicated by a May 1947 survey (later included in Ely Chinoy's landmark 1955 book, Auto Workers and the American Dream) that was published by Fortune, despite the postwar economic expansion in America, one-fourth of workers were worried about keeping their jobs, and an overwhelming two-thirds believed it unlikely that they would ever earn enough money to be able to retire at the age of 65. Workers were also worried about inflation eroding their earning power, especially after President Harry Truman allowed the Office of Price Administration to be dismantled in 1946 after heavy corporate lobbying. In contrast to the state activism of the New Deal years, the administration now appeared to be stepping aside from active management of the economy, despite public support for such measures. The union's leaders believed that by setting an economic benchmark through its contracts, they had found the best way to gain higher wages and improved benefits for their members and, by extension, for other workers who would benefit from the improved standards that union contracts introduced to the economy at large.

In the first collective bargaining negotiations after World War II, Reuther suffered a serious setback to his reputation during a failed strike effort against GM that lasted from November 1945 to March 1946. Aware of the public's support of price controls to stem inflationary pressures, Reuther coupled the UAW's demand for a 30 percent wage increase during contract talks with a pledge by GM not to increase the final cost of its automobiles. Objecting to what they viewed as an unnecessary and counterproductive intrusion by the union into managerial prerogatives, GM's officials rejected Reuther's program outright. The ensuring 113-day strike made Reuther a nationally known labor leader, but it did little to achieve the UAW's goals. In the end the union settled for a wage increase and some minor changes in the final contract.

Hoping to avoid the prolonged wrangling of the 1946 talks, GM introduced a new factor into the March 1948 collective bargaining negotiations. Eager to stabilize its work force to ensure a steady and profitable stream of vehicles leaving its factories, GM President Charles E. Wilson offered to link future wage adjustments to the national Consumer Price Index, determined by the federal government's Bureau of Labor Statistics. The idea came to be popularly known as a cost-of-living adjustment (COLA). Wilson also put forth the idea of linking general boosts in wage rates to increases in worker productivity, a concept he labeled an "annual improvement factor." The UAW countered with demands for a pension program and a guaranteed 40-hour workweek in addition to wage hikes. After two months of negotiations, the resulting two-year contract generally followed what GM had initially offered, with the annual improvement factor pegged at 2 percent annually and a COLA to be adjusted quarterly. Although the union's leaders were disappointed over their failure to expand the contract beyond wage and benefits issues, the COLA agreement was the first that an industrial union ever achieved in a collective bargaining agreement.

The Treaty of Detroit

The 1948 contract proved to be a model for the 1950 collective bargaining sessions. The May 1950 agreement between the UAW and GM, publicized as the "Treaty of Detroit" by Fortune magazine, essentially drew the lines of collective bargaining for the next generation. In exchange for improved wages and benefits—including cost-of-living adjustments, pensions beginning at $125 per month, and health care provisions paid in half by GM—the company retained all managerial prerogatives, including production and investment decisions. Over five years, the contract guaranteed a 20 percent rise in wages for GM members covered by UAW contracts. The arrangement allowed the company to enjoy a measure of stability in its work force; with a five-year contract in place, GM could implement long-range plans without the fear of labor disruptions. In exchange, auto workers expanded their wage and benefits packages in succeeding years. Reuther's goal of taking the UAW into managerial affairs would not be realized during his lifetime, but the agreement did signify that GM had accepted unionization as a permanent condition of its labor force.

Additional wage and benefit gains—not only at GM but among all auto companies and other heavy industrial manufacturers—followed in succeeding years. The collective bargaining agreement with Ford in 1955 introduced supplemental unemployment benefits (SUB). When combined with government unemployment compensation, the SUB provision allowed laid-off workers to collect up to 65 percent of their regular take-home pay. Contract talks with Chrysler in 1964 produced the first early retirement provisions, another advance in the wages and benefits enjoyed by UAW members. From 1950 onward, then, collective bargaining achieved the security and stability that would have seemed impossible during the tumult of the 1930s. Together with gradual increases in regular wages and COLA, SUB, health insurance, and pension contributions from employers, the standard of living for UAW members approximately doubled during Reuther's tenure in office through 1970. Following the pattern established by UAW contracts, other labor unions also successfully bargained for COLA provisions, pensions, and health care plans; by the time of Reuther's death, more than half of all collective bargaining agreements in the United States contained a COLA agreement and more than one-third provided for pensions.

The UAW and Labor Liberalism

Throughout his career, Reuther maintained that the Treaty of Detroit and its succeeding agreements demonstrated the pragmatism necessary for the survival of the labor movement. If the union had not delivered higher wages and improved benefits to its membership, it would have been far less able to engage in any of the other broad-based public policy projects that Reuther and other labor leaders championed. The list of contributions that Reuther and the UAW made to American liberalism from the 1940s onward is indeed impressive. In addition to being a major funding source for various civil rights groups, the UAW was also a major supporter of the historic 1963 March on Washington, a pivotal moment in the modern civil rights movement. The UAW's leadership also had a major voice in President Lyndon Johnson's War on Poverty and Great Society programs of the late 1960s, helped to enact student loan programs and Medicaid and Medicare, and consistently lobbied to raise the minimum wage. To Reuther's supporters, these accomplishments proved that the UAW retained its commitment to a broad-based social and economic agenda that went far beyond the collective bargaining table.

Critics of Reuther's career have claimed that the UAW's collective bargaining agreements in 1948 and 1950 set the stage for generations of union complacency. Although the UAW expanded contract talks to include COLAs, pensions, health insurance, SUB, early retirement provisions, and other benefits for its members, it failed to restructure the American economy in any fundamental way. Reuther's attempt to secure wage hikes while forcing GM to hold the line on its auto prices in 1946 marked the last time the UAW demanded a significant say in the management of its bargaining partners. From that failed attempt onward, the UAW would confine itself to negotiating over wages and benefits in contract talks. Because it did not restructure the political or economic landscapes of America through the Treaty of Detroit, the union remained vulnerable to the changes that eventually voided the agreement and brought back another period of uncertainty for its members during the 1970s and 1980s.

Indeed, all of these gains were possible because the American automobile industry, like most other sectors of the economy, shared in almost uninterrupted growth from the postwar era through the oil crisis of 1973 and 1974. Faced with little foreign competition, increasingly affluent consumers, and a stable labor force, American auto makers enjoyed a golden age of expansion and profitability. Concentrating on annual style revisions for larger, more profitable models instead of technological innovation or the introduction of smaller, more fuel-efficient cars, the industry was caught off guard by the abrupt change in consumer demands in the 1970s.

Dismantling the Treaty of Detroit

The economic restructuring of America's industrial landscape after the oil price shocks of 1973-1974 and the deep recession and "stagflation" after 1978 significantly curtailed the pattern established by the Treaty of Detroit. A sharp reduction in employment by the Big Three followed the declining sales of domestic autos in the late 1970s. UAW membership dropped from 1.5 million in 1979 to 1 million in 1983 and then to about 750,000 in 1992. Although competition from German and Japanese auto makers was often cited as the primary reason for the drop in the sales of American-made automobiles, the Big Three had contributed to their own dilemma by ignoring consumer demands for quality and fuel efficiency in their products. Under pressure to cut their operating costs, automobile manufacturers entered into contract discussions with the UAW in the 1980s determined to curtail the collective bargaining arrangement that had guided the industry for two generations.

Concession bargaining took various forms in the late 1970s and 1980s. One example drew the union into a closer working relationship with management in 1979 when the UAW's participation in the government bailout of the Chrysler Corporation helped to bring the auto maker back from bankruptcy. Given the economic changes that transformed the American economy in the 1980s, however, the UAW joined many other unions in concession bargaining in the hopes of saving the jobs of its members. Typically, the UAW was forced to limit or concede its demands for increases in SUB, COLA, and wage increases.

The union also confronted a hostile environment under the administration of President Ronald Reagan from 1980 to 1988. Eager to implement his vision of a free-market economy unencumbered by labor unions, Reagan set about dismantling the labor relations framework that had been in place since the New Deal. The president used his power to end a strike by the Professional Air Traffic Controllers Organization by breaking up the union in 1981, a clear indication of his administration's approach to labor relations. Reagan also appointed a slate of officials with antiunion perspectives to government posts, including the NLRB. With the federal government subsequently issuing a series of antilabor decisions through the NLRB, labor leaders also spoke of a breakdown of the labor relations bureaucracy that had been in place since the 1950s. Although the Treaty of Detroit survived in terms of the benefits maintained by auto workers, it was no longer the model for industrial labor relations in the United States.

Key Players

Chinoy, Ely (1921-1975): A professor in sociology at Smith College, Chinoy authored Automobile Workers and the American Dream in 1955. The book detailed the rising consumer aspirations of the increasingly affluent working class in America and is considered one of the most important sociological studies of its era.

Reagan, Ronald W. (1911-): President of the United States from 1980 to 1988, Reagan lived up to his reputation as a free-market advocate who wanted to curtail federal regulation of the economy. In addition to firing the members of the federal air traffic controllers over their refusal to end a strike in 1981, Reagan staffed the National Labor Relations Board with officials who shared his free-market antiunion beliefs. Union membership declined during Reagan's two terms in office, and the pattern of labor relations established under the Treaty of Detroit was curtailed.

Reuther, Walter Philip (1907-1970): Reuther was president of the UAW from 1946 until his death in 1970. In addition to making the UAW into one of the largest and most powerful labor unions in the United States, Reuther helped to define a cooperative model of labor relations between his union and its collective bargaining partners beginning with the Treaty of Detroit in 1950. Reuther was also a major figure in the modern civil rights movement and other liberal social causes.

Sloan, Alfred Pritchard, Jr. (1875-1966): President of General Motors from 1923 to 1937 and chairman of the board from 1937 to 1946, Sloan was responsible for rationalizing the administration and production schedule of the company.

Wilson, Charles Erwin (1890-1961): President of General Motors from 1941 to 1952, Wilson was trained as an engineer and after a legendary career in the automobile industry served as secretary of defense from 1953 to 1957.

See also: Fair Labor Standards Act; Ford-UAW Contract; Ford-UAW SUB Agreement; GM Recognizes UAW; PATCO Strike; Wagner Act.

Bibliography

Books

Boyle, Kevin. The UAW and the Heyday of American Liberalism. Ithaca, NY: Cornell University Press, 1995.

Carew, Anthony. Walter Reuther. Manchester, England:Manchester University Press, 1993.

Chinoy, Ely. Automobile Workers and the American Dream.1955. Reprint, Urbana: University of Illinois Press, 1992.

Freeland, Robert. The Struggle for Control of the Modern Corporation: Organizational Change at General Motors, 1924-1970. New York: Cambridge University Press, 2000.

Goode, Bill. Infighting in the UAW: The 1946 Election and the Ascendancy of Walter Reuther. Westport, CT: Greenwood Press, 1994.

Harris, Howell J. The Right to Manage: Industrial Relations Policies of American Business in the 1940s. Madison: University of Wisconsin Press, 1982.

Keller, Maryann. Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors. New York: William Morrow and Company, 1989.

Lichtenstein, Nelson. The Most Dangerous Man in America: Walter Reuther and the Fate of American Labor. New York: Basic Books, 1995.

Sloan, Alfred P. My Years with General Motors. Garden City, NY: Doubleday and Company, 1963.

Zieger, Robert. The CIO, 1935-1955. Chapel Hill: University of North Carolina Press, 1995.

—Timothy G. Borden