ABSTRACT
Even before the US suffered the Great Recession, the domestic auto industry had experienced a sharp drop in consumer demand. The recession intensified the downturn, which forced two of the Detroit 3 into bankruptcy and the third to leverage itself completely to avert the same fate. The prospect of the auto companies’ liquidation, which would have exacerbated the sizable rise in unemployment, led to a massive infusion of government loans. The federal assistance forced the remaking of Chrysler and GM, which had declared bankruptcy. To survive, each of the companies had to renegotiate contracts with the UAW in 2009, making another round of major bargaining concessions to add to those made in 2007, when the union agreed to a two-tier pay system and elimination of retiree health care for new hires and the offloading of their retiree healthcare benefit obligations to a nonprofit tax entity labeled the Voluntary Employee Beneficial Association (VEBA). These economic realities created incentives for the auto companies to compete more aggressively on the labor cost dimension, which led to efforts by FCA executives to use the NTC joint training center as a means to bribe union officials to creating a more competitive labor-management relationship by agreeing, at least implicitly, to certain concessions.
