Contract negotiations under way at TI Automotive Ltd.'s Warren, Mich., plant could determine the future of the former Bundy factory that employs about 240 union employees.
TI is facing heavy pressure from its customers to cut prices. TI Automotive has spent $9 million on new equipment at the Warren plant since 1997 and it hasn't produced the expected returns, according to a Nov. 11 letter to Warren plant workers from Vice President and General Manager Mike Vella.
``And as a result, we are now at a point of assessing what is in the best interest of the business,'' the letter states. ``I am very concerned, as you may be, about the future of the plant and our work here, as I believe the relationship may have deteriorated to a point which does not allow the plant to improve.'' Crain's Detroit Business, a sister publication to Plastics News, obtained the letter from an employee.
But since the letter was written, the union agreed to a company request for early negotiations on a contract that expires in May.
An industry analyst said more midsize suppliers like Warren-based TI Automotive likely will ask its unionized employees to renegotiate deals to help lower prices and keep plants running.
Dave Martin, president of United Auto Workers Local 369, did not return two phone calls and a written request for comment. Dan Clinton, vice president of human resources for TI Automotive, said he would not comment, citing a confidentiality agreement between the company and the UAW.
A member of the Local 369 bargaining committee, in a message on a union bulletin board, said he thinks the company isn't creating a ruse to wring out concessions.
``For the first time, we have legitimate competition for our jobs and I don't think the company is bluffing,'' said a message by Richard Barkley and obtained by Crain's Detroit. ``What I do know is I'm gonna do whatever I can to keep our jobs and not lose our shirts in the process.''
One TI employee, who did not want to be named, said the letter from Vella seems clear: The company wants the union to rework the contract or face a shutdown.
``I took it as a threat and others think that too,'' the employee said. ``He's insinuating something, that's for sure.''
TI Automotive makes plastic fuel tanks and fluid-handling systems and reported $2.3 billion in 2002 sales. The Warren plant produces tubes used in fluid-handling systems and runs three shifts.
Customers have ``demanded and received'' $71 million in price cuts from TI Automotive since 2000, according to Vella's letter. TI Automotive has spent money on automation and new equipment at the Warren plant, but costs are outpacing productivity improvements, the letter states.
The unnamed employee said part of the problem is that the new equipment isn't working as advertised, increasing scrap and slowing production, and management is blaming workers unfairly. However, an e-mail from Vella to union leaders and made available for employees states that the Warren plant has been ``the most resistant to our efforts'' in applying lean manufacturing and other process improvements.
An industry analyst said it's a good sign the two sides are talking months before the contract expires. It likely means TI Automotive's Warren plant is close to matching costs from competitors around the world, but wants some help from the union to make it happen.
``That would not be happening in a place where the gap is so substantial between the global price and your current price,'' said Craig Fitzgerald, partner and auto analyst at Southfield-based Plante & Moran PLLC. ``If there was a huge gap, I don't know why they would be entering into that kind of dialogue.''
Other suppliers are likely to do the same, Fitzgerald said. The issue is about more than the hourly wage. That alone can't make a North American supplier beat a price from China or South Korea, he said.
``The hourly rate is a small part,'' he said. ``The bigger elements are about productivity, for which both management and labor are jointly accountable.''