What Walter Won

The settlement that Walter Reuther was in the process of wresting from General Motors last week promised in many ways to be the best bargain for his United Auto Workers since World War II. By Reuther's own estimate, he won an average 12-c- hourly take-home raise and he drove much closer toward his goal of a guaranteed annual wage. Altogether, counting wage raises and new benefits, G.M.'s labor costs would go up an estimated 20-c- to 25-c- an hour in the first year of the contract. Reuther crowed that the deal was "noninflationary"--a claim strongly echoed by the Administration. G.M. made no such boast, but its captains told Labor Secretary Arthur Goldberg that 1962 auto prices would not go up.

The Cold-Shower Glow. General Motors gave Reuther pretty much the same beribboned package that he got two weeks earlier at American Motors Corp.--but without profit sharing. One reason for G.M.'s sudden retreat was that it wants nothing to block what it hopefully expects to be a banner selling year. Said American Motors Vice President Ed Cushman: "You should have seen Walter's eyes light up like a pinball machine when two G.M. vice presidents predicted a 7,250,000-car year for 1962. Walter knew he had power there."

More than that, Reuther knew that the Kennedy Administration was pressing for a quick settlement. On the strength of repeated hints dropped by Arthur Goldberg, Detroit became convinced that the Administration was prepared to take extraordinary action in case of an auto strike that might jeopardize the business recovery and the defense speedup. While General Motors figured it could economically risk a walkout, it also figured that to do so would only invite prompt government intervention that very likely would enforce the same kind of settlement that G.M. accepted voluntarily.

That feeling was strengthened early last week when, just 17 hours before the strike deadline, a personal telegram came in to both sides from President Kennedy, emphasizing "the high degree of responsibility you bear to the country . . ." In the final countdown, G.M. began to make one concession after another. After 17 solid hours of hard bargaining, Walter Reuther stepped out wearing a coldshower glow. "I feel very good," he beamed. "I'm delighted."

G.M. was less delighted. At week's end, wildcat strikes continued to flare up, and local contracts had been signed in only six of G.M.'s 129 plants. The odds were that many plants would be struck this week at least briefly, but most Detroiters were convinced that the "national economic agreement" between G.M. and the U.A.W. would soon be signed--and that Ford and Chrysler, in turn, would also buy it.

Another Buzz. In return for three years of labor peace, G.M. agreed to retain the cost-of-living escalator clause as well as annual productivity wage boosts of 6-c- an hour or 2 1/2% (whichever is greater). But the biggest gains came in job-security benefits for a union that is increasingly worried about automation-inspired layoffs. An auto worker will now get 65% of his take-home pay for hours that he does not work during "short" weeks. When he is laid off, he will collect, between company payments and state unemployment compensation benefits, 75% to 80% of take-home for a maximum of 52 weeks. (Previously, he got about 65% of take-home for up to 26 weeks.)

Desirable as new buffers against the pang of chronic unemployment were, some critics contended that the U.A.W.-G.M. deal made it almost worthwhile for a man to be laid off. And auto settlements usually are contagious throughout the basic industries. If the auto settlement leads to similar raises elsewhere, it would surely prove inflationary--Reuther and Washington economists to the contrary. On the brighter side, the prospect of a continuing free flow of cars off the assembly lines is good news for the steelmakers, who now comfortably talk of increasing output to 85% of capacity before year's end. And they, unlike the automakers, are already buzzing about hiking prices.

A Sort of Carrot. Determined to head the steelmen off, President Kennedy last week lectured them even more sternly than he had Detroit. A $4-to $5-a-ton boost in steel prices, wrote the President in a letter sent to the bosses of the nation's top twelve steel companies, would swell defense costs by $500 million a year and would inevitably trigger other price rises. The President's economic advisers figured that, even at present price levels, steelmen would net a comfortable 7% to 15% of stockholders' equity in the months ahead.

As clinchers, the President held out both a stick and a carrot. If the steelmen insisted on higher prices, he warned, "the consequences might be so grave as to require the adoption of restrictive monetary and fiscal measures." Clearly, that was a threat that whatever steelmen might gain from higher prices, they could expect to lose in Government-pegged higher interest rates and taxes. But if the companies held the price line now, wrote the President, then in next spring's labor negotiations "it would clearly be the turn of the labor representatives to limit wage demands."

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