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With Chrysler’s Future Uncertain, Iacobelli Is on the Hot Seat

April 5, 2007
There are few tougher jobs in today's business world than heading up labor realtions for a Detroit automaker. But on March 1, that was the position that Alphons Iacobelli accepted when he was promoted to vice president of union relations at DaimlerChrysler.

In his new role, Iacobelli, a 14-year veteran of the company, will be responsible for labor planning and strategy, employment security and all economic aspects of the 2007 negotiations with the United Auto Workers.

And this year’s contract negotiations with the UAW, which will begin this summer, are expected to be tougher than ever for the Auburn Hills, Michigan-based automaker. In February, the company announced it was cutting 13,000 jobs, or 16 percent of its workforce, over the next three years in an effort to return to profitability.

Meanwhile, DaimlerChrysler CEO Dieter Zetsche is exploring the idea of selling the DaimlerChrysler and is entertaining offers from a number of companies—adding even more uncertainty for the future of employees.

A Detroit native, Iacobelli admits these challenges are formidable. But he insists that by keeping the dialogue focused on the big issues affecting the industry while making sure that workers on the shop floor stay informed, DaimlerChrysler and the UAW will be successful in reaching solutions.

Iacobelli may have a unique perspective for someone in his position. His mother, Dora, was a 31-year veteran of Ford Motor Co., where she was a sewing machine operator and strong UAW advocate. Iacobelli recalls how, when he was a boy, his mother not only knew all the issues going on at the plant floor, but she was well aware of the economic challenges facing the industry. “The average worker on the floor has a keener understanding of what’s going on in our business than perhaps many give them credit for,” he says.

Iacobelli recently spoke to Workforce Management New York bureau chief Jessica Marquez about the challenges facing the industry, how labor relations have changed over the years and what to expect from this year’s negotiations.

Workforce Management: How have the challenges facing Detroit’s automakers changed your role as a manager of labor relations over the years?

Alphons Iacobelli: Historically this role has been viewed as contract administration at best. But over the last 10 years there has been a significant shift toward focusing on the competitive landscape, and rightfully so. The big challenge that DaimlerChrysler faces concerns competitive positioning relative to the transplant automakers from other countries. We are dealing with competitive issues that are much more complex than they were 10 or 15 years ago. This is no longer a cyclical issue. It’s a fundamental business issue and it requires having people with business knowledge beyond just understanding a labor agreement between a union and the company. It requires someone to oversee the entire management process. For example, in the recent restructuring we have announced, HR and employee relations were deeply involved. In the past, that would have been driven largely by the finance department.

WM: How does that change the kinds of employees you hire in labor relations?

Iacobelli: We have had to change how we recruit labor relations talent. Today we are looking for people with comprehensive business knowledge, not just employee relations. Specifically, that means we are prone to look for candidates with MBAs in recruiting, rather than just industrial relations majors.

The employees we seek today need to be engaged in crafting innovative agreements with the union in order to level the playing field with our competitors. Historically, we could rely more on traditional agreements with the union and allowing those agreements to legislate how we are going to build our cars and trucks. But today, we need to address short-term and long-term solutions to provide job security and be profitable.

WM: How has DaimlerChrysler been able to establish innovative agreements with its unions thus far?

Iacobelli: By working closely with the United Auto Workers and the Canadian Auto Workers, we have been able to develop team structures in a few plants like our Toledo, Ohio, assembly plant. In a team structure, you have fewer supervisors on the floor and instead we have instituted team leaders. If there is a conflict or a problem at the job station, rather than running to a supervisor, employees can resolve the job themselves.

These people know their jobs better than anyone else. This structure empowers our workforce and gives employees a greater deal of ownership. It also has resulted in improving quality and productivity.

WM: The Global Engine Manufacturing Alliance plant in Dundee, Michigan, has been lauded by DaimlerChrysler as the model for the future. [The Dundee plant, which opened in October 2005, was groundbreaking because the UAW agreed to a three-shift structure, as opposed to the normal two shifts, the use of contractors working alongside employees, and a team approach so the plant remains open 21 hours a day, six days a week, 294 days a year.] But the company has yet to implement the model in any other locations. Why is that?

Iacobelli: When we first put that agreement together it was clearly a laboratory environment where we could try different things. Some worked better than others. The objective is to take what worked well with the partners and develop new solutions for new businesses. Since GEMA launched, technology has already changed significantly, so it might require new ways of thinking.

You can’t really take that work practice and apply it everywhere universally. GEMA was unique to a time and location that made sense for that particular business model. I am not so much intrigued with taking that template and running it across every manufacturing facility. I am more interested in looking at what the future business models would require and taking a similar approach, then customizing future agreements to the needs of the business.

WM: Other than the obvious competitive hurdles DaimlerChrysler is facing now, what is your biggest challenge?

Iacobelli: Leadership development is my second-biggest challenge. I am focusing 50 percent of my energy on a solid group of executives. I am dedicating a good amount of time talking to entry-level, management and executive-level employees, helping them to shape their areas of interest. If we can give them some indication of where there are opportunities within the organization and we can match their personal and professional aspirations with those opportunities, we get the benefit.

WM: Given the current situation at DaimlerChrysler, however, there must be employees looking to leave the company, if not the entire industry. How do you address that?

Iacobelli: The industry challenges are imposing. But I have a high degree of confidence in the existing leadership and the leadership that we are bringing up through the system. When an industry is facing so much uncertainty, there is a normal degree of washout. But usually there are individuals with a long-term interest in seeing the company succeed. I am one of those individuals and so was my mother, who worked for 31 years as a sewing machine operator at Ford Motor.

WM: What are you doing to address employee morale?

Iacobelli: People want to know where they are in the process. They don’t want a canned right answer. They also want to have a say. So it is incumbent on us as leaders to demonstrate transparency to the extent it is possible. The perception of uncertainty is probably one of the biggest morale busters, so we need to minimize unwarranted speculation. We have a lot of work to do. We are doing town halls and using every forum we can to update employees on the recovery.

The next area of focus for us over the next two months is how we get that message to the shop floors to make sure they are hearing factual messages.

WM: While you can be as transparent as possible and say that you have faith in existing leadership, the fact of the matter is that tomorrow you might get bought and everything is different. How can you address that concern?

Iacobelli: I can’t provide an answer to that. All I can give employees is the best information that we have available to us now. We know that what we say today is across the world with a push of the button, and we are focused on providing truthful communications.

WM: How has the dialogue with the unions changed in the past 10 years?

Iacobelli: Ten years ago we would take a more constructionist view of the collective bargaining agreement and the issues arising from it. So we may spend time on a specific appeals board case or some issue that came from the plant floor.

Today, there is a massive shift in focus to discuss not just the agreement, but to discuss the industry challenges and how we can work together to address them. So over the past two quarters, for example, we have talked a lot more about health care and how the union and company can work together to come up with solutions. The tone has changed to be more focused on how we can work together to improve the competitive landscape. For example, we are working to affect legislation regarding health care benefits.

WM: Does the sharp decline in union membership make negotiations easier for companies?

Iacobelli: No, I think it presents greater challenges in the long run. With the introduction of new technology and greater efficiencies that are occurring on every level of manufacturing, there are fewer people required to accomplish the same tasks. That means that we have to spend a great deal of energy and time on developing socially responsible programs to accelerate some retirements. We have worked closely with the UAW to design these programs with the mutual interest of protecting the integrity of the business while serving the individual needs of the employees.

WM: The Big Three in Detroit will begin contract negotiations with the UAW this summer. How will this year’s negotiations be different from past years?

Iacobelli: The economic environment has changed. The industry challenges with regard to the transplants continue to gain momentum. Despite the fact that the union and management have come to a convergence on quality and productivity benchmarks, we continue to diverge on overall labor costs specifically in regard to health care and other non-wage components that are escalating the entire total cost picture.

WM: Retiree health care is one of the points of contention between the union and Detroit’s Big Three. Do you believe that retiree health care is a relic of the past?

Iacobelli: My own personal opinion is that we have to find a solution that addresses the needs of current and future retirees as well as the needs of the companies. That is a significant economic challenge that remains to be resolved. That solution not only is unique to the union and the companies, but it also includes other forums, like government getting involved with legislation. That is an area where we are spending a lot of our energy.

WM: Did your mother receive retiree health care?

Iacobelli: As a retiree she enjoyed health care. Double-digit inflation since her retirement in 1992 has made it extremely difficult for organizations to continue to support that without looking for creative solutions.

WM: What advice would you give other companies that are managing union relationships?

Iacobelli: The sharing of information is vital. I would also encourage them to use a third-party independent source to provide data. You need to engage in an honest dialogue about the state of the industry and the state of your specific business.

Click here read the latest details of the Chrysler sale from Workforce Management's sister publication Automotive News.

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