AUTOS: Double-Edged Sword

In 1948, when General Motors Corp. and Walter Reuther's United Automobile Workers (C.I.O.) signed a "cost-of-living" contract, both sides hailed it as a noble experiment in labor relations. Under the contract, the autoworkers got an 11¢ an-hour raise, plus an automatic boost of 3¢ an hour at the end of the first year. They also agreed that their wages should be adjusted up or down each quarter to compensate for sizable movements of the Bureau of Labor Statistics' "cost-of-living" index. For a while, it looked as if the union had played it smart: three months after the contract was signed, it got a cost-of-living boost of 3¢ an hour. But after that, the autoworkers had to take two pay cuts totaling 3¢ an hour (although they also got an equal increase last year under the automatic "improvement factor"). With each pay reduction, G.M. wisely made small cuts in the prices of its cars.

Last week, there was more bad news for the union, good news for motorcar buyers. Because the B.L.S. index had declined 1.6 points, G.M. announced that it was lopping another 2¢ off the wages of 290,000 hourly-paid workers, and $10 off the quarterly pay of 72,000 salaried employees. As it had done before, G.M. simultaneously cut the prices of its cars—from $10 on Chevrolets to $40 on the most expensive Cadillacs. But the union no longer liked the double-edged sword. It announced last week that when the G.M. contract expires in May, it will wash its hands of the deal, go after a guaranteed annual wage instead. Cried Walter Reuther: "We'll win it, too."