Week of reckoning for GM, UAW

Members weighing $11,000 bonuses vs. closures

October 21, 2019 12:00 AM

REUTERS

UAW members rally at GM's headquarters. The strike will extend at least through Friday.

DETROIT — A proposed contract with General Motors that more than 46,000 UAW members are voting on this week contains lucrative bonuses and wage gains, but it doesn't bring any production from Mexico to the U.S. or save three plants that shut down this year.
The UAW's national strike against the automaker will extend at least through Friday, Oct. 25, as the tentative agreement GM reached last week with union leaders goes to the rank and file for ratification.

UAW officials are touting the fact that the deal addresses many top priorities: wage increases, a path to permanent employment for temporary workers, no increase in health care costs and a shorter wait for new hires to earn top wages. Full-time hourly workers would receive bonuses of $11,000 and 4 percent of their annual pay shortly after ratifying the contract.

"A lot now depends on how they explain it to members and how transparent they are," Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor, Mich., told Automotive News.

But the UAW's failure to save Lordstown Assembly in Ohio and two transmission plants in Michigan and Maryland has put many members on edge and could complicate ratification. If the deal passes, the UAW would then use it as a framework for contracts with Ford Motor Co. and Fiat Chrysler Automobiles.

"You really never walk away completely satisfied," said a member of the UAW's GM council who asked not to be identified. "You hope and pray your membership understands."

The GM council's decision last week to endorse the contract but continue the strike to at least 40 days is an unusual move for the union, but if UAW members return to work and then reject the contract, "the leverage is gone," said Art Schwartz, a former GM negotiator who's now president of Labor and Economics Associates.

What's in the deal

Temp worker conversions
Full-time temporary workers with at least 3 years of continuous service will become permanent employees in 2020. Starting in 2021, full-time temps will become permanent employees after 2 years on the job. Layoffs of up to 30 days won't restart the calculation of continuous service.

Same health care
GM had proposed workers pay 15% of their health care costs, up from 3% today. The deal keeps health care coverage and out-of-pocket costs unchanged.

Record ratification bonus
Full-time employees get $11,000 upon ratification of the deal, up from the $8,000 that GM initially offered and that workers got in 2015. Temporary employees who have been on the job for at least 90 days when the deal is ratified get $4,500.

Uncapped profit-sharing
Annual profit-sharing payouts are no longer capped at $12,000. The formula ($1,000 for every $1 billion in North American earnings) is unchanged.

Shorter path to the top
New hires start earning top wages after 4 years instead of 8. By September 2023, all current permanent employees would be earning at least $32.32 an hour.

Alternating bonuses and raises
In November 2019 and October 2021, workers get a 4% lump-sum bonus. Base wages increase 3% in 2020 and 2022.

Flexible vacation
Workers no longer have to use 2 weeks of vacation time for a 2-week shutdown period. One week can now be used at their discretion.

Buyout offers
Up to 2,060 workers can receive a $60,000 retirement incentive. Workers displaced by the closure of plants in Ohio, Michigan and Maryland can elect a $75,000 retirement incentive ($85,000 for skilled trades), a buyout of up to $75,000 depending on their level of seniority or several other options.

Source: UAW, GM

An additional week of the strike will result in $400 million in operating losses for GM, according to an estimate from Anderson Economic Group, a consulting firm in East Lansing, Mich. The firm estimates that it will cost the striking workers a total of $14 million in wages per day and laid-off supplier employees $20.5 million a day.

Even if UAW members were to send their leaders back to the bargaining table, GM is unlikely to reverse its decision to shut down the three plants, Schwartz said.

"The union tried their very best to keep those plants open. Basically, they got a lot of money and other benefits to [treat] the wound," he said. "How can they get all that stuff and reopen the plants as well?"

Plant closures, investments

Detroit-Hamtramck Assembly is the only one of four U.S. plants GM targeted for closure last fall that would remain open under the agreement. The 53-year-old Lordstown plant that President Donald Trump and other politicians had lobbied GM to spare would be officially closed for good. A parts distribution center in Fontana, Calif., that employs 31 hourly and 24 salaried workers also would close, the agreement says.

Under the proposed contract, GM would spend $5.7 billion to create or retain about 9,000 jobs at four U.S. plants and its suburban Detroit tech center through 2023, plus $2 billion to refurbish other unspecified plants.

The automaker also is aiming for $1.3 billion in indirect investments — resulting in up to 1,400 jobs in and around Lordstown related to battery-cell and electric pickup manufacturing — bringing total spending to $9 billion. The Lordstown investments are not part of the tentative agreement with the UAW.

GM agreed to invest $3 billion in Detroit-Hamtramck Assembly to build electric trucks, vans and battery modules, according to language in the proposed contract. The plant, which was scheduled to close in January, would employ 2,225 people at full capacity, GM told the union.

TOM WOROBEC

Workers on strike at Detroit-Hamtramck Assembly last week. The tentative agreement would save the plant from closure.

GM also pledged investments in next-generation midsize pickups in Wentzville, Mo., next-generation utility vehicles in Lansing, Mich., and Spring Hill, Tenn., and preproduction operations in Warren, Mich. The contract does not discuss moving any production from Mexico to the U.S.

The $7.7 billion in direct investments represents a decline from the $8.3 billion GM pledged in the 2015 labor contract. The 2015 commitments touched 12 plants but amounted to smaller investments at each one.

Ratification challenges

Dziczek said the permanent shutdown of three plants will be hard for UAW members to swallow and that many will want to know details about upcoming plant investments.

What's not in the deal

Reopening Lordstown
The deal saves only 1 of the 4 U.S. plants GM had targeted for closure: Detroit-Hamtramck Assembly. Lordstown Assembly in Ohio, Baltimore Operations in Maryland and Warren Transmission in Michigan, all of which ended production this year, would not reopen. GM intends to sell the Lordstown complex to a company that wants to hire about 400 people to make electric pickups there. GM also wants to bring about 1,000 battery-cell manufacturing jobs to the Lordstown area, but they would be covered by a separate agreement.

Insourcing from Mexico
The UAW has criticized GM for building the Chevrolet Blazer and other vehicles in Mexico, which accounts for about a quarter of its North American production, according to Automotive News Data Center estimates. GM was Mexico's largest auto producer in 2018. There is no mention of shifting any production to the U.S. from Mexico.

Specifics about plant investments
GM agreed to invest $2 billion in refurbishing U.S. plants, but there is no breakdown of where and when that money would be spent. The company also said it would spend $5.7 billion at Detroit-Hamtramck Assembly, Wentzville Assembly in Missouri, crossover plants in Michigan and Tennessee and preproduction operations at the Warren Tech Center in Michigan. No other U.S. plants are mentioned by name.

Source: UAW, GM

There was considerable negative reaction to the deal on social media immediately after details became public, with many workers confused about issues such as new pay scales and the time it takes to reach top wages.

"Right now, they're reacting to media reports," Dziczek said. "They've got to go to these educational sessions and read it themselves."

Dziczek said there's likely to be a bloc of voters who will reject the contract on principle, with the knowledge that the union got a better deal with FCA in 2015 after members rejected the first tentative agreement with the automaker.

Pattern for Ford, FCA

The UAW could have a tougher time than usual getting Ford and FCA to follow its pattern-bargaining philosophy with respect to the GM deal, if it's approved.

"The things GM won, neither of them wanted to do," Dziczek said. "GM achieved the ability to close three plants, which is a win that Ford or FCA aren't trying to get."

Ford and FCA, in separate statements, said they were continuing to work toward reaching fair agreements with the UAW.

Neither of the other automakers has been struggling with U.S. plant capacity utilization as much as GM. FCA was at 86 percent and Ford was at 82 percent, compared with 71 percent for GM, according to LMC Automotive.

Ford has more U.S. hourly workers than GM, and FCA has more temps and in-progression workers earning wages below the top rate. The raises in GM's tentative deal would cost both companies more.

In addition, GM's decision to keep health care costs unchanged will be a blow to both companies, which were each looking for relief in that area. Before talks began, Ford projected that its health care costs would top $1 billion next year.

Vince Bond Jr. contributed to this report.