What GM’s contract victory means
By Paul Ingrassia
The views expressed are his own.
That’s the bottom line from the new four-year contract with the company ratified by the United Auto Workers union yesterday.
GM retained the two-tier wage system that allows it to start new hires at $16 to $19 an hour, above the current starting wage but far below the $32 an hour for UAW veterans. Premium-paid skilled-trades workers, such as electricians, can be offered buyouts and be replaced by standard production workers at new-hire wages.
And GM got clearance to offer pension-buyout plans to UAW retirees, providing “maximum optionality,” its chief financial officer declared. That’s atrocious English, but it’s good business.
After 65% of GM’s U.S. workers voted for the new contract yesterday, GM declared that its break-even point in North America wouldn’t increase and that the profit impact of the new contract would be “minimal.” The union hung its hat on 6,000 factory jobs “added or saved” during the four-year agreement, and bonuses of at least $11,500 per worker.
If that sounds like a great trade-off for GM, which it is, the outcome is about as much as a surprise as Vladimir Putin returning as Russia’s president or euro zone leaders continuing to grapple with Greece. The negotiating odds were stacked in the company’s favor. The UAW gave up the right to strike at GM and Chrysler until 2016, as a condition of the government bailout of both companies. And the union was chastened by Detroit’s near-death experience in 2009, finally realizing that “job security” measures such as paying workers indefinitely not to work actually destroyed job security. Numbers don’t lie: the UAW’s GM ranks have shrunk by nearly 90% over the past 40 years. There are 48,500 GM workers covered by the new contract, compared to the 400,000 workers who waged a 67-day strike in 1970, forcing GM to grant them a 30% wage hike over three years.
To be sure, vestiges of Detroit’s old unreality remain. The new GM-UAW contract is 1,854 pages long, thicker than a big-city phone book, and hardly a template for operational efficiency. Page 327 refers to GM Chairman “Stempel,” but Bob Stempel departed in 1992.
But there are signs that the reality of factory life is departing from the absurdity of the contract. A recent visitor to the plant in Lansing, Mich. where GM builds the Cadillac CTS was stunned to see workers and managers changing assembly-line procedures without first clearing them with the local union’s shop committee, the once-standard process that always produced delay and often resulted in grievance filings designed to harass managers into submission. The factory will soon add a second shift, and many of the workers on that shift will be at the entry-level wage.
All this is testament to union President Bob King’s effort to present the UAW as an enlightened organization that has shed the antagonistic attitudes of the past. That’s central to his effort to organize the Japanese, German and Korean “transplants” in America, which the union has failed to do for 30 years.
That will be an uphill battle, despite the new peace pact with GM. With Detroit adopting the transplants’ operating model and two-tier wages, it’s hard to see what advantage the UAW can possibly offer either the transplant companies or their workers. Meanwhile, King still must get new contracts with Ford and Chrysler.
The latter is proving problematic. The government rescue of Chrysler saddled that company with far more debt, relative to its size, than GM. So Chrysler chief Sergio Marchionne is resisting a contract patterned after the new GM deal.
But Chrysler and the UAW certainly will reach an agreement. The truth is that a contract victory for Detroit’s companies is also a win for a union trying to reverse its long and steep decline, and the union’s leadership finally realizes that.
PHOTO: General Motors employee Peggy Burnside inspects a 2012 Chevrolet Sonic as it rolls off the assembly line at the GM Orion Assembly Plant September 14, 2011 in Lake Orion, Michigan. REUTERS/John F. Martin-General Motors/Handout