What GM’s contract victory means

By Paul Ingrassia
September 29, 2011

By Paul Ingrassia
The views expressed are his own.

General Motors won.

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


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So let me get this right. Ingrassia says that a company that is basically owned by the UAW was able to negotiate a contract with the UAW. Hallelujah!

Where do you get these people. It proves the old contention – just write a left wing book or article and the Pulitzer will soon be yours.

Posted by eleno | Report as abusive

How does a 17.5% stake owned by a trust constitute ownership? The pension trust is more correctly owned by GM, since to sell it would decimate GM (and cause mass layoffs), and seeing GM succeed (and therefore increase in value) is in the retiree’s best interests.

Unions in Europe have far more bargaining power and tacit ownership than flooding a pension fund with shares in a bankrupt company and hoping for the best.

Now if retirees health care benefits weren’t so expensive, the pension trust wouldn’t need to make these concessions.

Posted by Mike_s1 | Report as abusive

“Now if retirees health care benefits weren’t so expensive, the pension trust wouldn’t need to make these concessions.”

There was an opportunity to fix that with the health care reform- not only retiree benefits but current employee benefits. Had we had with wits to extend Medicare to every American taxpayer, we would have freed business and individuals alike from the onerous weight of for-profit insurance companies that inflate the cost of health care finance in this country by nearly 30%. Funded through broad based taxation in addition to the current payroll taxes, the public option would have put American companies on an even competitive footing with most of the rest of the industrialized world. Instead of paying for primary health insurance for employees, they would be able to buy lower risk and lower cost supplemental policies, which could cost 1/3 as much. This would also eliminate one of the huge sticking points in labor negotiations and would have dramatically benefitted small businesses, providing a huge economic stimulus and probably ending the recession and weak job market.

But, nope, the right wing managed to screw citizens and business alike.

Posted by Cunamara | Report as abusive

GM is history …. Second time around it is bankcrupting investors …

Last time I last all my retirement money , this time round was wise enough to stay away , IPO opening price 36 now 20 , sucks …..

Posted by MMM6 | Report as abusive

The likes of Hyundai are like a dagger to the heart of , likes of GM

Old story , the days of making vehicles for John Wayne are over boys …..

Posted by MMM6 | Report as abusive

Don’t be so quick to declare “victory”. GM is going to run into problems like Boing/Vertol did with low wages attracting drug problem employees and dealers on the production line.
This lower wage tier is what employers want to maximize profits. Now the problem of wages not keeping up with the economy is getting worse instead of better.
How long will this go on? Until we see workers and consumers out protesting in the streets?
GM may have won, but the worker has lost big time.

Posted by rendy815 | Report as abusive

Only those in the Skilled Trades get $32 an hour. Try getting some facts straight news people.

Posted by ConsSuck | Report as abusive

I don’t get it. When will America wake up and abolish unions? They served their purpose 60 years ago, but now it is time to move on. Bloated wages & excessive pensions all contribute to unions making more money and the cost of doing business to sky rocket. Products are more expensive so you sell less! You sell less the company makes less money. It’s a vicsious cycled that has to stop!

If the line worker is making $32 an hour, then why the hell did my transmission die at 100k miles in GM vehicle? Or my steering go out at 40k? Or my computer system fry at 20k? My Toyota and Honda never had that issue. Oh wait…they don’t have a union.

Wake up America! Everybody wants to make more money, but guess what union workers, I don’t think you should do it on the backs of your customers and tax payers. Give this country a chance to compete with the rest of the world and work for an honest wage instead of a bloated one. I wish I had the luxury of filing a “grievance” every time a supervisor or manager looked at me crossways because my performance sucked.

Posted by ckingwevl | Report as abusive

$32hr @ 40 hrs is $61k/yr with leagcy costs about $100k/yr! Too much for a factory worker folks-unsustainable PERIOD! They’re making almost as much as 9 month/yr teachers-which is unsustainable too! You won’t have to wait too long to find out I’m right either-the market will be very soft for the avg $30k+ vehicles and schools/states are in crisis! Takes a crisis for us to change-we’re there!

Posted by DrJJJJ | Report as abusive

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.

It appears Government Motors is an appropriate name!

Posted by DrJJJJ | Report as abusive

General Motors has announced their plan to reduce their pension liability by an anticipated 26 billion dollars. The plan, announced on June 1, will offer select U.S. retirees a continued monthly payment and other salaried retirees a lump-sum payment. This decision is a complex one, and obtaining the advice of a qualified financial advisor is recommended. A free white paper and additional information on the GM (NYSE:GM) Pension Buyout plan is available at http://gm-pension-buyout.com/?page_id=38 . The deadline for the pension buyout plan is July 20, 2012.

Posted by jennygoren | Report as abusive