Rick Haglund: UAW-GM deal will likely boost workers, economy

October 19, 2019 5:00 am

GM headquarters, Detroit | Image by jowest from Pixabay

President Donald Trump could take a lesson in the art of the deal from the United Auto Workers and General Motors Co.

A tentative four-year contract between the UAW and GM appears to be a big financial win for workers while giving the automaker the flexibility it needs to profitably navigate what are likely to be turbulent economic waters ahead.

About 49,000 UAW workers, including 17,000 in Michigan, will be voting on the accord in union halls over the next week. Union locals must wrap up voting by 4 p.m. Friday. The strike, which started on Sept. 16 will continue until the contract is ratified.

Workers would get 3% base-wage increases in the second and fourth years of the contract, and 4% lump-sum increases in the first and third years of the contract. The pact gives full- and part-time temporary workers a shortened path to permanent status and makes no changes to the union’s health care plan. 

That’s huge. UAW members pay about 3% of their health care costs, compared to the national average of about 29%.

The agreement also puts an end to GM’s two-tier wage system, which was implemented in 2007 as the company careened toward bankruptcy.  All permanent GM hourly workers will earn at least $32.32 an hour by September 2023.

Permanent workers also will receive a record $11,000 signing bonus, while temporary workers will get $4,500, upon ratification. That could give an immediate boost to Michigan’s economy, said Michigan State University economist Charles Ballard.

“The ratification bonus checks will go a long way toward reversing [the strike’s] damage,” he said. “In fact, my guess is that many of the workers will spend a good chunk of the $11,000 check in the near future, and that would definitely give a boost to the economies of the communities that have a lot of GM employees.

“As I look at the wages, bonuses, investments and all the rest, it looks like a pretty good deal for the workers,” Ballard said.

But GM also is looking to shrink its hourly workforce by offering $60,000 bonuses about 2,000 eligible workers if they retire by the end of February, according to the tentative pact.

Among promised investments is an agreement to keep open GM’s Detroit-Hamtramck assembly plant, which had been slated to close. GM is reportedly planning to invest $3 billion at the plant to build electric trucks.

But GM didn’t come away empty-handed. Far from it. While the agreement saves Detroit-Hamtramck, the UAW agreed to allow the automaker to permanently close three factories: the Warren transmission plant, a transmission and electric motor plant in Baltimore and the Lordstown, Ohio, assembly plant.

“The UAW got a lot of what they wanted, but they didn’t turn back the decision on those three plants. That’s a pretty hard loss,” said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor.

Lordstown, which built the Chevy Cruze and employed more than 1,300 workers, was shuttered in March.

The plant became a national flashpoint in the heated debate about corporations moving good-paying U.S. jobs to lower-wage countries like Mexico in search of bigger profits.

Prior to labor talks, the UAW unsuccessfully lobbied GM to build its new Chevy Blazer SUV at Lordstown. Instead, the company is producing the vehicle at its assembly plant in Ramos Arizpe, Mexico.

Worker anger over that decision poses a threat to contract ratification. The decision by UAW bargainers to sacrifice Lordstown was said to be at the heart of a sometimes contentious 6 ½-hour meeting on Thursday  by UAW local leaders, who recommended approval of the tentative agreement.

And unlike in past agreements, the UAW summary of the tentative contract did not say much about specific investments, promises to build new vehicles and bringing back jobs from Mexico.

“That’s kind of concerning,” Dziczek said, adding that there could be more investment details in the full tentative agreement, known as the “white book,” which the UAW did not publicly release.

She also questioned reports that GM would invest $3 billion in the Detroit-Hamtramck plant for electric truck production, saying that such an investment would be far more than what automakers typically spend on a new assembly plant.

The Detroit News reported Friday that the new investment would create 2,225 new jobs there to build electric vehicles and battery modules at full production.

Alan Baum, an auto industry analyst in West Bloomfield who forecasts electric vehicle production, said he thinks it’s unlikely that full production would be reached during the four-year contract period.

The high cost of large batteries needed for pickups and declining federal rebates for electric put electric trucks at a cost disadvantage with gas-powered trucks, at least for now.

“Here’s the problem,” Baum said. “The number of employees they’re talking about at Hamtramck suggest a high volume of sales. I’d be quite surprised if volumes were that high in four years.”

But the tentative deal between GM and the UAW represents a significant win for the union and gives the automaker a measure of certainty over labor costs at a time when it faces wild swings in regulatory and trade policies by the Trump administration.

Now it’s up to the workers to say, “Deal or no deal.”

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Rick Haglund
Rick Haglund

Rick Haglund writes the "Micheconomy" column for the Michigan Advance. He's a former reporter and business columnist for Booth Newspapers, now the MLive Media Group, with extensive experience covering Michigan’s economy and the auto industry. He now works as a freelance writer based in Southeast Michigan.