UAW Strikes a Deal with GM

Sunday, October 25, 2015 may become an influential day in the lives of unionized General Motors workers across the country.

United Automobile Workers, an American labor union known for its success in negotiating deals with employers, managed to secure a tentative four-year contract with GM after dismissing a previously agreed upon contract extension. Faced with the threat of strike should they miss the 11:59 PM deadline, GM and union representatives came to an agreement with a mere 16 minutes remaining. After reaching the proposal, local union leaders voted on it on October 28th. Upon its passing, UAW-GM’s approximately 52,600 hourly workers nationwide decided the contract sufficed with a 55.43% majority in favor. A nationwide strike, while used as a threat by UAW to induce cooperation from GM’s representatives, would likely prove detrimental to both the company and the union workers. If workers partake in a strike, they are consequently giving up their income for its duration, which is often a hindrance to maintaining budgets and paying bills. However, GM would arguably experience the effects sooner and in more damaging ways. It is estimated that if the unionized workers strike, GM would suffer a “loss of revenue of $243 million per work day, or $26 million in daily operating profits” (WSJ). With the recent boom in the auto industry and GM’s place as “arguably the strongest of 3 automakers in North America” (Detroit Free Press), (the other two being Ford and Chrysler), the company is not in a place to risk obstructions to its productivity. It appears that risk aversion dominated GM’s actions as it deemed the negotiated contract as a less costly alternative to strike.

 

Although GM avoided strike in this instance, automakers are particularly vulnerable to union threats in general. A strike in one area of an automotive company can be felt across the company as a whole, spreading across the entire industry, and even affecting global markets. This is a result of a characteristic auto industry practice known as “just-in-time” (JIT) production. Because automakers require many inputs for assembly, there exists an interdependency among the various areas of production. JIT production rests on the idea that in order to remain competitive and minimize wastefulness and overproduction, a company receives daily shipments of auto parts to be used in production shortly after delivery. Companies like GM often cannot sustain production during strikes due to a lack of readily available inventory. This makes auto companies susceptible to more frequent threats of strike and harder hitting effects.

 

Supposedly resembling UAW’s recent negotiations with Fiat Chrysler, the provisions of the GM contract grapple with the wage gap between the first and second tier, or veteran and in-progression workers. Under the contract, veteran workers will earn a “3% wage increase for the first year, 4% lump sum in the second year, 3% wage increase in the third year, and 4% lump sum for the last year.” Meanwhile, in-progression workers will receive traditional health care benefits and an $8,000 signing bonus. In addition, the 4,000 production line workers eligible for retirement between February 1st and May 1st of 2016 are now entitled to a newly offered $60,000 bonus. However, this has led to some discontent due to the remaining 16,000 employees eligible for retirement who will not receive a buyout due to the cap on retirement bonuses.

 

Concerns with the new contract have also emerged over stipulations concerning temporary workers. Under the tentative agreement, temporary workers who have been employed at GM for at least 90 days prior to the contract’s enactment will receive a lump sum payment of $2,000 plus benefits including health care plans and wage increases. While beneficial for some, these provisions have contributed to a larger sense of unease, particularly among workers who worry they will be laid off in favor of those who do not meet the 90-day requirement.

 

Overall, the hourly workers’ responses to the tentative contract were mixed. For the slight majority, the promise of better pay and benefits was enough to prompt agreement while others rejected the offer in anticipation of a more favorable contract. Nevertheless, ratification is not a guarantee yet because hourly workers are not the only employees who have a say in the matter. Skilled members voted subsequently, but these results were less compliant; the voting concluded with a 59.5% majority opposed to the contract. Because UAW-GM had a 55% overall majority in favor of the contract, UAW has the power to proceed with ratification of the contract despite this source of resistance. However, upon determination of the main contributing factors behind the opposition, UAW might choose to reopen negotiations, potentially opening the door to more threats of strike. Whether marked by celebration or regarded as ill-famed, UAW negotiations with GM may change the lives of unionized GM workers for some time to come.