Strike digs deeper into UAW workers' pockets
The 49,000 United Auto Workers members walking picket lines of their national strike against General Motors Co., now in its fifth week, are draining money from the union’s strike fund and diminishing any potential economic gains from a new contract.
A deal may come down to whoever hits a breaking point first, experts say. Top-paid production employees have lost an estimated nearly $5,000 in base wages and profit-sharing, according to economic and HR experts, as well as Detroit News calculations. The losses — which could be recouped from ratification bonuses of more than $8,000 — have led employees to cut their household budgets, they say, and request deferred car payments.
Anderson Economic Group estimates that GM employees on strike have lost nearly $319 million so far in wages. Including workers up the supply chain who have been affected, lost direct wages total more than $624 million for four weeks. GM’s stock is down almost 9% since the strike began, and the automaker is out more than $1 billion in profits because of the work stoppage.
"This is a real chunk out of the earnings and expenditures available to people that shop in Michigan stores, that get their houses repaired in Michigan, that pay utility bills, that buy groceries, that go to restaurants and when they can plan for vacations and save for college for their kids," said Patrick Anderson, CEO of the East Lansing-based economic group. "It’s a very painful chapter for Michigan and one that I fear will put us into a one-state recession."
As the strike reaches its one-month mark Wednesday, the impact of the longest national strike against GM since 1970 continues to mount as the two sides struggle to craft a tentative agreement. With 17,000 UAW-GM employees in Michigan, the state has taken the hardest hit. Anderson estimates the state has lost $14.7 million in income tax revenue.
UAW members voted to strike for temporary workers to have a path to a permanent job, for better wages, for affordable health care, for a greater piece of GM's profits and for job security, UAW spokesman Brian Rothenberg said in a statement.
"The real question is what was the cost to UAW members and our nation’s middle class not to strike," he said. "That’s why 100% of our local UAW GM Council voted to strike. Some things are well worth the struggle of standing up and sacrificing for our families and our future."
GM declined to comment. The impact on GM will be better known when the company releases its earnings Oct. 29.
Top-paid production employees at GM, who represent more than 40% of the hourly UAW workforce, earn about $1,220 for a 40-hour week. Including two weeks of $250 strike pay and two weeks of $275 strike pay, they have lost $3,820 in base wages for the first four weeks.
The 15% of GM hourly UAW employees who are skilled trades may be out even more. Starting wages for temporary employees, who represent on average 7% of GM's workforce, is $630 for a 40-hour week, which not all temps work. Based on that, they have lost nearly $1,500 in base wages.
The UAW's International Executive Board on Saturday voted to move up a Jan. 1 scheduled 10% increase in strike pay to $275 per week starting Sunday. It also lifted a restriction on strike pay for those who make extra earnings from part-time work elsewhere.
“It was a blessing for me,” David Parnell Jr., a GM employee for almost four years, said about the strike pay increase. He also is looking for part-time work. The walkout is “a life strain as far as being able to help provide for my family. It’s difficult. I tried to get my car payment deferred; they wouldn’t do it. It’s been a struggle.”
The 46-year-old Detroiter treks 75 miles each way to Flint Assembly after recently transferring from Detroit-Hamtramck Assembly. He has four kids in college, three of whom attend school out-of-state. He makes $21 per hour at GM and his wife also works at AK Steel Corp. She has tried to pick up extra shifts.
“I want General Motors to do the right thing,” he said. "I want a fair contract with sustainable work, that’s the biggest thing. You can talk to us about these billion-dollar investments and bring an electric truck to D-Ham, but you don’t know if that electric truck is going to sell. Of course I want to come back, but it's got to be sustainable work."
UAW members aren't the only ones affected. About 10,000 people have been laid off at non-UAW GM sites in Ontario, Mexico and Ohio. Anderson expects GM will have to make cost-cutting measures that could affect its U.S. salaried workforce of about 50,000. The salaried workforce hasn't been affected to date.
"There’s no way you can stop production in an auto company for a whole month and have half your workers go unscathed," Anderson said. "This is going to affect salaried worker compensation."
The company reported $11.8 billion in pre-tax earnings in 2018 and paid up to $10,750 in profit-sharing checks to 46,500 UAW hourly employees based on hours worked. Temporary employees do not receive profit-share checks. GM in a letter last week said its latest offer to the UAW removed a $12,000 cap on profit-sharing.
Profit-sharing is calculated as $1,000 per $1 billion in profits GM earns, Colin Lightbody, a former Fiat Chrysler Automobiles NV labor negotiator and president of HR and Labor Guru Inc., noted in a recent blog post.
"If GM loses $1 billion in profits as a result of this strike, then UAW members' profit-sharing checks will be $1,000 less this year," Lightbody wrote. "The longer that this strike goes on, the more pain and suffering that both parties will endure."
That includes the international union. It is now overseeing three strikes at Pennsylvania-based Aramark Corp. janitorial services company, at North Carolina-based Mack Trucks Inc., and at GM — and that's adding pressure to the union's strike fund.
The UAW strike fund, fed by member dues, held $721 million at the end of 2018, the union has confirmed. If the about 49,000 GM-UAW members, which includes temporary employees, received the two $250 checks and two $275 checks, the union will have spent almost $51 million on strike pay by next week.
The Center for Automotive Research’s estimates put the strike pay costs to the UAW strike fund at as much as $12 million a week. With another 850 Aramark janitors on strike at five GM facilities in Detroit-Hamtramck, Warren, Flint, Grand Blanc and Parma, Ohio, the union's strike fund will have lost an additional up to $659,000 in strike pay alone.
The decrease puts the fund further from its goal of reaching $850 million, which is when UAW members would see their dues decreased to the pre-2011 level. The impact could have been worse.
After outrage from the union, other labor organizations and Democratic presidential candidates, GM reversed its decision to transfer costs of employee health insurance benefits to the union a week and a half after the strike began. The company continues to pay the health care costs in the decision that was retroactive.
In 2018, GM spent $900 million on hourly health care costs — about $1,530 a month for each UAW member, according to information supplied by the automaker. With the strike hitting the one-month mark, the union has saved about $75 million in health care costs it would have paid during the strike because of GM's decision.
The UAW Retiree Medical Benefits Trust is also affected by the strike. The trust owns 100,150,000 shares of GM stock and has taken a paper loss of $337 million since Sept. 13 before the strike began. Created as part of the 2007 collective bargaining agreement, the trust moved retiree health care liabilities from the automakers to a new independent Voluntary Employee Beneficiary Association.
The strike still isn't a "huge blip on the radar screen" nationally, Grant Thornton's chief economist Diane Swonk said. But it is coming at the time of a trade war and a slowing economy with a manufacturing sector that has taken losses. The latest jobs report issued Oct. 4 by the U.S. Bureau of Labor Statistics shows the manufacturing sector lost 2,000 jobs during the month of September.
"The issue is it alone can't tip the economy in one direction or the other but it's in the context of things that are already bad for the overall sector," Swonk said. "You have to kind of squint to see it in the national data right now, and that's because they are not as big as they used to be. If this were 40 years ago, this would be a different story."