Big profits, slowing sales make for tough UAW contract talks

Ian Thibodeau Breana Noble
The Detroit News
The United Auto Workers Local 174 sign is shown outside their building in Romulus.

Slowing sales, new competition, a federal investigation into bargaining practices and years of booming profits for the Detroit Three will make contract negotiations with the United Auto Workers the most contentious in years. 

The automakers and UAW officials on Monday and Tuesday will mark the official start to 2019 bargaining with ceremonial handshakes at the automakers' respective headquarters. Current contracts expire Sept. 14.

The last contract was negotiated in 2015 during periods of growth. Four years later, potential plant closures, expensive bets on future technology, and an uncertain regulatory and trade environment make for a tougher negotiating environment.

Automakers want contracts that would curb spending over the next several years in anticipation of a downturn. The UAW will be looking for its piece of the fat profits all three Detroit automakers have reported annually since the last contract was negotiated.

Meantime, experts say those working in the plants are most concerned with job stability and what electrification, autonomous vehicles and declining sales mean for their jobs. They say the UAW will be less likely to bend on issues like health care costs, wage increases, temporary employees and future product allocation. And that could lead to strikes.

"After they’ve reported record profits, it’s time that they give back some of the things they took from us over the past 25 years,” Ypsilanti-based GM worker Bill Bagwell Jr., who belongs to UAW Local 174, told The Detroit News. "We built the company. My father built the company as did those before him. We built the company to invest in Russia, to invest in China, in Brazil, in Europe. If it wasn’t for the UAW GM workers throughout the last 50 years, none of them would be there."

Kristin Dziczek, vice president of industry, labor and economics at Ann Arbor's Center for Automotive Research, has monitored negotiations for years. She said meetings at the 2019 bargaining table will have many new aspects that were not factors in recent years.

"We've had a decade of profitable, healthy auto sales," she said. "It is very difficult for those companies to go to the table and claim poverty in any sense. But they want to be girded against any downturn by not getting locked into higher costs."

UAW officials and officials representing the automakers have been largely quiet about what's expected this year. UAW spokesman Brian Rothenberg referred to UAW President Gary Jones' comments made during a March speech at the Special Bargaining Convention in Detroit.

"We are ready," Jones said then. "We are ready to put in the work, and we are ready to make the plans. And we are ready to set the bar high. We are ready to gear up and fight for what is right... there will be no more quiet closing of plants, no more shipping of jobs to Mexico and abroad without a sound. They are on notice."

Expectations from the UAW and employees are high after record years. While the UAW is expected to angle for assurance on wage increases in place of profit-sharing or lump sums dependent on profits, automakers are expected to focus on reducing health care costs, adding more temporary workers to the lines and prepping plants for more products they don't make many of yet, like autonomous or electric vehicles.

"Workers know things are getting bad," Dziczek said. "They'd like to lock in a base wage increase. They don't want to see any changes in their health care. They've contributed a lot to the success of the companies some coming out of the bankruptcies. All of those things make this much more difficult."

Also looming over the talks are several decisions or ongoing situations involving the Detroit Three.

Fiat Chrysler Automobiles NV is building a new plant in Detroit that's outside of its 2015 bargaining agreement. The automaker ran its plants well past capacity for most of the last few years, and needs more room to build Jeeps while consumers are still hungry for SUVs.

Meantime, an ongoing federal investigation into whether the FCA-UAW negotiations in 2015 were corrupted during a years-long conspiracy looms over their bargaining table. The scandal has led to eight convictions, including former FCA Vice President Alphons Iacobelli. The investigation could lead the union to put up a tough front, especially since FCA and the union reached a deal first in the last round of negotiations in 2015 even after union workers rejected a first agreement.

FCA also is looking to form partnerships that will help lead it into the autonomous and electric future of the industry after a failed merger bid with French automaker Renault.

Health care is costly for all three automakers. Under the 2015 agreements, UAW employees pay as little as 4% out of pocket for coverage. Some aren't required to have a primary-care physician. All three automakers are expected to try to negotiate a plan that would place more cost on the employees.

"The UAW’s brand has been to offer the very best health care coverage to its members at little to no cost," said Michelle Krebs, an analyst for Cox Automotive. "I don’t think they want that slippery slope for it to come up again in future years. Automakers see that as not sustainable because of the rising costs, and it is becoming very expensive to offer that."

The companies are expected to negotiate for more temporary workers. The 2015 agreements varied for each automaker on when and how the automakers could hire or use temporary workers. The UAW has said the "temporary" designation is meant for people who fill in on the line in case of absences or time off, much like substitute teachers. Those employees don't get the same benefits as full-time UAW workers.

The automakers argue that temporary workers protect against layoffs. They also have processes that would allow temporary workers to become full-time employees in some cases.

And as GM moves to correct its own capacity issues by pulling products out of four U.S. plants in 2019, experts expect the Detroit automaker will be a strike target, and have a particularly contentious negotiating period as the UAW tries to fight to keep the automaker from permanently closing any plant. In May, the automaker announced plans to sell its Lordstown Assembly plant in Ohio to electric-vehicle start-up Workhorse.

The UAW is suing GM for its plans to "unallocate" Lordstown, Warren Transmission and Baltimore Operations before the current contract expires. The Detroit-Hamtramck plant is not included in the lawsuit because its production was extended through January 2020, after the current contract expires. Union leaders, who balked at the announcement by GM and Workhorse, are expected to demand a new vehicle for Lordstown during contract negotiations this fall.

Twitter: @Ian_Thibodeau, @BreanaCNoble