GM, UAW battle over worker pay from temps to CEO
When handshakes opened labor talks in July, United Auto Workers President Gary Jones promised to halt what he called a “race to the bottom” and to fight against "wage loss."
At the same time, nonunion foreign automakers operating in the United States are setting a new standard for what competitive costs look like — creating a fierce battle over compensation ranging from entry-level temporary workers to General Motors Co. CEO Mary Barra.
Pay is a top issue for the 46,000 hourly UAW members on strike against the Detroit automaker, a national walkout that marked its 10th day on Wednesday. UAW leaders say they are at the bargaining table to fight for fair wages and workers' share of profits after GM posted $27.5 billion in net income over the last four years.
"When we are in full production, imagine doing the same thing 340, 350 times over eight- to nine-hour periods," said Meoshee Edwards, a team leader at the Detroit-Hamtramck Assembly plant who has worked for GM for 23 years. "A lot of people don't understand we feel we have earned what we are fighting for."
But GM is unlikely to fulfill the union's expectations, experts say, with uncertainty around declining car sales, a trade war with China, the time when automakers will recoup investments into autonomous and electric vehicles, and rising fixed costs. Nonunionized foreign rivals' hourly labor costs, including benefits, are $13 less per employee than GM, according to the Center for Automotive Research in Ann Arbor.
The message on the picket lines is radically different. A common complaint is that GM has the money to give its employees more considering Barra’s total compensation package in 2018: $21.87 million — roughly 240 times the $90,000 average pay of hourly employees. That includes wages, bonuses and profit sharing but not benefits, according to the company. Skilled trades employees are paid an average of $122,000 a year.
The base salary of GM’s chief executive, however, is flat from 2010 when adjusted for inflation. Meanwhile, base wages for top-earning production employees at GM have fallen roughly 10% since 2010, one year after the automaker emerged from bankruptcy.
Barra "gets that money off the sweat of my back," said Matt Moorhead, a GM employee at the Lansing Grand River assembly and stamping plant. "If I don’t sweat, she doesn’t make money.”
Twenty-six hours before beginning its national strike against GM, the union rejected an offer that would have raised base wages by 2% twice over four years. Employees also would have received 2% in bonus money in the other two years in addition to an $8,000 signing bonus to be paid upon ratification of the contract.
"We’re proud that GM has been a part of the backbone of middle-class America," GM spokesman David Barnas said in a statement. "We want to continue providing jobs that support families and communities — but can only do so if we remain competitive."
President Jones in July condemned the automaker for making "cuts" to benefits, jobs and wages, putting retirement security "in jeopardy," adding more temporary workers and outsourcing jobs to Mexico and China.
"In the bankruptcy, that was when the union was bending over backward and giving things away and backing up from what we got," said Neal Kesterson, an electrician at GM's customer care and aftersales center in Ypsilanti.
Those decisions, Kesterson said, have affected temporary workers and new hires who are not paid the top wages. Employees like him who have worked for GM since before 2007 "lost a few things, some nice perks" like cost-of-living adjustments and personal paid holidays, the 47-year GM veteran said. "I'm thankful for what I've had. I want to see that for others, and I'm not seeing that."
Hourly GM employees hired before a contract agreement in October 2007 received their first wage increase in a decade in 2015 of 3%. They received another 3% increase in 2017, bringing top pay for production workers to $30.46 per hour. In 2010, their hourly wage was $28.69, according to company reports and the Center for Automotive Research.
The $28.69 wage was the same pay employees had earned when UAW members ratified the 2007 contact.
During the Great Recession, "nobody took a pay cut, pension cut or health care cut,” said Art Schwartz, president of Labor and Economics Associates in Ann Arbor and the former general director of labor relations at GM. "You can't say that about the salaried workforce. The union protected their workers."
The $20.6 billion GM owed to the "UAW Retiree Medical Trust" created in 2007 was not reduced during the automaker's bankruptcy, either. The trust emerged from the GM bankruptcy owning more than 17% of the company, second only to the stake held by the U.S. Treasury Department. The trust still owns 7% of GM's outstanding shares.
The Detroit Three and the union in 2007 agreed to a second-tier wage system for new hires. Under the 2015 contract, second-tier workers became "in-progression" employees who receive wage increases each year for eight years until they reach the top of the pay scale. Their wages start at $17 per hour.
Reducing the timeline for in-progression employees to earn traditional wages and create a clearly defined path for temporary employees to become permanent are top priorities for the union during this year's labor talks.
GM has used temporary employees for decades, at first for summer vacation replacements and then during volume spikes and vehicle launches, Schwartz said. Now they make up 7% of GM's hourly U.S. workforce, though they represent 20% of foreign automakers’ hourly employees, according to the Center for Automotive Research. The starting wage for non-permanent employees at GM is $15.78 per hour, slightly more than half of what so-called "legacy" workers hired before 2007 earn.
"If I am doing the same work they're doing," said Breeuna Primm, a 24-year-old temporary employee who has been at GM's Lake Orion assembly plant for seven months, "I should have the same benefits."
GM's base wages do not include the often hefty bonuses and profit-sharing checks permanent employees receive. In 2010, the year after GM emerged from bankruptcy, hourly union members did not receive any profit share or bonus.
Since then, however, eligible GM hourly employees collectively have made more than $3.5 billion in profit sharing. In 2018, they received profit-sharing payments up to $10,750. Legacy hourly employees also received a 4% lump-sum bonus. With the additional compensation, many employees' total pay would have outpaced inflation.
Profit sharing is automakers' preferred method of compensating employees, Schwartz said.
"Workers are getting way more from profit sharing" than from a wage increase for the year, he said. "But it's not guaranteed, and it doesn't compound. Once a pay increase is in there, it's in there forever."
UAW members at GM also pay 3% out-of-pocket for health care compared to the 28% paid by an average American family, according to the Kaiser Family Foundation. Health care costs per person increased by 28% between 2010 and 2017, according to the Centers for Medicare and Medicaid Services.
But UAW members such as Jared Grace, a GM employee at Pontiac Metal Center, see the potential for a 5% raise.
“The money is definitely there to cover that wage increase,” said Grace, who has worked for GM since 2007 and is now married with two children ages 1 and 3 adding to his list of expenses. “Prices of goods get higher and higher throughout the years.”
Barra's base salary in 2018 was $2.1 million. That's about the same amount GM paid in 2010 when adjusted for inflation: Edward Whitacre Jr. stepped down in August of that year; Daniel Akerson replaced him that September.
Barra's compensation "reflects GM's success today," Barnas said. At-risk stock awards granted for meeting business goals represent 90% of her pay. Barra's total compensation is a roughly 152% increase from that of Akerson and Whitacre's combined compensation of $7.53 million in 2010 when adjusted for inflation.
Of companies earning at least $1 billion in revenue, Barra was the 60th highest-paid chief executive. CEO compensation has risen 940% from 1978 to 2018, while worker pay was up 12%, according to data from the Economic Policy Institute, a Washington D.C.-based think tank.
The belief is that CEOs must be paid more “in order to attract the best of the best,” said Julia Wolfe, a state economic analyst for the think tank, adding CEO compensation has become about "the unique position of power" they wield. "These people at the very top are getting these wages, and we are not seeing broad-based wage growth for everybody else in the economy."
Average wages overall in the manufacturing industry are nearly flat since September 2010 when adjusted for inflation, according to the U.S. Bureau of Labor Statistics. The average union-represented wages in the manufacturing industry, however, were up 5% between 2010 and 2018.
The 10% decrease in value of GM's base wage for legacy production employees is less than the greater U.S. motor vehicle manufacturing industry, however. Average inflation-adjusted wages are down 15% since September 2010, the most recent peak prior to 2018, according to the Bureau of Labor Statistics. Vehicles produced in the U.S. by non-UAW represented employees represented more than 70% of market share, according to the Center for Automotive Research.
"When workers’ purchasing power erodes during good times, that means you’re not simply earning less, you’re diminishing purchasing power. That can slow economic growth if it is widespread enough," said Harley Shaiken, a professor at the University of California-Berkeley who studies labor issues. "Profitable times in the past have resulted in workers wondering, 'How much would we gain?' Even with these profitable gains, they're wondering, 'How much are we going to lose?'"
UAW members such as John Hatline, who works at Detroit-Hamtramck, see Barra's pay and calculate it to be around $11,000 per hour. They feel they deserve a piece of that.
“The whole plant has done the math,” said Hatline, a 45-year GM employee. “I don’t think anybody is worth that kind of money.”
But the CEO position is probably one of the hardest jobs in the world, said Edwin Locke, professor emeritus for the University of Maryland Robert H. Smith School of Business. It often requires smart and swift decision making, while keeping in mind the many headwinds and operations around the globe.
"To me," Locke said, "a great CEO is worth their weight in gold."
Also noteworthy: UAW delegates last year voted to increase their leaders' pay, upping the international president's salary 31% to $200,657.07, at its constitutional convention when they also elected Jones. He has since been implicated in a years-long conspiracy that involved spending more than $1 million of member dues on personal luxuries.
UAW presidents take their posts in the middle of the year, making it a challenge to calculate the wage difference from 2010, also an election year, to 2018. But the president's new annual base salary is a 10% increase from former UAW President Bob King's 2011 base salary of $159,293 when adjusted for inflation, according to a filing with the Office of Labor-Management and Standards.
"I think that their salaries are just disgusting," said Omar Guevara, an in-progression employee at Detroit-Hamtramck. "They have become the 1% they claim to fight, while workers are trying to hang on at $28 per hour."