GM strike, day 17: Details on Monday offer from carmaker emerge
Details of General Motors Co.'s Monday night offer to the striking United Auto Workers began to emerge late Wednesday, with wage increases or lump-sum payments offered in all four years of a proposed contract, the Associated Press reported.
Talks recessed at 8 p.m. Wednesday, after the UAW had rejected a "comprehensive proposal" on Monday from GM and submitted a counterproposal Tuesday over disagreements on health care, wages, temporary workers, skilled trades, job security and "concessionary" measures. Negotiations are expected to resume Thursday.
Union bargainers rejected Monday's offer because it took money from other places to fund profit-sharing, and it didn’t give temporary workers a clear path to a full-time job, a person briefed on the negotiations told the AP.
Another person briefed on the talks said that much of what the union objected to, including proposed concessions, has been removed or is being bargained. That person said health care would remain the same as it is now. The person, who also didn’t want to be identified because the talks are confidential, did not know the status of other provisions that were being discussed Wednesday.
Among the union’s problems with the Monday offer is a provision requiring temporary workers to be employed for three uninterrupted years before they automatically become full-time. It’s unlikely the workers would not be laid off in three years, making it almost impossible to reach full-time status, the person said. Full-time workers on the picket lines say they want to see temporary workers get permanent jobs.
For workers who were hired before 2007, the Monday night offer included 2% raises in 2020 and 2022, as well as a 2% lump sum payment in 2019 and 3% in 2021. Workers also would get an $8,000 ratification bonus, and a cap would be lifted on profit-sharing.
Full-time workers hired after 2007, who now are paid less than older workers, would get the same profit-sharing and ratification bonuses. But they wouldn’t get pay raises other than the steps on the pay scale negotiated in the last contract, the first person said of the Monday night offer. Those who have reached the maximum pay rate of $28 per hour would get a 2% lump sum payment in 2019 and 3% in 2021. But the union wants new hires to eventually make as much as older production workers who are paid $30 per hour.
Although the company promised uncapped profit-sharing, the Monday night offer proposed shifting money from annual quality bonuses and other payouts to fund any increase, the first person said.
GM also kept its offer to build an electric pickup truck at a plant in Detroit that it had planned to close, and to build an electric vehicle battery factory run by a joint venture somewhere in the area of Lordstown, Ohio, where GM also wants to close a factory, the person said.
Inventory at dealers has decreased by nearly 50,000 units since the UAW began a nationwide strike against the Detroit automaker Sept. 16.
As GM sells from its existing inventory and that supply continues to dwindle, it could place increasing pressure on the automaker to make a deal with the union.
GM still had 759,633 vehicles at the end of September, the company said Wednesday when it reported its third-quarter sales. That is down from about 798,000 units in August, according to estimates from auto information website Edmunds.com Inc.
Despite the decline, GM's supply still is expected to last 81 days — 11½ weeks — according to Edmunds. That is well above the industry average of just 66 days.
"Inventory looks pretty decent; it looks good in terms of whole numbers," said Jeremy Acevedo, senior manager of industry insights at auto information website Edmunds.com Inc. "We don't know where it is or the distribution of what those vehicles and models are. We could be getting to a point where the model mix isn't optimal for certain areas."
Despite the overall inventory decline, GM's days' supply actually increased three days from August — but the U.S. auto industry's days' supply rose by five days. The increase is because daily sales were significantly fewer in the month of September in comparison to August, slowing the rate at which GM is estimated to sell vehicles in the future, Acevedo said.
The automaker declined to comment on the estimates because it reports its inventory levels quarterly, company spokesman Tom Henderson said.
The strike has not yet had a significant impact on GM's sales with the automaker on Wednesday posting a 6.3% increase in dealership deliveries for the past three months year-over-year.
If the stikes continue, however, it could bite into GM's fourth-quarter results, experts said. How quickly GM can ramp up production once the walkout ends also will play into that. The automaker said Wednesday it was idling its assembly and transmission plants in Silao, Mexico, where it builds profit-heavy pickups, including GM's top-selling Chevrolet Silverado. The 6,000 affected workers there bring GM's non-UAW furloughed employees to nearly 10,000 in Mexico, Ohio and Ontario.
As the strike continues, more suppliers and their workforces are being affected, according to East Lansing-based Anderson Economic Group. The consulting firm now estimates lost wages of laid-off non-UAW employees and workers at suppliers has surpassed that of lost earnings by UAW members on strike — $18 million per day nationwide versus $14 million.
"This is becoming very painful for people in southeastern Michigan," said Patrick Anderson, CEO of the economic consulting firm. "There are no new issues in these labor negotiations. Everything that is being discussed was known months in advanced. The damage now to a financial position to a lot of workers, including many who don’t work for GM and have no ability to vote for or against a strike at GM, is now considerable."
If UAW members picket through this weekend, total direct wages losses are expected to exceed $412 million nationally, Anderson said.
Of the 46,000 hourly GM employees on strike, more than 17,000 are in Michigan. The losses of wages and salaries both direct and indirect in Clinton, Eaton, Genesee, Ingham, Macomb, Oakland and Wayne counties is estimated to total $780 million, 1.8% of earned income in the region for a quarter.
"That is a clear indication that we could be pushing the region, which half of Michigan's residents live in, into a one-state recession," Anderson said. "This affecting how much people are going to spend at Christmastime on credit, what they’re going to do for vacation, how much saving they're saving to buy a home. It is real money out of actual people’s pockets."
More suppliers said Wednesday they have been affected by the work stoppage in GM, joining companies such as Nexteer Automotive and Magna International that already have announced layoffs.
Southfield-based Lear Corp., which makes cars seats and electrical systems, said its UAW-represented employees “at impacted facilities are unable to work due to lack of production volume."
Lear didn’t provide what facilities are impacted specifically nor did the company say how many employees are out of work because of the national strike. The UAW said it represents employees at 11 Lear facilities across the U.S., including in Flint; Arlington, Texas; and Wentzville, Missouri.
“Lear has long partnered with both GM and the UAW to deliver world-class products to customers,” a Lear spokesman said in a statement. “We are monitoring the current situation and remain hopeful an amenable solution is soon reached that is beneficial to all parties."
Some of Auburn Hills-based Continental AG’s “customer releases have been impacted, but we are still shipping to select GM locations and have not experienced any significant impact overall,” a company spokeswoman said.
“We are continuing to watch the situation and will adjust our production schedules in accordance with the customer releases depending on the duration of the strike,” the spokeswoman said.
Southfield-based Denso International America Inc., meanwhile, has no intention of laying off employees because of the strike because the supplier has "a robust and diverse customer portfolio," said Andrew Rickman, senior regional public relations specialist. Denso produces thermal, powertrain, mobility, electrification and electronic systems.
Michigan's Unemployment Insurance Agency has processed about 3,500 claims from workers at auto suppliers that the agency believes is a result of the strike as of Sept. 30, spokeswoman Lynda Robinson said. The maximum benefit amount a claimant may receive is $362 per week.
That is slightly above the $250 per week maximum striking UAW members can receive. Picketers began picking up their checks Monday. For comparison, top-paid production employees earn $30.46 per hour, or about $1,218 per week.
GM itself could be out $660 million in profits if the strike persists through Sunday, Anderson said, as estimated costs have grown from under $10 million per day to $90 million daily if the strike were to continue into a fourth week. Wall Street analysts estimate the effect could be far greater — even $1 billion after the strike's first two weeks.
Anderson estimates the loss of federal income and payroll taxes could be more than $155 million by the end of the week. Lost income taxes in Michigan is estimated to be $9 million — just as the state of Michigan is in the midst of a heated budget battle.
"What is going on is serious for the state," Anderson said. "If we look ahead, if this is not solved in a constructive manner soon, you not only risk a one-state recession, you risk telling consumers all across the country Detroit hasn’t learned its lesson. That’s the nuclear option that I want to avoid."
Strike pay is taxed, but taxes are not deducted from the checks. Members pay taxes later when they claim strike pay on their tax returns. The UAW will issue an annual tax form if it has given $600 in strike pay to a member.
The sticking points in negotiations the UAW identified earlier this week consist mostly of fixed costs that compound on themselves. Fixed costs contribute to the $13 per hour per employee more in overall labor costs GM pays than its foreign-owned rivals operating in the United States, according to the Center for Automotive Research in Ann Arbor.
Additionally, GM faces uncertainty around declining sales, a trade war with China and the time when automakers will recoup investments in autonomous and electric vehicles. But the message of the picket line is that UAW members, especially temporary workers, deserve a greater piece of the tens of billions in profits GM has earned over the past four years.
The UAW argues that the Detroit Three use line workers designated "temporary" for years as though they are full-time employees without a clear path to a permanent, higher-paid position. The starting wages for temporary production employees at GM is $15.78 per hour.
They're meant to be employees who fill in when someone's absent, the UAW has said. Temporary workers make up less than 10% of each of the Detroit Three's total UAW workforce. At GM, they represent 7% of it.
It also is unclear if a tentative agreement immediately would send UAW members back to work. Members could remain off the job for several more days if a subcouncil of the bargaining committee and local union leaders decides to wait to end the national strike until after UAW members ratify the contract. The walkout already is the longest national strike against GM since 1970, which was 67 days.
The strike is the UAW's first since the Great Recession and GM's bankruptcy in 2009. Now in its third week, it has left a lasting economic impact, experts have said. How much of an impact it has had is expected to be revealed in the months to come.
The Associated Press contributed.