Howes: Auto investments herald arrival of UAW bargaining time
The United Auto Workers’ national contract talks with Detroit’s three automakers, beginning next month, are a quadrennial rite steeped in equal parts economics, politics and theater.
The past few months have delivered large helpings of all three, thanks to auto executives angling to buy goodwill with rank-and-file members and their bargaining committees. The preferred tool: plant investments to expand production, create jobs and curry a bit more favor with President Donald Trump, the nation's tweeter-in-chief and self-appointed defender of working folks.
Not that the auto brass actually would admit such crass transactionalism. Right, the timing of their investments is driven solely by product cycles, not contract dates or the need to impress Wall Street investors still unconvinced the new Detroit is fundamentally different from the lot the feds ran through taxpayer-funded bankruptcy 10 years ago.
This week is no exception — witness General Motors Co.’s pledge to invest $150 million at Flint Assembly to build heavy-duty pickups even as it moves to idle four U.S. plants, three of them in Michigan and Ohio. The automaker also is investing $300 million and adding 400 jobs at Orion Assembly, creating 450 jobs at three other Ohio plants, and spending $24 million in Fort Wayne to boost truck production.
Anything to deflect attention from the looming closure of its Lordstown Assembly plant in northeast Ohio's Mahoning Valley. GM's North American plant restructuring, announced the Monday after Thanksgiving, rekindled public and political sentiment expecting an automaker bailed out by U.S. taxpayers a decade ago to keep operating — whatever the market trends.
Those expectations, however unmoored from the reality of GM's past or its present excess plant capacity problems, won't change anytime soon. The times won't allow it, no matter how desperately CEO Mary Barra and her team want to leave their past behind.
At least until talks conclude in the fall and Lordstown's fate finally is bargained, the 1960s-era plant and its people will remain a flashpoint with the UAW, the White House and members of Congress. All are suitably outraged by the industrial logic that makes GM the leading importer of vehicles built in Mexico (725,108 last year), leaving the folks of Lordstown behind or moving to find work.
Rival Ford Motor Co. early this year invested $1 billion in its Chicago Assembly, pumped $900 million into Flat Rock Assembly south of Detroit, and is upping SUV production in Kentucky. And Fiat Chrysler Automobiles NV is preparing to build a new Jeep assembly plant on Detroit’s east side even as it expands production of Grand Cherokees at nearby Jefferson North Assembly.
It's all a setup for arguably the most contentious round of UAW-Big Three labor talks since GM and the old Chrysler Group LLC emerged from bankruptcy a decade ago. After a long run of strong profitability, UAW members will be expecting base-wage increases, signing bonuses, sweetened profit-sharing formulas and yet more new product allocations to ensure plants keep humming.
Reality is likely to be less bullish. Trump's replacement for the North American Free Trade Agreement has scant hope of passing a House controlled by Democrats, leaving the UAW with a trade deal its leaders consistently say they hate. His multi-front trade war with China and the European Union is producing meaningful headwinds for automakers, including the prospect of 25% tariffs on vehicles imported into the States.
Sales in China, the world's largest market, are declining, causing meaningful implications for GM and Ford. A slowdown in the pace of U.S. sales is expected within the life of the next UAW contract, with one analyst — John Murphy of Bank of America Merrill Lynch — predicting a 30% slide in auto sales come 2022.
And a federal criminal investigation into alleged corruption at the UAW's joint training centers, funded by the automakers, as well as charities associated with top union leaders, looms over the talks. Hardly affirmation, that, of a union long-considered "clean" compared to its peers in organized labor.
How the continuing probe could affect this year's bargaining, if at all, remains to be seen. Still, the pressure will be significant: the industry is changing much faster, and demanding more financial discipline, than four-year bargaining cycles can effectively manage.
Just ask the people in Lordstown. In less than one contract, their plant went from running three shifts building the Chevrolet Cruze compact to empty and idled, waiting to learn their fate.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 p.m. and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM