Howes: Strike slog signals UAW-GM battle over rising costs

Daniel Howes
The Detroit News
UAW Local 163 members protest outside General Motors Co.'s Romulus Engine Plant on Saturday, the sixth day of the union's national strike against the automaker.

Eight days in and the United Auto Workers national strike against General Motors Co. feels no closer to ending than it did when it started.

That's not good for members walking the picket lines, for investment in new product programs as the automaker burns through precious cash, or for prospective union-organizing drives that will be confronted with the legacies of the walkout and the widening federal investigation into union corruption.

Parrying those harsh realities will not be easy. Nor will persuading skeptical members to ratify a tentative agreement and get back to work — especially if they think their leaders are too cozy with management (like the Fiat Chrysler Automobiles NV members in 2015 who rejected their first contract) or too corrupt to deliver a solid agreement.

Everyone's preparing to consume cash. Because GM's U.S. production (and some in Ontario) has ground to a halt, suppliers are adjusting production schedules and moving to some layoffs; the union soon will begin issuing strike-pay checks for $250 a week; local and state governments will book less tax revenue, crimping already squeezed public budgets; and businesses that rely on autoworker checks to drive their top lines will begin to feel the pinch.

The longer the strike lasts, the more GM is likely to join the union and dig in its collective heels. The automaker is caught between a metaphoric rock and hard place: rising expectations from investors looking for evidence the new GM is savvier than the old GM are pressuring the company to hold the line as much as possible on raising its industry-leading hourly costs.

And yet the sum total of the UAW-GM wish list points in a single direction — raising fixed costs. Quickening schedules to get "in-progression" workers sooner to full pay, reducing GM's ranks of temporary employees in favor of permanent hires, increasing hourly wage rates in two of the contract's next four years — all of it, and more, promise to raise fixed costs and to widen the competitiveness gap between GM and its rivals domestic and foreign.

How that's a recipe for running a robust business shareholders would want to own is a question that defies an answer. They wouldn't. And over time, GM risks sliding back to the uncompetitive mediocrity it was before slumping into a federally induced bankruptcy 10 years ago, a restructuring that made the UAW and its health-care trust GM's largest shareholder.

The union's "UAW Retiree Medical Trust" emerged from the GM bankruptcy owning more than 17% of the company, second only to the stake held (and later sold) by the U.S. Treasury Department. The trust still owns 7% of GM's outstanding shares, according to the most recent proxy statement, ranking the UAW trust as the automaker's third-largest shareholder.

That means UAW members and retirees — be it through profit-sharing payouts, vehicle sales or share appreciation — have a financial interest in GM's performance, real and perceived. Not that you'd know that judging by the rhetoric coming from picket lines and the Democratic presidential candidates mouthing stereotypical talking points.

We won't know for some time whether the strike will further dampen consumer demand for the automaker's cars, trucks and SUVs. But if it does, another vicious circle risks unleashing the downward spiral that creates more unused plant capacity, an ominous prelude to yet more plant closings or sales to third parties not covered by the UAW-GM national master agreement.

GM already has the highest all-in hourly labor cost among all automakers, foreign and domestic, operating in the United States, says the Ann Arbor-based Center for Automotive Research. GM runs $13 an hour higher than the average for foreign-owned automakers running in the Midwest and South, compared to $11 an hour above average at Ford Motor Co., and $5 an hour above average at Fiat Chrysler.

Widening that gap would be akin to throwing the company into reverse just 10 years after it emerged from a taxpayer-financed bankruptcy. Including wages, overtime and profit-sharing payouts, GM's hourly workers' earnings average roughly $90,000 a year and its skilled trades average $122,000 a year, according to the company — far above the national average of $22 an hour, according to Trading Economics.

Can GM afford what the UAW is demanding? Probably. But that doesn't answer two more important questions: for how long, and at what ultimate price?

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Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.