Howes: After inevitable UAW-GM battle, uncertainty looms
The strike was inevitable, ensured the Monday after Thanksgiving. But was it necessary?
Probably. General Motors Co. CEO Mary Barra shocked labor leaders in two countries last November with plans to idle four plants in the United States and one in Canada. And those plans to end production at one plant each in Ohio, Maryland and Michigan, as well as the province of Ontario, still are mostly going ahead despite a tentative agreement in a costly national strike now in its 39th day.
One industry executive likened GM's plant-idling gambit to a declaration of war on the United Auto Workers. With hindsight informed by more than a month of picket lines, heated rhetoric and still-uncertain prospects the proposed agreement will pass muster with a majority of members, that martial comparison turns out to be just about right.
GM's play to address the worst plant-capacity problem in the U.S. industry struck at the heart of an implicit bargain that has long governed the automakers and the UAW: When times are good, wealth is shared, jobs are secured and product investment flows — especially inside a company rescued a decade ago by the Obama administration and American taxpayers.
These are good times, arguably the best for the Detroit-based industry since the Motor City's Golden Age in the 1960s. Record profits, strong sales and a market rotation toward profit-rich trucks and SUVs fattened bottom lines, swelled executive bonuses and boosted profit-sharing payouts to UAW-GM hourly workers.
But these are not normal times. The steady approach of the Auto 2.0 spaces of mobility, electrification and autonomy — hastened by stiffening regulatory standards in China, the European Union, even the United States — is forcing automakers to maximize earnings now, to restructure to reduce costs, to invest in expensive new technologies and partnerships to navigate a future no one can see clearly.
The management of GM, bruised by the ignominy of federally induced bankruptcy, is vowing to never again make the kind of mistakes that contributed to the Detroit automaker's collapse into a Chapter 11 essentially dictated by the White House. And the UAW's leadership, starting with President Gary Jones, is implicated in a continuing federal investigation into union corruption.
The legal jeopardy looming over Jones, his predecessor Dennis Williams and other current and retired union leaders infuses this once-in-a-generation confrontation with more uncertainty, more mistrust and more distraction. None of those, and more, helped to speed a bargaining process slowed by an over-sized union negotiating team that frustrated its GM counterparts.
Instead, the legal troubles created a credibility problem that worsens with each additional conviction and signs the investigation is drawing closer to Jones, Williams and at least one retired vice president, Joe Ashton. Even as the UAW leaders continue to prosecute their longest national strike against GM in nearly 50 years, the feds are prosecuting a massive case against the union's leadership.
And it's creeping into actual bargaining. The UAW and GM reached "a new memorandum of understanding" that pledges to dissolve the UAW-GM Center for Human Resources and joint activities under two company-financed trust funds. The existing building overlooking the Detroit River will be sold and "funds remaining" will be "used for going-forward joint activities." Expect GM's rivals to do the same.
Normal times these aren't. Caught in the middle are more than 48,000 UAW-GM members and their economic expectations in President Donald Trump's America, a curious mix of neo-national protectionism concerned far more with where cars, trucks and SUVs are built and a lot less with what a Made-in-America premium costs and whether it's competitive.
By recent historical standards, the UAW delivered a solid contract to members that excises some of the most hated elements adopted as GM (and its rivals) slouched toward the financial reckoning of 2008 and 2009. After a dozen years, the "two-tier wage" structure grudgingly adopted under then-UAW President Ron Gettelfinger would die with the new contract.
The eight-year "grow-in" period for so-called "in-progression" employees to reach top pay would be shortened to four years. And temporary workers, roughly 7% of GM's hourly workforce, would become full-time employees after three years and receive credit for time already served.
Base-wage rates would be increased 3% in the second and fourth years of the contract with 4% lump-sum bonuses paid in years one and three. The UAW's generous health-care plan, requiring members to pay just 3% of their cost, would continue; pensions essentially would be untouched; the $12,000 cap on hourly profit-sharing payouts would be abolished; and GM agreed to pay members a ratification bonus of $11,000, effectively reimbursing members for lost wages and paying them a few thousand extra for striking their employer.
As ratification votes roll in from around the country, a question looms: Are UAW members getting what they wanted from their longest such strike against GM since 1970? On economics? Yes, pretty much. On who determines where GM assembles vehicles and whether the UAW can successfully over-rule those decisions? Not so much.
'Is anyone safe?'
And that's probably the biggest reason at least two locals so far are voting down the proposed agreement: there is no production "coming back" from Mexico. And if GM can get the union's assent to close Baltimore Operations in Maryland, Lordstown Assembly in northeast Ohio and Warren Transmission in southeast Michigan, the thinking goes, is anyone safe?
In an era of transformational change, the uncomfortable answer — at best — is, maybe not. The auto industry that for the better part of a century installed internal-combustion engines and geared powertrains into vehicles, that employed hundreds of thousands to produce proven technologies, is preparing to change the way its metal moves people and goods.
That has profound implications for the UAW, its members and their place in the automotive value chain. Electric vehicles are less technically complex, require fewer parts, fewer workers to assemble them and are expected to last longer than the vehicles rolling off assembly lines around the world today.
Both GM and the UAW understand what change like that could mean for their respective business models, but it's not yet clear either side has decided how to manage it — assuming outright denial, that is, cannot be a viable option.
The deal under consideration by UAW-GM members will cost the automaker cash over the next four years. And it will cost cross-town rival Ford Motor Co. even more, given its larger UAW workforce and higher concentration of production in the United States.
But this deal isn't just about dollars and cents for GM. It's about flexibility, about securing the go-ahead to close one U.S. assembly plant, two powertrain operations (the leading edge of the coming electrification wave, anyone?) and to wind-down assembly in Oshawa, Ontario. That will lower fixed costs, reduce engineering expense and increase plant-capacity utilization by eliminating more than 300,000 units of U.S. production in Ohio alone.
With its next-generation range of profit-rich, full-size SUVs scheduled to launch in the early years of the new contract, GM is betting the higher revenue and profit generated from the new vehicles will offset the higher compensation and pledge to make temp workers permanent full-timers sooner.
The bottom line: who stands to get what they want depends on time. Short-term, the UAW leadership is in the process of delivering a comparatively rich contract covering the next four years. But its pledge to create a joint National Committee on Technological Advanced Technology with GM, for example, probably is not sufficient preparation to navigate a very uncertain, electrified future.
GM appears to be laying the foundation for a longer-term reinvention that envisions using fewer plants to build more products, that converts production capacity to the electrified value chain (it plans to build a joint-venture battery-cell plant with LG Chem Ltd. near the shuttered Lordstown site), that prepares for an automotive century expected to look very different from the last one.
You want to know why UAW-GM members are anxious — why middle class anxiety is emerging as a core tenet of the emerging 2020 president campaigns for both parties — despite pay increases, bonuses and agreement to retain quality health care?
That's it: guarantees look more like intentions than iron-clad promises, and the future looks less certain than the past. That's not what New Detroit is supposed to be about, but increasingly it is.
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.