We voted down the tentative agreement. But they used a procedural loophole to ratify it. We think it’s a very bad agreement and a very bad precedent, and we’re going to do everything we can to overturn it.
Though UAW boss Bob King has said that organizing transplant factories is a life-or-death struggle for the union, but the real make-or-break issue this year was the contract negotiations with the Detroit Automakers. And though King roundly denies that a rift has been formed in his union over two-tier wages, the facts simply don’t back that position up. In the last contract to be ratified (with Chrysler) for example, only 54.8% of the union approved the deal… hardly the “overwhelming support” that King claims. Moreover, 55.6% of the skilled-trades workers at Chrysler rejected the contract, according to the Detroit Free Press. King’s narrative of experienced workers “demanding” higher wages for the Tier Two brothers “in the greatest spirit of solidarity” just doesn’t hold up to scrutiny. (Read More…)
Considering the United Auto Workers’ VEBA fund is still Chrysler’s second-largest shareholder, CEO Sergio Marchionne is taking an amazingly hard line with the union. With a GM deal long done, and Ford’s deal moving towards approval, Chrysler is the last automaker on the UAW’s to-do list… and Marchionne tells Bloomberg he’s up for a fight if necessary, saying
I sincerely hope that we don’t have to get to arbitration. But if necessary, Chrysler will go there. We and GM are completely different
Marchionne is reportedly pushing the UAW for a number of tough concessions, including a mere $3,500 signing bonus (compared to $5k at GM and a reported $6k at Ford), and the elimination of a planned 2015 cap on entry-level “Tier Two” workers (at 25%). And though both of these are tough asks, he’s using UAW boss Bob King’s concept of union internationalism as a cudgel against the UAW, playing Italian unions off their American counterparts. And as a result, he could earn Chrysler a favored place among America’s unionized autoworkers. (Read More…)
The prospect of a Chinese auto industry growing at insane speed thanks to a booming market and resiliently low wages has long kept auto industry execs up at night, most notably inspiring Sergio Marchionne’s acquisition of Chrysler. But basic economic principles dictate that you can have a high rate of growth or low wages… but not both. Growth inevitably drives inflation, which drives up wages, which in turn slows growth. And according to a report in the Wall Street Journal [sub], that dynamic is already taking hold.
Jae-Man Noh, head of Hyundai’s joint-venture operations in China, said average manufacturing-worker wages in China—about 27,000 yuan ($4,200) a year per worker in 2009—are likely to double by 2015 from current levels.
Auto makers are expected to be affected as much as other industries by the trend, if not more, Mr. Noh said, adding that wage costs for many foreign auto manufacturers already have doubled in less than a decade. He said that a rival foreign auto maker that Hyundai has researched has seen worker wages in China rise to 49,000 yuan a year per worker in 2010, up from 24,500 yuan a year in 2003.
“We need to let go of our perception that the Chinese market is a low-cost production base,” Mr. Noh told a group of reporters at Hyundai’s office in Beijing. He didn’t offer specifics on Hyundai’s wage costs in China.
And though the laws of supply and demand made this development inevitable, the story of the decline of China’s low-wage manufacturing base is a lot more interesting than you might think. After all, economic and historical forces may seem mechanical in the abstract, but on the ground level they work in dramatic, disruptive ways.
One of the legacy costs that GM was not able to reduce in the bailout was pension costs, a whopping $128b obligation as of the end of 2010. And though the plan is “only” underfunded by $10.8b at the end of June according to GM, Kenneth Hackel, president of CT Capital LLC (and author of two textbooks on valuing securities) recently told Bloomberg
The financial risk because of [GM’s pension liability] is higher than people understand. The cold reality is if you used a conservative discount rate and you wanted to close out the plans, you would have to raise about $35 billion.
With GM’s market cap sagging into the low-$30b range (currently around $34b), the risk of pension liabilities growing larger than GM’s market capitalization is very real. And as lower interest rates and a weak stock market reduce pension fund returns, the obligations grow, in turn putting pressure on GM’s stock price. And it’s not like nobody saw this coming: a GAO report released in April 2010 issued dire warnings about the state of GM and Chrysler’s pension obligations. Now, according to the ace reporters at Reuters, GM and the UAW have hashed out a buyout deal giving workers the option of being bought out of their pensions. Which has us dying to know: what’s a UAW pension worth in cash?
UAW Local #273 members working at Chrysler’s Global Engine Manufacturing Alliance factory in Dundee, Michigan voted to authorize a strike[Ed: despite a no-strike agreement that was agreed to inexchange for Chrysler’s bailout] in advance of negotiations over local issues, particularly a recently announced rotating shift schedule that has created unrest at another Chrysler plant in the Detroit area. The proposed schedule is so unpopular that almost 99% of local #273 members voted to authorize a strike if negotiations break down. The shifts, which rotate 12 hr day and night shifts week to week, are intended, Chrysler says, to maximize productivity. The UAW says it is to reduce overtime pay. The normal 3 shift model increases straight-time production by 20% to 120 hours per week.
As predicted, the hand-wringing over Sergio Marchionne’s letter to Bob King was not enough to derail the basic motivations for the UAW to reach new deals with the automakers. Last night the union agreed to a tentative agreement with GM, its pattern target for this, the first round of negotiations since the bailout. That agreement must be approved by the union rank-and-file, but if ratified, Reuters reports that it includes
The re-opening of the idled Spring Hill, TN plant to build an unspecified “new product”
$5,000 signing bonuses (at a cost to GM of $245m)
According to the NYT, “significant improvements to health care benefits” are also part of the deal
According to AN [sub], the union “successfully fought back efforts to make major changes — and weaken — our retirement plan.”
Sources close to the negotiations told The Detroit News that a deal was imminent with General Motors Co. when Chrysler CEO Sergio Marchionne sat down at his Mac computer and fired off a sharply worded letter to UAW President Bob King at 10 p.m. Wednesday, accusing the union leader of violating their gentlemen’s agreement to sign off on a deal by the 11:59 p.m. deadline.
Shortly after the letter was sent, talks stopped at both companies.
Chrysler and the UAW agreed to extend their current contract for one week. Talks resumed Thursday between the two sides, but nothing of substance is being discussed at the bargaining table, according to people familiar with the talks.
Actually, that’s not exactly what everyone is reporting…
The United Auto Workers and the Detroit automakers have been locked in negotiations for months now, as both sides seek to redefine their relationship in the post-bailout era. And though all sides have stressed the importance of avoiding intractable disputes in an alleged new spirit of cooperation, it seems that the prospects of a quick, painless conclusion to negotiations remains elusive. The UAW’s contracts with Chrysler and GM both blew past their deadlines at midnight last night, and Ford, the only manufacturer at theoretical risk of a strike, extended negotiations earlier this week. TTAC has not covered these negotiations in much depth for the simple reason that little information leaks out of them. But with contracts expiring and optimistic rhetoric crashing on the rocks of reality, the frustration is clearly starting to boil over. And who is surprised that Fiat-Chrysler CEO Sergio Marchionne is the first to let his frustration show?
Saab has already warned its workers that paychecks due tomorrow could be delayed until “committed” funds from investors arrive, but Bloomberg reports that the warning may not be enough. According to the report
Any delay in the August payments will prompt the unions immediately to start a process aimed at ensuring state coverage of wages in the event of the carmaker’s failure, officials from the IF Metall and Unionen labor groups said. The unions, after gaining employees’ backing, would first file payment requests with Saab. If salaries remain unpaid in seven days, the unions may then ask a district court to declare Saab bankrupt.
That could put Saab into bankruptcy in as little as two weeks. Saab’s long nightmare seems to be drawing to a close. (Read More…)