The strike is over. The United Autoworkers Union (UAW) has announced they've reached an agreement with General Motors which will lead to a new contract for their members. Everyone's gone back to work. Everyone is happy, and all's right with the world– at least until the full impact of the agreement hits the workers. At that point, they might realize that they gave up two days' pay and got practically nothing in return. Let's see how it adds up.
The exact details of the agreement haven't been released. They won't be final until the members ratify the new contract. However, the Detroit Free Press has released what "a person briefed on the deal said" would be included in the new contract.
The biggest change: the establishment of a Voluntary Employee Beneficiary Association (VEBA). This health care superfund is designed to pay for UAW members' health care for "the next 80 years" (according to UAW boss Ron Gettelfinger). For GM, the VEBA unloads transfers health care responsibilities to the union. Industry soothsayers are currently pegging GM's contribution to the VEBA at around $35b. That's substantially less than the over $50b bill GM faced.
The amount of cash vs. stock GM will use to pay for the VEBA is the big question hanging over this part of the deal. Even if GM has to pile on even more debt to git 'er done, the Street loves this VEBA. So it's a big win for GM– for now. Whether or not it will work out for the UAW is a whole 'nother story, as it puts the union into the unfamiliar position of administering their members' soaring health care costs and raises the possibility of massive fraud and mismanagement. Score: GM 1, UAW 0.
GM and the UAW disagreed over wage structures. GM wanted to institute a two-tier structure where new workers receive lower pay and different benefits from current workers' compensation. Of course, the union found the idea entirely unacceptable. And then gave in. However, since this fits right in with the "just don't mess with my benefits" mentality most UAW members exhibit, GM gets the win. Score: GM 2, UAW 0.
The UAW also agreed on different wage structures for "non-core" jobs: those workers who don't actually assemble vehicles. As compensation to non-core workers who currently enjoy full pay and benefits, GM will offer a "targeted special attrition program" to "relieve the pain of the wage reductions." In other words, GM will eventually pay some of their workers less. Score: GM 3, UAW 0.
The new contract doesn't include any wage increases per se, but it does include a $3k bribe to accept the contract signing bonus. The signing bonus will cost GM much less than a strike or any other form of compensation. Score: GM 4, UAW 0.
The contract contains another bonus: lump sum payments over the last three years of the four-year contract. The bonuses are roughly equal to three percent of annual wages. That works out to an $1,800 payment for someone who makes $60K per year. It's still a lot cheaper than across-the-board raises and if it's tied to profits, well, what profits? Score: GM 5, UAW 0.
Other terms in the agreement include the "possibility" of GM maintaining the level of its union workforce in the U.S. and modifications to the jobs bank program. The details of the jobs bank changes aren't available yet, so it's too early to score that one. Getting even the hint of a promise that GM won't cut its UAW workforce is a major point for the union. Score: GM 5, UAW 1.
The UAW's national leaders will convene late this week to vote on the deal. The full membership will vote on it this weekend. The UAW's president is optimistic it'll be approved. "It's an agreement we're proud to recommend to our membership," Gettelfinger crowed. "This contract will be better in some ways; it will be different in some ways. Our retirees will be exceptionally pleased with the contract."
Different? Of course, GM CEO Rick Wagoner had his sound bite as well: "This agreement helps us close the fundamental competitive gaps that exist in our business. The projected competitive improvements in this agreement will allow us to maintain a strong manufacturing presence in the United States along with significant future investments."
Wagoner's statement reveals an inconvenient truth: GM management continues to see labor at the root of all their problems. Unloading retiree health care costs, not giving raises and paying new workers less won't close any "fundamental competitive gaps." To be competitive they have to offer a competitive product.
The new UAW contract may improve the bottom line for a few quarters, but until GM sorts out its brands, trims its dealers and starts designing world-class, brand-unique products for those workers to assemble, there's nothing any contractual fine-tuning can do to save the company's failing North American operations.
76 Comments on “The UAW Goes Back to Work: Even the Winner Loses...”
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I have to say that I’m rather stunned that GM got such a big win against the UAW. I really had less faith in GM’s management, but kudos to them.
I would like to see how Mr Gettlefinger will sell this to the UAW’s rank and file. I wouldn’t be too impressed with it! This strike has made the UAW look like a vicious German Shepherd guard dog, with its teeth removed. Not very frightening unless you don’t want to be gummed to death! This could do them image damge in later negiotations.
But as Mr Williams, rightly, points out, this will give GM a short term win, but when the customers still stay away from their products, who will GM blame for their woeful situation?
It’s all about product, product product! Make a good product and keep your customers happy. That is what GM should be concentrating on. I’m not saying that cost cutting and re-negiotation of the UAW’s contract weren’t important, but that is all unsustainable growth. Without a customer base, no money will flow into GM’s coffers. Hence, no money for R & D. GM should concentrate on building an Accord/Camry killer with a profitable price and a killer warranty on it. It is those kind of ideas which will help GM. Instead, we’ve got a senile ex army man telling us how the next generation of products will be good, so stick around! Oh we’re sticking around, Mr Lutz, question is, is GM going to stick around long enough…..?
What I wonder is whether the UAW will make the tier 2 employees pay the same union dues as the tier 1. How much animosity will there be between the workers. I think this will create a bigger “Not My Job” attitude at GM.
Something to keep in mind here is the strike played out exactly like analysts forecast. It gives the union members some false bravado that they had something to do with GM making an agreement. Actually happened 2-3 weeks faster than I thought.
The end contract is not what GM needs to return to profitability but it gives them time. Will they be successful? Who knows. There are some good products here and there and some good ones in the pipeline but the core facts of too many brands and too many dealers will still be an issue.
At least we have another 4 years to postulate.
Anyone listen to CNBC Squawk Box this morning? Mark Haines, a pleasant-enough financial journalist, let it slip out that his Buick will likely fall apart because the quality of GM cars is terrible. I expect he’ll get a strongly written letter from Rabid Rick for that one!!
My guess is that the strike was actually viewed as necessary in order to get the contract passed by the union’s membership . Most rank and file union members are typically not gung ho strikers and would probably view any agreement favorably after being a few days on strike.
I understand that a $3,000/union member bonus is less expensive than a long, drawn-out strike ($219M vs several billion), but it is still fundamentally wrong. Look it up in the dictionary under “b-r-i-b-e”.
That said, the whitecollar bonuses that GM and Ford have been paying out over these unprofitable years are even more fundamentally wrong, and undoubtedly cost the company more than $219M. Look this up in the dictionary under “l-o-o-t-i-n-g”.
I will wait for the FULL details.
Per RF’s earlier piece, I’m wating for the quo in the quid pro.
Nothing is free.
MgoBLUE:
Do I look those up one letter at a time? Not trying to start anything.. Just an attempt at humor.
How is it any different for GM to give bonuses/bribes than it is for the U.S. Military? My cousin scored high on the ASVAB in high school, so they offered him a $12K signing bonus so he would go into the nuclear tech program.
ex-dtw:
Maybe they showed them their books and said “Either come back to work by the end of the week, or pack up your lockers and hit the unemployment line.”
It’s easy to play hardball when you are sure your job is safe, but when your company is teetering on the edge of oblivion.. different story.
@MgoBlue
I think looting is a little harsh. You have to remember that the whitecollar workforce is far more mobile than the bluecollar one.
Understanding that, and understanding that nobody with options wants to stick around and play for a losing team with few prospects for winning, management has quite a dilema.
Q: How do you keep the decent managers around? A: Pay them not to leave.
Unfortunately, the bleaker the situation the bigger the “bribe” to stay needs to be, and coincidentally the more egregious it looks from the outside.
The real trick is figuring out who is actually adding value. And obvioulsy they are geeting some of it wrong, i.e. Ricky W, but that doesn’t make the act fundamentally wrong, egregious, or unnecessary.
You can’t get something from nothing.
Sure, cutting costs by paring wages or medical benefits – alone – are not going to save GM (or Ford or anybody else). But if money is flying out of your pocket on feathered pinions (pinions are a poetic word for wings — get it, the dollar bills have wings and they fly out of your pocket on their own power and it seems there is little you can do about it), you won’t be able to afford the engineering to come out with good cars that consumers will want to buy.
Seems that the “death watches” will have to be tempered a bit — maybe changed to “GM patient prognosis” while GM uses (or misuses) this “win”. As has been belabored many times here; make cars that people want and can have confidence (and yes, even pride) in owning – something that’s been missing for a long time at GM.
Where is the money going to come from for the VEBA? Union dues go up? Wow, this is huge.
Maybe they believe that some sort of universal health care proposal will come and save the day?
Maybe they showed them their books and said “Either come back to work by the end of the week, or pack up your lockers and hit the unemployment line.”
It’s easy to play hardball when you are sure your job is safe, but when your company is teetering on the edge of oblivion.. different story.
I tend to agree with this assessment. Gettelfinger is not an idiot, and this token strike allows him to somewhat save face with union rank and file while giving them something better than a pink slip.
ret: You nailed it! By Franks scores we lost 20-1.Ron Gettlefinger got the job done.By the time this ratifys,and it will by 70% est.Ron will feel like Rex Grossman.
Back to work bros/sisters,dam! I was hopping for a long weekend out of this.
Nice to see you back mikey.
mikey,
From the media coverage the folks in Oshawa were not overjoyed to endure the consequences of a decision that was not of their making.
They were taking it in stride, with an air of concern.
A major point (worth two points?) for the union is that the contract still includes the Jobs Bank at all. The Jobs Bank was established based on the crazy notion that GM or Ford or Chrysler may actually gain back market share and need these workers again. The major flaw being that 1) the market share is NEVER coming back and 2) there will always be plenty of labor available on the open market, thus no need to pay a reserve work force.
I just cannot grasp how GM can continue such a stupid program – and it would gall me to no end knowing that some of what I pay for a car goes to paying these people.
I agree with Mr. Williams, the UAW lost it, also the two tier arrangement is not good in the long run and will come back to haunt the Union, bribes of $3000.00 after Tax is a lot less than $3000.00 Crazy eh.
Mikey,
Do you get paid short work week for the outage you endured or is the CAW not entitled to this benefit if your outage is the result of a strike in the US? No flaming intended, but as a former GM of Canada employee, I am curious
# Steve_S:
At least we have another 4 years to postulate.
Don’t bet on it.
Maybe they believe that some sort of universal health care proposal will come and save the day?
Exactly. The hope is a health care president gets elected, and by 2010 the Union and GM can unload the costs of healthcare on the rest of us. This is a stopgap deal.
Toss 35 Billion into a Union operation and the need for corruption is just irresistable.
Thanks Ryan, I thought a better shut up for a couple of days.It would of been too hard to stay within TTAC guidelines.
We took it in stride in Oshawa the truck plant never missed a beat.Plant one and two got a couple of days off.
The weather was perfect,you couldn’t get a tee off time anywhere.
It must of been a slow news day I’ve never seen so much media.Buzz has never seen a microphone or a TV cam he didn’t love.
My take from what we know,is we have bought some more time.GM got what they wanted,fair enough.
I wonder where management is gonna point the finger now,
Yes queensmet everybody got paid short work week 80%
Its was an American labour dispute,we were layed off due to a lack of parts.
I think the strike’s real positive was the reduction of the Built on Monday’s cars this week.
Yeah but there will a lot of built after a strike vehicles
Now that the strike is over, the real cock and bull work comes. They need to sell this to their people. I see one of two things happening:
it will get voted down; or
it will be passed, but the voting irregularities will be questioned, like it was two years ago when Ford voted to have their retirees pay co-pays and deductible and the rank and file could not see how it passed; I think it was by less than 100 votes.
If it comes to being voted down, the uaw leadership will negotiate the lower pay for all, higher health care co-pays and deductibles for all, different work rules, end of job banks, no more classifications, etc. Basically, they will give GM what they want.
It will also be voted down.
Then the leadership will tell their people that those are the only two choices they will have, a VEBA or everything else that GM wants. With the VEBA, everything else stays the same. Guess which one they will want?
I doubt that anyone is seriuosly counting on Universal Health care in this country to bail GM/UAW out. Even Hillary will not be able to make it happen without cutting back on services and/or increasing taxes. The government cannot afford to continue with the level of taxation and health care. Don’t believe me? Ask Mikey how long takes to get an MRI in Oshawa if it is not a life or death situation. 6 months +. How many Americans will put up with constatnt pain that could be diagnosed with an MRI. Is that what HC will promise? NO. Is that what she would deliver? YES.
No she will not be able to bail GM or the UAW out with universal health care. Nor will anyone else.
So how does GM get the $35 billion and how much does that cost? Break it down please!
guyincognito:
So how does GM get the $35 billion and how much does that cost? Break it down please!
That’s the $51b question. We’ll let you know as soon as we know, which could be a while– given how long it took GM to fess-up to the $2b VEBA underpinning their “historic health care giveback.”
What a dog and pony show.
The bosses get bonuses, the workers get 5K for a signature, the retirees get robbed and the UAW leadership gets to play “fingers gone wild in the cookie jar”.
They make Tony Soprano look like Mary Poppins.
Funniest part though is that they expect the public to do business with them.
What happens to the money if the health care picture changes?
Remember that eventually all these retirees & spouses (who don’t die before the age of 65) go on Medicare and a good portion of their benefits are funded up by the taxpayer. The GM portion becomes a medicare supplemental policy.
The Detroit News website has a list of key provisions of the deal, and they don’t sound as GM-favoring as the analysis here. Of course the DN may be misreading their sources. If I read the DN right, the two tier wage is for non-manufacturing jobs such as bookkeeping, janitorial etc.
The jobs bank still exists but with members having to take a job if one exists in a larger-than-previous geographical area.
If the DN is right, I wouldn’t give GM the score it received above. Further, the public seemed to be on GM’s side. DN’s forum had 75% expressing anti-union views. Four years ago the public didn’t know about the jobs bank, the level of UAW benefits, etc. This time around they do know. If GM didn’t get out of this everything they need to restucture their labor costs, the public will turn a deaf ear to any complaining of GM in the years to follow. GM has had its chance to fix any and all disagreements with the UAW.
How long before we read about UAW bosses getting caught stealing from VEBA to buy planes and Caribbean vacations? I know GM is happy to get rid of it, but now the fox really is guarding the hen house. That’s a whole heap of money placed in a jar next to some of the greediest hands on the planet…
Union leader’s brothers, sisters, kids, aunts and uncles will be managing the VEBA. I wonder where Gettleinger got the idea that they have enough in the VEBA for 80 years, or is that the jail term for the 1st union boss caught embezzling
80 years? Who in there right mind would predict something so far out, especially for healthcare which no one can predict future costs on the way it’s exponentially going up. It sounds like a flat out lie.
There is another point for GM that no one has mentioned yet. The strike was just long enough to kick a few bucks back to GM via unpaid payroll. It also probably helped GM par down unsold inventory since the factories were not cranking out any new whips during the strike.
They seem to miss the point that if the data is correct it potentially represents the % that would not consider a 2.X car. And this with Detroit demographics.
The one other thing that comes to mind is, how can it be possible for 73K people to vote away earned benefits for 430K people?
Surely there would be some legal recourse for the victims of the heist?
@Radiums
Plant downtimes are measured in weeks, so a couple of days would be only a minor correction to inventory.
Not worth the effort if that was the only goal.
The Detroit News is the more conservative of Detroit’s two papers. The Free Press is the other, and their forums probably contain tales of Rick Wagoner lighting his cigars with thousand-dollar bills.
Welcome to the collective.
You get this in corporations, too; management votes themselves pay raises instead of dealing with upcoming problems, and the shareholders are too incompetent to vote out the board.
Or they give massive priority to one group of shareholders instead of another; look at how the security company at-stake was sold off for exactly the amount that one level of financiers had contributed.
It’s worse in unions because the union bosses have infinitely more flexibility to play favorites. “Retirees? Oh, screw those guys.”
This is democracy, folks. The majority votes themselves the money.
Hippo
As I understand it, this will be a pattern for beginning talks with Ford and Chrysler. The agreement reached at those two may be different. So these are GM UAW’ers voting on the deal with GM.
I disagree with Frank’s assessment. The VEBA will be so corrupted by the UAW that they will be back getting more money from GM long before the 80 years are done. This is pure graft in my opinion and will end up just like the Delphi sale/bailout of years ago. I would be that there is some language that puts responsibiliy back on Gm should the fund get in trouble.
Secondly, no UAW employee lost their job or suffered any pay cut. Sure the new off line employees will get lower wages and so will the temps but GM will be shedding jobs for many years if their product line doesn’t improve. GM still has to pay.
THe guarantee of Jobs in the US may be a real future problem since the only way GM can make money is by building in overseas plants. They may be severly limited. GM will still have to pay.
I call this a surrender by Rick Wagoner. He got future savings MAYBE. And seems to have limited his options severly. With GM’s market share dropping GM needs to layoff people without having to pay them forever. They did not get this IMO. THe jobs bank soldiers on but proabably with some minor changes that don’t amount to much.
All in all not much has changed really, This contract will guarantee GM death by a thousand lashes and will not generate the turnaround that GM so desperately needs.
I agree with the points made above.
The way I understand it there are currently 430K GM retirees and dependents affected by the VEBA. Anything coming from the other 2.X would be in addition to this.
What I’m saying is that in view of how things are being played today, the sums involved, the fact that the GM/UAW deal basically is the equivalent of the FEMA credit cards in NOLA for lapdances and Gucci hand bags, it shouldn’t be too hard to organize the retirees that are getting shafted into a class action and secure top legal representation at federal level and get an injunction.
Why let the UAW pull off this heist? Given the conflict of interest between the UAW voting members and the retirees perhaps a trust fund with much tighter financial control and integrity could be established under court supervision. Anything that gets the money out of the UAW’s hands, and IMO there is a good legal basis for it as it solves several conflicts of interest.
I haven’t read the news stories, but, surely the whole point of VEBA is to put responsibility of employees’ health care squarely within the employees’ hands, and let GM be done with it.
I mean, it’s not like GM would make such a stupid short-term decision to… oh wait.
Ryan — if the US armed forces need to use signing bonuses to attract top talent, so be it. As a tax payer I’m not thrilled, but market forces are market forces.
ex-dtw — If GM and Ford pull out of this dire situation, I’ll take back my comment. By returning to longterm profitability, the retention bonuses would have paid off. No debate there. And believe me, I’m hoping scenario happens.
The other side of the argument is this: in Southeast Michigan, the union labor earns a wage higher than most (if not ALL) other hourly manufacturing environments. Simultaneously, this wage structure helps to inflate the Big 2.0 white-collar salaries. So GM and Ford’s salaried workers are already making better than market rate (this is not my guess, this is my EXPERIENCE). For that reason, they have very few alternatives when it comes to “other” work, ie, “leaving” one of the Big 2.0. So IMHO, retention bonuses are unnecessary, because nobody is leaving. (If so many people were leaving, why did Ford have to PAY ten thousand white-collars SEVERANCE?) This is my justification for calling it ‘looting’, and is why I’m glad I’m not a shareholder, short or long term.
Nonce
Do you know what that screenname means?!
MgoBLUE – I agree, but it is GM’s perogative if they choose to “bribe” union members to ratify the contract, and it is the duty of the members to know enough to figure out if they are being dooped. I don’t see the problem.
No doubt, if GM is back on their feet by next contract, the UAW will expect compensation for their part in it.
KatiePucrkrik,
British slang. Probably not known in the US. Sort of like being “knocked up” means something totally different in the US than in England.