The UAW Goes Back to Work: Even the Winner Loses

Frank Williams
by Frank Williams
the uaw goes back to work even the winner loses

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.

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  • Jkross22 Jkross22 on Sep 27, 2007

    Is there anything more crooked than the UAW? Other than GM "management", that is?

  • 26theone 26theone on Sep 27, 2007

    So will there also be a Ford sponsored VEBA and a Cerberus sponsored VEBA as well? How are medical benefits handled for a non union employees? Are the unions really getting into the health care business?

  • Kcflyer on one hand it at least wont have dirty intake valves like Honda's entire lineup of direct injection ice vehicles. on the other hand a CRV offers more room, more range, faster fueling and lower price, hmm
  • Tassos BTW I thought this silly thing was always called the "Wienermobile".
  • Tassos I have a first cousin with same first and last name as my own, 17 years my junior even tho he is the son of my father's older brother, who has a summer home in the same country I do, and has bought a local A3 5-door hatch kinds thing, quite old by now.Last year he told me the thing broke down and he had to do major major repairs, replace the whole engine and other stuff, and had to rent a car for two weeks in a touristy location, and amazingly he paid more for the rental ( Euro1,500, or $1,650-$1,700) than for all the repairs, which of course were not done at the dealer (I doubt there was a dealer there anyway)
  • Tassos VW's EV program losses have already been horrific, and with (guess, Caveman!) the Berlin-Brandenburg Gigafactory growing by leaps and bounds, the future was already quite grim for VW and the VW Group.THis shutdown will not be so temporary.The German Government may have to reach in its deep pockets, no matter how much it hates to spend $, and bail it out."too big to fail"?
  • Billccm I had a 1980 TC3 Horizon and that car was as reliable as the sun. Underappreciated for sure.