The outcome of contract negotiations between the United Auto Workers and General Motors Corp. could determine how many vehicles GM builds in the U.S. and the size of the UAW rank and file.
Talks between the two sides have continued six days past a contract expiration — an indication that both sides know they face a critical juncture. GM is seeking major concessions on labor costs, while the union is trying to stem an alarming loss of jobs that began in the early 1980s.
David Cole, chairman of the Center for Automotive Research, thinks GM is holding the stronger cards. He says the UAW has to help GM lower its labor costs or the union faces a “doomsday scenario” in which more jobs will go to other countries.
“What’s at stake is whether GM will be competitive with wages and benefits,” he said. “If that doesn’t happen, I think you’ll see GM pull back substantially on investment in the U.S. and dramatically increase investment in Canada and Mexico.”
GM has developed global engineering and manufacturing systems that allow it to build many U.S. vehicles elsewhere because they share parts with foreign models and the plants operate the same. Among the exceptions are large pickups and sport-utility vehicles, which are built only in North America, but sales of those have been declining. GM is ahead of Ford and Chrysler in this regard and could move the fastest to shift production elsewhere, Cole said.
“GM has options, but the union doesn’t. If GM decides to move production elsewhere, the union is toast,” he said.
But Harley Shaiken, a labor expert at the University of California at Berkeley, says the union still has clout. He thinks the talks are dragging on because the union won’t make concessions on wages, benefits or work rules until it gets assurances that jobs will stay here.
“The union wants to make sure a more competitive GM builds cars in the U.S. I suspect they’re bargaining hard for some employer commitment on jobs, that being competitive also means having jobs in places like Flint and Saginaw,” he said of plants in Michigan.
“The stakes are high, they’re in new territory, and both sides want to get it right. They’re going to have to live with it a long time.”
Negotiators met in Detroit again Thursday amid unconfirmed reports that the UAW and GM moved retiree health care, a key issue, to the side.
GM wants to shift its $51 billion retiree health-care liability to the union, which would manage a fund and take on cost risks. The sides apparently haven’t agreed on how much of the liability GM would accept, with the automaker reportedly offering 65 cents on the dollar and the union seeking more.
The last time the negotiations dragged on this long was 1984, when it took six days for the UAW and GM to agree. The union also had walked out at 17 plants. The UAW has held off on a strike this year, though it warned this week it may set a date.
As it has been for three decades, job security is a major issue.
Union membership has declined to about 530,000 from a peak of 1.5 million in 1979, and the three domestic automakers employ only 180,000 of those. In the early 1980s, GM alone had more than 350,000 UAW members; now it has 73,000.
The UAW is recruiting members, though lately they have been graduate-school teaching assistants and dealers at casinos in Atlantic City, Detroit and Newport, R.I., not hourly workers at the growing number of foreign-owned assembly plants in the U.S. The UAW has yet to gain a foothold in any “transplant” factory not linked to a U.S. manufacturer.
That has UAW President Ron Gettelfinger performing a delicate balancing act.
While trying to safeguard members’ jobs, wages, and benefits, Gettelfinger must cut a deal that will benefit the automakers, whose shrinking hold on the U.S. market has been a major cause of the UAW’s woes. U.S. carmakers control a little more than half of the nation’s market, about the percentage GM had 35 years ago.
“With a good labor deal, we can keep many plants open. With a bad deal, we’ll see restructuring increase in size,” said Sean McAlinden, a labor economist at the Center for Automotive Research.
The union has helped out before, agreeing in 2005 to accept cuts in health-care benefits for GM and Ford retirees and over the years boosting productivity to lower the labor cost gap with Toyota to about $1,300 per car from $2,500.
But GM wants more, reportedly pressing for cuts in pension and health-care benefits for active workers, who now pay less than 10 percent of their medical costs; wage freezes or cuts; more flexibility in job assignments; and a two-tier wage structure in which new hires would get considerably less in pay and benefits.
The base UAW wage is $28 an hour, but GM says benefits for active and retired workers push the labor cost to $73.26. The Center for Automotive research says Toyota pays its non-union U.S. workers $45 an hour, including benefits.
That’s why Cole thinks GM will move production to Canada, where national health care reduces GM’s per-vehicle cost by about $1,000 compared to that in the U.S., and to Mexico, where auto workers make about $7.15 an hour in wages and benefits.
Under the North American Free Trade Agreement, cars produced in Mexico and Canada are treated the same as those built in the U.S., so they carry no import duties or taxes.
GM coaxed 34,400 workers last year to leave or retire with incentives, but the average age of GM’s active UAW members is 50. Cole estimates that another 20,000 will be retirement eligible within a few years, and if GM can’t replace them with new hires at lower wages and benefits, he sees those jobs leaving the U.S.
“The reality is that GM has drawn a line in the sand. You get on one side of the line, and GM will invest here. You stay on the other side, and there will be no investment, and the party’s over,” he said.
Union members worry that the generous health benefits they expect in retirement will be at risk if GM shifts that responsibility to the union.
“I don’t hear much talk about job security,” said Doug Hanscom, who works at a Wilmington, Del., assembly plant. “There isn’t any these days.”
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