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Lots on the Line as GM Set to Begin Contract Talks with UAW

Maker wants more givebacks, workers want concessions restored. Is a battle brewing?

by on Jul.22, 2011

UAW Pres. Bob King doesn't think GM's 2-tier pay structure offers new employees a living wage.

The United Auto Workers Union is set to begin contract negotiations with General Motors Corp. Chrysler Group and Ford Motor in the coming days and, as always, the negotiations with the GM will once again serve as the main event .

After all, Ford hasn’t had a serious labor disruption since Gerald Ford occupied the White House. Even if the talks at Ford turn contentious — and they might — the company still has the option of bringing in executive chairman Bill Ford to smooth over any rough edges. Bill Ford is widely respected inside and has a well-founded reputation for being more than fair with union members.

At Chrysler union leaders and the rank-and-file have been thoroughly charmed by Sergio Marchionne, who has gone out of his way in the past two years to court the UAW. The union leadership at Chrysler has reciprocated, giving Marchionne wide latitude even though, up until this week, they were the technical owners of the company.

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But at GM, the long legacy of bitter fights and mistrust between labor and management still overshadows the negotiations. Both union leaders and GM’s management have made an effort to move on and give the company the equivalent of a post-bankruptcy fresh start.  Nonetheless, labor relations at GM are very much a work in progress.

And that could bring some serious problems as the talks head to a September deadline — even though the terms of GM’s 2009 government bailout bar both a worker strike and management lockout.

One sign of the company’s apparent commitment to earn labor peace is its new, $2 billion capital improvement program, updating GM plants across the country and adding thousands of new union jobs.  While this clearly fits into a new business model based on improved productivity, shifting exchange rates – and lowered labor costs – it also appears timed, at least in part, to appease the UAW, which has made rebuilding the employment base at the automaker a top priority.

The union has responded quite favorably, both UAW President Bob King and Joe Ashton, the union’s top negotiator at GM, repeatedly praising the maker for taking seriously its responsibility to invest in the U.S. The union has been particularly effusive about GM’s decision to build a small subcompact car at the company’s plant in Orion Township.  The facility will be producing the new 2012 Chevrolet Sonic, which replaces the brand’s old, Korean-made Aveo.

However, the investment at Orion also provoked a bitter backlash among union members, who staged vocal protest over the union’s decision to bypass traditional ratification procedures to impose a new local labor agreement at the plant and to extend the two-tier wage system approved in 2007.  That reversal of a long-standing union policy that all line workers get the same pay has divided opinion among the rank-and-file.

Long-standing resentment of GM’s labor tactics runs fairly deep among the company’s blue-collar workers. “GM doesn’t treat people right,” one GM employee complained in a recent e-mail.

The divisions between labor and management date back more than seven decades, the UAW earning representation rights only after a long and angry sit-down strike at the once massive GM operations in Flint, Michigan.  In the 1990s, union-management antipathy has led to countless confrontations, including one battle that shut the company down for six weeks and cost it billions in lost sales.

As part of the terms of GM’s 2009 government bailout, the UAW is restricted from striking the automaker.  That doesn’t mean company management can relax.  In many ways, GM’s management also has more riding on the talks than either Ford or Chrysler.

Even with partial ownership by the government, GM, to a much larger degree than either Ford or Chrysler, remains a creature of Wall Street. It’s in the company’s very DNA. So GM’s management remains at the mercy of the Wall Streets whims to a very large degrees.

Thus, GM has elected to not to disclose its “all-in” hourly labor rate prior to the negotiations. Chrysler said its rate post-bankruptcy is hovering at $51 per hour and Ford’s rate is hovering around $58, according to people familiar with the numbers.  (There are some apples-and-oranges issues, however, and Chrysler’s numbers are likely closer to Ford’s than they appear here.)

If it doesn’t get what it wants, GM appears prepared to push the talks to binding arbitration. Binding arbitration during this round of negotiations was the price the union had to pay for aid to Chrysler and GM. Chrysler would like to avoid it but GM is actively preparing for it.

After all even after bankruptcy, GM faces an underfunded pension program, which virtually precludes any kind of raise in pensions for active or retired workers, and health-care costs remain problematic since even after bankruptcy union members pay a relatively small 5% share of their health care costs. Nationally, the average is more like 30%.

However, the real issue could be the new, second-tier starting wage, which at GM is near $16 per hour, significantly less than the $28 per hour collected by GM’s long term employees. GM’s recovery plans is built around expanding the number of temporary and active workers collecting the smaller wage.

But UAW president Bob King, while emphasizing he wants to avoid confrontation, said earlier this month that he doesn’t believe the second-tier scale provides a living wage by which a worker can support himself and a family and wants to see it raised during this round of negotiations.

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