As the United Auto Workers target in its drive for a new contract, General Motors Co. faces a difficult challenge in finding a way to satisfy the UAW’s demands for economic gains and new protections of existing jobs in the automakers U.S. factories.
“We look forward to having constructive discussions with the UAW on reaching an agreement that builds a strong future for our employees and our business,” GM spokesman David Barnas said.
But the discussions are full of complications, such as GM’s plans to close down five plants in the U.S. that until very recently employed UAW members.
“I don’t think the contract will boil down to Lordstown but it is certainly going to dominate the early discussions,” said Arthur C. Wheaton, a labor expert at Cornell University. “I am not optimistic GM will consider keeping it open or giving it another product.”
“I am not sure the UAW wants to put a line in the sand saying Lordstown or strike, I do think that employment security and reasonable buyouts for those not able to transfer is likely,” Wheaton added.
Nevertheless, Gary Jones, the UAW’s president, indicated that despite the unfolding scandal that has weakened the union’s leadership at a critical time, it wasn’t about to back away from a confrontation with GM.
“No one goes into collective bargaining taking a strike lightly. But it is a key tool in the tool belt as our bargaining team sits across from the company,” Jones said in a statement confirming the union had the authorization from its members to strike if can’t reach a settlement when the contract expires in mid-September.
“Ultimately, the company holds that destiny in their hands as they bargain. Clearly the UAW stood up for them in a very dark time, now that they are profitable it is time for them to stand up for all of us.”
Meanwhile, GM executives have to worry about the company future prospects.
Before the negotiations began in July, company officials who discussed the upcoming contract talks with reporters said the bargaining was bound to be difficult because of the combination of large profits chalked by Detroit’s automakers from booming sales in recent years and the expectations the economy will soften in the next several months.
Right on cue, a key U.S. factory gauge unexpectedly contracted this week for the first time since 2016.
The Institute for Supply Management’s purchasing managers index fell to 49.1 in August, weaker than all forecasts in a Bloomberg survey of economists, data released Tuesday showed. Figures below 50 indicate the manufacturing economy is generally shrinking. The group’s gauge of new orders dropped to a more than seven-year low, while the production index hit the lowest since late 2015.
The ISM report also noted that manufacturing is technically already in a recession with a Federal Reserve measure of output declining in two consecutive quarters.
The ISM’s measure of new orders, which are tracked by some as a leading indicator of a downturn, declined to 47.2. It was the first time since December 2015 that the gauge fell below 50. ISM’s production gauge also sank below that mark, to 49.5 in August from 50.8.
The data adds to concerns a broader U.S. recession is coming and may complicate the re-election chances of President Donald Trump, whose pledges to revive manufacturing have been a signature issue.
Nonetheless, the auto industry’s seasonally adjusted annual rate of sales or SAAR is still running at a healthy rate of about 16.6 million units. However, if a strike develops, GM is unlikely to recover sales and revenue lost during a walkout very easily.
GM doesn’t drive the economy the way it once did. But any decline in the company’s production would register on economic indices and reduce the economy’s rate of growth. Nonetheless, older auto workers have complained for years their wages have been frozen, with their last raise coming in 2007.
Younger workers, who joined the union as production increased in 2010, have had to contend with a lower starting wage that has left them well-short of the $31 per hour wage at the top the pay scale. The two-tier wage system has contributed to the frustrations of younger workers, who generally are not as well off financially as their blue-collar parents.
Union negotiators mentioned at the start of the contract bargaining they were mindful of the growing disparity – even with profit sharing – between executive compensation and the wages of production workers.