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UAW Reaches Tentative Deal with General Motors Ending Strikes Against Detroit Automakers
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By Associated Press
Published 6 months ago on
October 30, 2023

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DETROIT — The United Auto Workers announced Monday that it reached a tentative deal with General Motors, capping a whirlwind few days in which GM, Ford, and Stellantis agreed to generous terms that would end the union’s six weeks of targeted strikes, pending approval of the rank and file.

The deal UAW President Shawn Fain closed on his 55th birthday is modeled on the ones agreed to with crosstown rivals Ford and Jeep-maker Stellantis, and would give workers higher raises than they’ve received in years. If approved, it would also claw back some concessions the UAW agreed to almost two decades ago, when the automakers were in desperate financial shape.

Analysts’ Take on the Deal

Analysts say Fain’s combative stance with the companies paid off for the workers, winning them pay and cost-of-living raises that would top 30% by the time the contracts expire in April 2028. Workers would get an immediate 11% pay bump upon ratification.

But analysts say the deals run the risk of forcing the automakers to raise prices beyond those charged by competitors with nonunion factories. And they come at a time when the auto industry is trying to fund a costly and historic shift away from the internal combustion engine to electric vehicles.

Impact on the Auto Industry

“The three tentative agreements show the UAW’s power and the car companies’ weakness,” said Erik Gordon, a business and law professor at the University of Michigan. “The companies are trying to figure out how to transition to EVs without losing too many billions of dollars, and now face a huge bump in labor costs for the products that will finance the EV transition.”

Fain, the first UAW president directly elected by members in the union’s 88-year history, campaigned against the union establishment by telling workers the companies are the enemy and the UAW would be at war with them. He decried what he called corporate greed, outrageous CEO salaries, and a system in which the union acted as a business partner with the automakers.

Fain said the agreements are large enough for the UAW to use them to recruit new members at nonunion factories owned by Tesla, Toyota, and others.

“One of our biggest goals coming out of this historic contract victory is to organize like we’ve never organized before,” Fain said Sunday night while announcing details of the contract with Ford. “When we return to the bargaining table in 2028, it won’t be just with the Big Three.”

The GM Pact

The GM pact came after the UAW added another plant to the list of those on strike against the company, ramping up the pressure to bargain on the last Detroit holdout. About 4,000 workers at GM’s Spring Hill, Tennessee, complex — the company’s largest — walked out Saturday night, threatening production of four vehicles and parts that supply nine other factories as far afield as Mexico.

Seeking to bring the talks to an end and facing an estimated $200 million per week in losses, GM CEO Mary Barra went to the union’s Detroit headquarters to finalize the deal.

It came during a furious few days of agreements that still need to be ratified by 146,000 UAW members at all three companies. Ford agreed to a new contract last week and was followed by Stellantis on Saturday, which raised the pressure on GM to settle for essentially the same terms.

Union members could still vote down the deals, and there is some sentiment for holding out to get more. But the contracts seem likely to bring labor peace to the domestic auto industry.

Reactions to the Deal

Fain, though, didn’t get everything he wanted. He started off seeking 40% raises and even asked for a 32-hour work week for 40 hours of pay.

Mike Huerta, president of a striking UAW local in Lansing, Michigan, was hesitant to celebrate the deal before seeing more information, saying “the devil’s in the details.”

“Our bargainers did their job. They’re going to present us with something and then we get to tell them it was good enough or it wasn’t,” said Huerta.

Huerta said Monday that it’s been a tough few nights on the picket lines with dropping temperatures and rain. “We were ready to continue if we needed to,” he said. “And if we do turn it down, we’ll be ready to go back again.”

Shammira Marshall, a forklift driver at GM’s parts warehouse in Van Buren Township, near Detroit, said the holidays will be a bit nicer this year thanks to the tentative deal.

“Christmas, Thanksgiving, the New Year — that’ll help,” she said of her expected raise.

President Biden’s Remarks

President Joe Biden praised the deals to end strikes that had threatened the country’s economic growth. He joined striking workers on a picket line last month and spoke to Fain on Monday to offer congratulations. The deals, he said, marked a victory for collective bargaining: “These agreements ensure the iconic Big Three can still lead the world in quality and innovation.”

Future Implications

Marick Masters, a business professor at Wayne State University in Detroit, said the contracts will cost the automakers billions and force them to cut costs elsewhere or raise prices. Ford said earlier that its deal with the union would raise labor costs by $850 to $900 per vehicle.

Yet with serious competition from nonunion automakers, GM, Ford, and Stellantis could have trouble raising prices, Masters said.

A study this month by Moody’s Investors Service found that annual labor costs could rise by $1.1 billion for Stellantis, $1.2 billion for GM, and $1.4 billion for Ford in the final year of the contract. The study assumed a 20% increase in hourly labor costs.

Wells Fargo Analyst Colin Langan estimated that the contracts would drive up the companies’ hourly total labor costs by about 30%, to $76.08 at Ford, $78.15 at GM, and $75.63 at Stellantis. Analysts have said that foreign automakers with U.S. factories generally have hourly labor costs of $45 to $60, which includes what they spend on worker benefits.

With increased costs and geopolitical uncertainty, Detroit automakers face an increasingly difficult future, Masters said.

EVs may not be as profitable as combustion engine vehicles for quite a long time, making it harder for the companies to fund the transition, Masters said. “We could very well look at a situation four or five years from now in which these companies are not profitable, and they haven’t been able to make this transition as they had hoped.”

But Barra, whose company already has started to cut other costs, said Monday that the deal works for GM and “reflects the contributions of the team while enabling us to continue to invest in our future and provide good jobs in the U.S.,”

The union contends that the companies are making billions of dollars in profits and can afford to pay workers to make up for previous concessions. It says labor expenses are only 4% to 5% of a vehicle’s costs. With Stellantis yet to report third-quarter numbers, the three companies combined have posted net income in 2023 of about $24.5 billion through September.

At GM, workers would get cost-of-living pay that would bring raises to a compounded 33%, with top assembly plant workers making more than $42 per hour. Top-scale workers there now make around $32 per hour.

Starting wages for new GM hires would rise by 70% including cost-of-living adjustments, to more than $30 per hour.

Some wage tiers were eliminated, and it would take just three years for new workers to get to the top of the assembly pay scale, the union said.

The UAW began targeted strikes against all three automakers on Sept. 15 after its contracts with the companies expired. At the peak, about 46,000 UAW workers were on strike — about one-third of the union’s 146,000 members at all three companies.

 

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