GM-UAW Negotiations Update
So, where do we go from here? GM has tabled what appears to be a solid economic offer that includes wage increases or lump sums in all four years of the agreement, improved profit-sharing plan plus a generous signing bonus of $8,000. GM has also promised new investments, more UAW jobs and potential solutions for the “unallocated” plants. What are they asking for in return from the UAW? It’s simple, they are asking the UAW to help them remain competitive with their international competitors who produce vehicles in the United States. According to the Center for Automotive Research (CAR), GM’s estimated all-in labor costs are $63 per hour worked or $13 higher than their international competitors (CAR has pegged them at $50). The new economics tabled by GM will only serve to increase this competitive gap even further unless economic offsets can be negotiated with the UAW.
There are at least two economic offset opportunities available that can be structured in a way that does not unduly affect the UAW members who will be voting on this contract. Firstly, the international producers utilize significant numbers of lower cost temporary employees – these temporary employees are typically the feeder pool for permanent positions when they become available. If the UAW accepted a higher proportion of temporary employees, these individuals would be dues-paying members, would eventually migrate to full-time positions and since they have not been hired yet, would not be voting on this contract. Secondly, initially the UAW seemed to be downplaying the relevance of healthcare costs in these contract discussions. Perhaps they were embarrassed about the fact that UAW members are only paying about 3% out-of-pocket for exceptional coverage or concerned that they will receive little sympathy from the public on this matter. In any event, healthcare cost differentials are another primary driver of the $13 labor cost discrepancy to the international producers. Both parties are aware that there are numerous healthcare cost reduction opportunities available that would minimize intrusiveness on the vast majority of the rank and file (see my September 8th blog for examples).
In summary, the parties must not ignore this competitive labor cost gap. Otherwise, I am afraid that at some point, the Detroit 3 automakers will experience déjà vu and it will be 2009 all over again.