Was the strike worth it for GM-UAW workers? Cost vs. Benefit Analysis Update
Strike Cost vs. Benefit Analysis – Updated to reflect GM’s 3rd quarter earnings announcement that the strike will cost the automaker ~$3 billion in 2019
Now that the tentative agreement has been ratified, it is time to look back and see if the strike was worth it for UAW members. Over the past few weeks, I have been challenging the GM strikers’ Return On Investment (in this case the Investment is defined as compensation lost during the six-week strike). Accordingly, I have been asked by several interested parties to assess the economic impact of the strike on a typical UAW employee. Therefore, I have selected a Traditional production employee for my illustrative example below. In order to draw a conclusion, one must first look at the four-year compensation as defined by the key economic elements of the Final Agreement ($24,034) and then subtract the four-year compensation had the employees accepted GM’s pre-strike offer ($15,755). While on strike, the UAW leadership was able to negotiate an additional $8,279 in compensation over the four-year agreement. However, as noted below, from that amount, we must deduct the cost of the six-week strike, estimated at $9,000, comprised of $6,000 in lost wages (~$1,000 per week - net of strike pay) plus $3,000 in lost profit sharing as a result of GM’s estimated lost profits of ~$3 billion in 2019 due to the strike. Therefore, as illustrated below, GM strikers are still out-of-pocket $721 ($8,279 gain minus $9,000 loss) at the end of the four-year agreement and they will not actually hit breakeven until the year after the contract expires.
This analysis looks purely at the economic impact of these specific contract elements over the four-year period. Accordingly, it does not factor in the intangibles such as improved job security, temporary worker issues, etc. Clearly, with the strike, from a longer-term economic perspective, the GM employees will be better off starting in Year 5 once breakeven is achieved. Was the strike worth it for the GM workers? Given all of the stress, anguish and uncertainty that the strikers had to endure over the six-week period, I am personally not convinced that this Return On Investment was worth it. Having said that, it is really not up to me to be the judge – the GM strikers are the only ones capable of objectively answering this question and I am sure that some will say yes and that some will say no….
For additional comments about the GM-UAW Agreement, including two key contract elements that surprised me, please see my October 25, 2019 blog – link below.
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