Why I think that this strike may drag on….

GM – UAW Negotiations Update

This strike could potentially last for weeks, if not months.  This is very unfortunate because in the end, if there is no compromise, at some point one of the parties will simply throw in the towel, bring an end to the strike, make the adjustments that they need to make and then begin preparing for the next set of negotiations in 2023.  If this is the case, both GM and the striking UAW members will have lost a ton of money during the strike period plus one party will come out a winner in the short-term but will ultimately come out a loser in the long run. If GM throws in the towel, the UAW will declare itself the winner, perhaps not realizing that GM will have already begun preparations to downsize its UAW workforce in the future.  If the UAW waves the white flag first (which in my opinion is highly unlikely), it will appear that GM won this tug-of-war. However, if this is the case, GM will be stuck with a less than motivated workforce who will likely file grievance after grievance for the next four years while waiting for another shot at the company in 2023. As you can see, there has to be a compromise or both parties will fail in one way or another.

For this to get resolved and for the UAW to really win in the long run, their leadership must recognize that the competitive labor cost gap is real and that it absolutely needs to be addressed in this round of bargaining in order to secure the future of their membership.  As I have mentioned before, competitive labor costs are often seen as the best form of job security. According to the Center for Automotive Research (CAR), GM’s labor costs are $63 per hour compared to $50 per hour at their international competitors in the United States. The hourly UAW workforce of 47,000 at GM is likely working approximately 95 million hours each year, so when you apply this $13 per hour labor cost gap, GM has a competitive labor cost disadvantage of over $1.2 billion each year.  Therefore, over a four-year labor contract, that translates into almost $5 billion in terms of a competitive disadvantage. So, when the media reports that GM could be losing $50 million per day during the strike period (assuming of course that this production cannot be made up after the strike), it is a drop in the bucket compared to what they are facing as a competitive labor cost disadvantage today and well into the future. 

In order to resolve matters, the parties must brainstorm ideas and come up with compromise solutions with respect to the key remaining issues which include temporary workers and healthcare (see my previous blogs for potential compromises on these topics).  As you can see, the company requires economic offsets to fund the new economics proposed in this contract and to address the $13 labor cost gap in order to improve competitiveness. I am seeing more and more articles in the media highlighting that “UAW autoworkers are the elite of America’s blue collar workforce” (Detroit News).  Therefore, as the strike goes on there will be less and less sympathy from the public for the UAW strikers. In addition, it will be difficult for the UAW to continue to cry poverty for their members when thousands of job seekers routinely apply for temporary worker positions whenever the Detroit 3 automakers add new shifts. Right now, it appears that most of the sympathy for GM strikers is coming from politicians who are trying to secure the “union” vote in the next election. 

Hopefully soon, the parties can engage in interest-based bargaining with a sense of urgency and come up with compromises that can bring this strike to an end.  Failing that, this strike could drag on for a long time.

If you are interested in learning more about bargaining preparations, development of negotiations costing models, bargaining strategy formulation or labor cost reduction strategies, visit our website at www.hrandlaborguru.com