22 September 2011


Story first appeared in USA Today.

Late Friday night, the UAW and General Motors reached a deal on a tentative labor agreement covering 49,000 U.S. workers that gives a long-awaited glimpse into what the post-bankruptcy Detroit auto industry — and union — will look like.

The deal will create an undisclosed number of new jobs, and if the terms are viewed as reasonable, it will likely be heralded by the backers of GM's 2009 government-backed bankruptcy as proof the rescue was a success.

The UAW feels this contract will get their members who have been laid off back to work, will create new jobs in their communities and will bring work back to the United States from other countries.

While many details of the deal were not immediately divulged, the UAW press release shared some of the positive highlights of the deal:
  • "Significant" investments and products for GM plants.
  • Wages and benefits that "reflect the fact that it was UAW members who helped turn this company around," said Joe Ashton, UAW vice president.
  • Improved profit sharing
The new jobs include opportunities at powertrain plants in Warren and Romulus, Mich., and Wentzville, Mo., people familiar with the talks said. GM will also reopen the former Saturn assembly plant in Spring Hill, Tenn., they said.

Profit sharing will now be based on income from all GM's North American operations, not just U.S. plants, a person familiar with the deal said. With the new formula, the average profit-sharing check from last year's $5.7 billion North American profit would have been between $5,000 and $6,000, instead of the $4,000 or so that workers received, the person said. The union claimed profit sharing would be more transparent. Indeed, the bonuses will be based on a simple chart that lists ranges of profits and corresponding profit-sharing payouts, the person said. The bonuses will have a cap.

The contract also increases the entry-level wage, the person said.

Now, the UAW must sell the deal to its GM members. A vote is expected to take place in seven to 10 days.

A 25-year GM worker now at the Pontiac stamping plant, said he was pretty confident the two sides would reach a deal. He said he hopes GM will be restoring some of the benefits for the retirees and a raise of some kind for the new hires.

The four-year deal could set the competitive tone for the Detroit Three as they continue recovering from the Great Recession that sent GM and Chrysler into bankruptcy two years ago.

After kicking off negotiations in late July, it was clear the UAW was making more progress at GM, and both sides worked toward reaching a deal before the Sept. 14 expiration of the 2007 contract. That didn't happen. Final details were eventually hammered out at about 11 p.m., after several days in which a deal seemed close, punctuated by an angry letter to UAW President Bob King from Chrysler and Fiat CEO Sergio Marchionne.

Friday night, union officials heralded their tentative deal.

A GM exec said they worked hard for a contract that recognizes the realities of today's marketplace, enabling GM to continue to invest in U.S. manufacturing and provide good jobs to thousands of Americans. She said they are proud of this agreement and are happy that it truly recognizes that the success of the company is tied to the success of the workers, and as everyone knows, they have had, and will continue to have, some real differences with GM. It's the union's job to fight for workers and protect their members, and we will continue in that fight.

Evaluating and replicating the new deal.

The UAW is expected use the deal as a guide for talks at GM's crosstown rivals. Chrysler is widely expected to be the next automaker to reach a deal with the UAW, followed by Ford, where talks might be complicated by the automaker's strong turnaround and workers' recent discontent.

In the days ahead, the deal will be scrutinized by autoworkers, Wall Street and the taxpayers and politicians who helped finance the controversial 2009 bankruptcies of the two automakers.

If the terms are viewed as reasonable, the contract and the new jobs that go with it could be sold as a victory by President Barack Obama and the Democratic Party, who backed the automakers when public support was weak.

GM likely benefited by negotiating the first tentative agreement with the union in this round of bargaining, the first since the financial crisis of 2008 and 2009.

Friday night, the union claimed to have prevented cuts to pensions and secured improvements, not cuts, to health care benefits.

Mindful of taxpayers' aid.

In July, when contract talks began, GM and UAW leaders said they would keep the taxpayer assistance in mind as they worked on the new contract.

Both sides were also equally invested in showing the world that they weren't slipping back into what might be perceived as their old ways.

High labor costs — relative to foreign rivals — and heavy retiree health-care burdens had helped to drag down the Detroit Three in the years before the financial crisis. Other contributors: general mismanagement; an over-reliance on light trucks, especially SUVs; and a reliance on profit-eroding incentives that damaged brand value.

That "old Detroit" paradigm was largely cleaned up during the restructurings at the Detroit Three in recent years. The union did its part, too, agreeing to amend its labor contract with GM and Chrysler in 2009 before the automakers' bankruptcies. That deal brought U.S. wages and benefits to near-parity with foreign competitors, ended the notorious "jobs bank" that paid laid-off workers, eliminated cost-of-living raises and replaced some of the payments owed to a union's health-care trust with stock.

While GM and Chrysler completed their makeover during quick trips through bankruptcy, Ford self-financed its turnaround — a fact that became a proud marketing point for the automaker.

Healthy and making progress.

Today, the Detroit Three are more profitable than they've been in years, and at far lower sales volumes.

Consider this: Between 2005 and 2008, when the U.S. selling rate generally surpassed 16 million cars and trucks, GM and Ford posted losses that topped $100 billion.

In the first half of the year, when the selling rate was about 12.8 million cars and trucks, GM and Ford made $5.4 billion and $4.9 billion respectively. That's on top of the $4.7 billion GM made last year and the $6.6 billion Ford made in 2010.

Chrysler, meanwhile, continues to improve as its new Italian owner Fiat integrates the management teams and product portfolios. But, for now, it remains the weakest of the Detroit Three. Its $254 million loss through the first half of the year was largely due to repayment of government loans. Chrysler posted a loss of $652 million in 2010.

Given those profits, the UAW's King said he saw no reason for additional concessions and declared that autoworkers deserved to benefit from automakers' new found profits.

The automakers haven't objected to that notion, but have remained firm in their opinion that the reward be shared in ways that do not increase their fixed costs. Wall Street could see rising fixed costs as regression into Detroit's former bad habits.

King, a creative and practical leader, had repeatedly suggested that the two goals were not adversarial and remained positive that a deal could be reached that achieved goals on both sides.

He also was aware that a contentious round of negotiations, or one that gave workers either too little or too much, could have further tainted the images of the automakers or their union.

Chrysler talks contiune.

At Chrysler, contention is still possible, even if a strike is not. At GM and Chrysler, workers gave up the right to strike on wages and benefits as part of the U.S. government's assistance for the automakers. Any impasse will go to binding arbitration under the terms of that deal.

The scathing letter CEO Sergio Marchionne sent to King on Wednesday could signal trouble or just a momentary flare-up. Marchionne criticized King for failing to show up to a previously scheduled meeting to negotiate the contract after Marchionne flew back from Germany.

Even without Marchionne and King, talks between the UAW and Chrysler were scheduled to continue through the weekend, under a continuation of the outgoing 2007 contract. And Marchionne was expected to return to the table Tuesday.

Today's new agreement with GM could also give King the opportunity to convince Chrysler that he is more of a partner than an adversary and patch up the relationship.

Ford talks resume next week.

Meanwhile, at Ford, no bargaining is planned for the weekend, although it's expected to resume next week. Bargainers there have maintained a slower pace than at GM and Chrysler.

Ford and the UAW have indefinitely extended the contract they reached in 2007.

Talks in Dearborn are expected to be more complicated. For one, Ford's turnaround is regarded as strong. It's been profitable since 2009 and it has gained market share and confidence under CEO Alan Mulally's "One Ford" plan.

Ford will likely push to get its labor deal competitive with those at GM and Ford, where the UAW was able to get more concessions out of its members to assist with the 2009 bankruptcies.

In early 2009, Ford got workers' cost-of-living allowances suspended and eliminated its jobs bank. After GM and Chrysler's bankruptcies, however, the Dearborn automaker sought to get a similar no-strike clause and an entry-level wage freeze.

But workers overwhelmingly voted down that proposal, despite the promise of a $1,000 bonus. The UAW has since filed a grievance against Ford over the reinstatement of merit pay for salaried workers, claiming unequal treatment for their hourly counterparts. That grievance remains outstanding.

With a strike out of the question at GM and Chrysler, Ford is the only automaker that faces the possibility of a strike this year. Workers at Ford have already authorized a strike, a routine step, although national strikes are rare.

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