GM – UAW Reach Tentative Deal

We’re gathering information right now – but here’s what we know:
1. Most importantly for both sides, the auto workers are going back to making cars this morning (thanking God, probably, that they aren’t going to be living on 200 bones a week for the next 6 months.)
2. GM has an official statement that the agreement is finalized, and…wait for it… it looks like there’s a VEBA! We knew it! Not on the table our ass.

No more healthcare costs for GM (minus that hefty up-front contribution). Interesting. Does this mark a Womakian shift in Detroit? Everyone seems to think the other Big 2 are going to jump in ASAP. Plus, what does assuming 50 billion in healthcare responsibilities mean for the Union? Does this create solidarity or itnernal strife?

We’ll keep updating this post throughout the day, as we learn more. In the meantime, discuss in the comments.

UPDATE [10:32 a.m.]: We got emailed that some people wanted an explanation of a VEBA. We scoured the web for one that wasn’t written for IRS auditors (i.e.: BORING), and found this fascinatingly well-composed description on the Hopkins k-12 School District Website. We did the math, and CE started learning about VEBAS in 20th Grade. Apparently that puts us at, like, 7th-grade in Minnesota. Kudos to you, libertarians!

UPDATE [9:15 p.m]: Details are trickling out finally – looks like not only did GM catch up to the Minnesota primary education system, they’re also getting the 2-tier salary structure they asked for – down to the dollar. From now on, temp and non-manufacturing workers will start at $18/hour, down $10 from the previous contract.

A lot of people seem to think the UAW is calling this a “victory” way too soon, citing a bunch of unanswered questions (like where the 38 bil will come from to fund the VEBA), and that the union is using the short strike to make this a win, when they did all the conceding. If the NY Times is correct, CE agrees:

In return [for taking over 50 billion in healthcare costs] the union won
guarantees that medical benefits for hourly workers and retirees and their
families will remain in place for the next two years. G.M. will also invest
money in its American plants, and will maintain its current union work force of
73,000.

Won? The union “won” that? So the UAW takes over the next 80 years’ worth of healthcare costs in return for a promise by GM to keep making cars. If we didn’t know it was the UAW, we’d be worried this was adhesion. No such luck – the CE prognosis: the union caved. Hard. Discuss in the comments.

Huh? Wha?

Seriously, you turn your back for two months…

We know we promised you a full report on the UAW negotiations on the 24th…of July. In our defense, CE had to work out a few administrative details (see here) that took a little longer than expected. All of the sudden it was the 62nd day of the UAW negotiations, and we were sitting around talking about the Second Amendment or some other arcane, unused law like nothing was going on. Honestly, it’s not like they’re actually negotiating at the moment, so maybe we just saw this coming and didn’t want to waste space on the boring parts. All the same, we’re a little embarrassed.

Not as embarrassed as, say, Rick Wagoner‘s gonna be if this strike thing keeps up. Honestly, did anybody realize the UAW still knew how to strike? Of course, each side is blaming the other for the stoppage, but that’s not the interesting part of this story.

According to the New York Times, GM is in a much better position to handle a strike now than it has been in the past, but that’s really bad news for the company. Confused? We were. For the Times’ analysis, and some more stellar CE commentary, keep reading.

First, how great is Rick Wagoner’s name? That guy was born to run a car company.

Anyway, according to production guru James P. Womack, this strike is some kind of watershed moment, marking a change for better or worse in Detroit. He says that though GM has backed away from “defining moments” in the past, someone this time finally said enough’s enough. Ok, first: backing away from “defining moments” just shows that GM is still the leader of the American Auto Industry. Plus, as the Times article points out, the car company hasn’t done anything yet, and it has a, um, “spotty” track record of standing up to strikes. From the article:

In the past, its response, by and large, was to cave in to U.A.W. demands. That happened during the last big walkout, at two parts plants in Flint, Mich., in 1998. That seven-week standoff occurred when Rick Wagoner, the current chief executive of G.M., was president of its North American operations.

(What does this guy have a 10-year itch or something?)

G.M. never recovered the 31 percent market share it held before the strike, and was forced to offer rebate deals to get customers back into showrooms.

“G.M. has made deal after deal that didn’t deal with fundamental problems,” Mr. Womack said. “This time they have to hold the line on a contract.”

“Hold the line”? Yeah, we may not hold our breath. G.M. has about 2 months of reserves to hit the market – not exactly going to get the dealership guys their Christmas hams. Oh, also: the Times article fails to mention that Womack is the chairman (and founder, apparently) of the Lean Institute, which advocates Toyota Production System application to American industries. While there’s nothing wrong with that, we’re thinking he may have a little bias in defining those “defining moments”.

Regardless, it’s the other issue here that has the CE staff buzzing like a Halo 3 Mountain Dew Big Gulp: The link between GM’s financial difficulties and its negotiating ability. Again, from the Times piece:

G.M. is better positioned to handle a strike now than in earlier contract talks, though not for reasons that have to do with strength. With its operations shrinking in the United States, the majority of its sales and profits are now coming from abroad.

It is selling more vehicles built in Canada, Mexico, and Europe, the source of new models for its Saturn division. And it is rapidly expanding production overseas, especially in China, which is fast becoming one of the world’s major car markets.

The company’s problems at home, which resulted in losses of more than $12 billion in the last two years, have forced it to close all or parts of a dozen factories, cut tens of thousands of jobs and offer deals to workers to quit or retire. A smaller G.M. means there are far fewer workers involved in this strike, so a halt in production inflicts less pain on the company.

The U.A.W. membership at G.M. has shrunk by more than 80 percent since the 1970 strike, when 400,000 workers were off the job for 67 days.

So, GM falls flat on its face financially, which ends up benefitting its bargaining ability and the bouyancy of its bottom line.* When you view this in the light of GM’s major goal in this negotiation, the VEBA it hopes will rescue it from the pensions** of the UAW workers, a cycle emerges that is worth some discussion. Since we make it a point not to take sides, the rest of this topic belongs to you – in the comments.

Talks Continue in G.M. Strike
*Intentional alliteration

One last thing – This VEBA has not gotten much attention (alas, ERISA issues never do), so we’re promising you a whole post on G.M.’s VEBA proposal and its potential effect on the situation in Detroit…once we track down our Benefits guy. They’re so antisocial in the ERISA department…

**UPDATE: Did we say “pensions”? We meant “health and welfare benefits”. Thanks to the tipsters for pointing out our mistake – and we reserve the analysis of the value of our education for another discussion.

So it begins…

I have been trying all day to figure out how to appropriately open CE’s doors – what first post would really capture the purpose and importance of what we’re trying to do here, and I had come up with zero. Then the Chicago Tribune did all my work for me.

Right on the front page of the Business section was this article. It details how the Senate’s energy bill (requiring all vehicles to average 35 miles per gallon by 2020) may be the final straw for a few key truck- and suv-manufacturing plants. According to the article, the current law has different requirements for cars than for trucks and suv’s.

The thing that struck me was that the UAW is supporting an alternative measure in the House that would raise the corporate average fuel-economy rating to 32-35 mpg by 2022. A little better, right? Wrong, say the workers at the plants that might close. They produce a product that currently gets 16 mpg. So even the plan their union supports wouldn’t keep them in their jobs.

The article outlines some workers and former workers – all of whom are supplementing their income. One guy installs solar panels, but says business is “kind of slow”. A retired employee is working at a food processing plant, where he makes $15/hour. “A far cry from the $27 that GM paid.”

With negotiations between the UAW and the Big 3 looming, does anyone think the issue of fuel economy will even have a minute’s worth of debate? Probably not. Plant closures are nothing new these days, and there are a lot of other issues that will take precedent at that table (retiree benefits, anyone?). So, what about this article makes it opener-worthy? Well, nothing – on it’s own.

It’s just that, for some reason, the Trib posts its almanac and obituaries in the inside pages of the Business section. So, right across the page, as I’m finishing the UAW article, tucked away on page 3, in tiny font, is the following:

ALMANAC, published July 5, 2007…
In 1935 President Franklin Roosevelt signed the National Labor Relations Act, which authorized labor to organize for the purpose of collective bargaining.

Hmm. It has been a long 72 years since the NLRA came into being. Now, the unions are finding themselves conceding hard-won benefits to their employers just to keep the businesses – and in the case of the UAW, the whole industry – afloat. It seems every modern movement, from globalization to universal healthcare to, apparently, environmentalism is affecting the Union’s (capital U) chance for survival as an effective way to do business. The future of the labor movement is unstable, and creative solutions are few and far between.

Is the movement in flux? Or is this the end of an experiment that began with that Almanac entry? Our best attempt at finding answers starts here, in the comments. See you there.

Chicago Tribune: M.P.G. bill could cost UAW jobs
Almanac – July 5, 2007