Finally, Some News of Labor Peace
Four important accords were struck during the past several days
By Chris Haak
While none of these events should come as a huge surprise to regular readers of this site, the past few days have seen a tentative deal between American Axle and the UAW that is likely to soon bring an end one of the longest strikes in the UAW’s history as well as Ford and Chrysler agreeing to tentative agreements with the CAW in Canada on new collective bargaining agreements. Finally, GM has reached a local operating agreement with the UAW local at its Lansing Delta Township crossover plant.
The American Axle strike, in which the UAW has been on strike for over 11 weeks, was probably the most critical to end for all parties; GM is far and away American Axle’s largest customer, and the strike virtually shut down GM’s truck production for several weeks until additional parts “could be found” (which many analysts and observers believe meant that AA was able to supply the needed parts from plants outside of the US. Even though GM’s bloated truck inventories (which, in terms of days’ supply, barely changed for the past several months in spite of tens of thousands of units in lost production), the idled plants still cost money even when not producing vehicles, and in fact are not earning any money. As a result, GM has lost close to $1 billion as a result of the American Axle strike. Within the past few weeks, GM has offered $200 million to American Axle to fund employee buyouts and one-time payments to employees to help entice them to accept lower wages going forward. The company had initially offered a very steep wage reduction to the UAW, but it’s believed that the final proposal agreed to by the bargaining team is still calling for wage reductions, but not as dramatic as the original request, and accompanied by “buy-downs” of over $100,000 in some cases to help employees adjust to earning a lower wage.
As we’ve reported previously, Ford and the CAW came to a new collective bargaining agreement a few weeks ago months before the previous contract had even expired. Many (including me) wondered aloud if Ford had possibly left too much on the table for the sake of labor peace and a smooth launch of the Flex crossover in the coming months. I also questioned whether Chrysler and GM would find Ford’s terms agreeable (though, to be fair to Ford, it was more of a concessionary contract than one where Ford really gave anything up in terms of wages or benefits). Then, on Thursday (just 11 days after the union’s membership ratified the Ford agreement), the CAW announced that it had come to a tentative agreement, subject to ratification, with Chrysler LLC and GM. As has been the practice for decades, the Chrysler and GM agreements closely mirror the Ford agreement; certain plants that had been expected to close will stay open for longer periods, there will be no two-tier wage structure for new hires in Canada as there will be in the US, and buyout offers of up to $125,000 (Canadian) to each CAW worker at the GM Windsor transmission plant, which produces four-speed automatic transmissions and is slated to close.
Lastly, UAW Local 602, which represents 3,300 workers at GM’s new Lansing Delta Township assembly plant that builds the Buick Enclave, GMC Acadia, and Saturn Outlook crossovers, has come to a local agreement at the facility. Following the national contract, which was agreed upon in the fall, management has to reach a local operating agreement with each local union concerning issues such as work rules and job classifications. There had been speculation among some in the industry that the UAW was using the local strikes as leverage to get GM involved in the American Axle strike (which GM eventually did, to the tune of $200 million), since the American Axle strike affected production of vehicles that GM had ample supply of. Also, as the AA strike wore on, their non-US facilities ratcheted up production and actually allowed GM to re-start production at some of its truck plants in spite of the ongoing Axle strike that had previously stopped production. It also seemed suspicious that the two plants affected by local strikes built two of GM’s hottest, must-win products (the aforementioned crossovers, and the Fairfax, Kansas plant that builds the new 2008 Chevy Malibu). However, analysts are now speculating that the local strikes are just a coincidence, and instead may be caused by member dissatisfaction with the landmark labor deal reached last fall.
Regardless of the motivations of the parties who settled, I’m glad that at least some of the headwinds facing the domestic auto industry have been eliminated. There are still many challenges facing each company, but further improved products, better marketing, and now some labor peace (with more competitive agreements) may help pull these companies out of their decades-long doldrums.
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