General Motors CEO Mary Barra paid a steep price for her company to retain flexibility in plant closings in GM’s new deal with the United Auto Workers, which ended the union’s 40-day strike against the automaker over the weekend. Now it’s up to Ford CEO Jim Hackett and Fiat Chrysler CEO Michael Manley to see if they can live with a GM-style deal in their own negotiations with UAW leaders who weren’t afraid to take on the biggest of the Detroit Three in a walkout, the length and tenacity of which stunned the industry.
GM’s 46,000 UAW-represented employees finally are returning to factories and parts depots around the country today after 57 percent of union members voted to accept the deal in elections at their locals last week. They held out for a new four-year accord that will give them alternating base-wage increases and lump-sum bonuses in each year, protection of their comfortable health-care benefits, better pay for new hires, a faster ramp-up to full compensation for temporary workers, and a lush “ratification bonus” of $11,000 per individual for approving the new contract. Most also will have opportunities for making up much of their wages lost to the strike because GM will be asking them to work a lot of overtime in coming weeks.
The strike likely cost about $3 billion in profits for GM, as estimated by Bank of America, and baked in about $400 million a year in future labor-cost increases, according to others’ estimates. GM can make up much of its lost production with overtime in the coming weeks, however, and there’s little indication that the company lost sales momentum over the last 40 days.
For Barra and GM, what emerged clearly in the company’s willingness to suffer such a long walkout was that they valued labor flexibility above everything else. While GM committed to invest $7.7 billion in its U.S. manufacturing operations over the next few years, securing 9,000 jobs, Barra didn’t agree to reverse GM’s plan to close a handful of big manufacturing plants—a plan that, when she announced it in 2018, prompted a very unpleasant phone conversation with President Donald Trump, who champions U.S. manufacturing.
Her stubbornness on this point stems from Barra’s conviction that GM will need maximum freedom to deploy its labor resources in a future that could include a further decline in U.S. new-car sales and most certainly will involve more redistribution of resources as GM invests massively in an ongoing industry evolution favoring electric vehicles and rolling out autonomous-vehicle technologies. In fact, some reports are that the final deal reached by GM and the UAW isn’t significantly more expensive for the company than the proposal it fielded in mid-September that was aimed at getting a deal with the union without a strike.
For Hackett and Manley, the challenge on their plates is to see whether a GM-style national pact suits the needs of their own companies. Traditionally, the UAW has used the first new deal in a bargaining cycle as a basic template for “pattern bargaining” with the other two members of the Detroit Three and insisted on a new contract with each of them that fits the basic template. UAW President Gary Jones is heading to Ford next.
But pattern bargaining could prove problematic for Fiat Chrysler and Ford. For instance, Fiat Chrysler has a relatively newer workforce than GM, meaning that Manley may have more difficulty accepting big cost increases associated with increases in new-hire pay and acceleration of regular status for temporary workers.
At the same time, while Barra and GM had incensed the union and its members with its plant closings, the basic disposition of UAW membership toward the other employers could prove to be different than that of the GM rank-and-file. Fiat Chrysler, for instance, is adding capacity, most notably with a multi-billion-dollar plan to refurbish an old engine plant in Detroit into a modern assembly plant to build a new Jeep that will be the brand’s largest model.
“This pattern is pretty costly because one of the big things GM won is closing plants that will save billions,” Kristin Dziczek, an economist and labor expert at the Center for Automotive Research in Ann Arbor, Michigan, told the Wall Street Journal. “The other two don’t want to close plants. If you don’t want to close plants, what is the win for the company?”