Experts: UAW needed big changes in deals – Lima Ohio


DETROIT — Nearly 12 weeks after the previous contracts expired between the UAW and the Detroit Three, including a 40-day nationwide strike against General Motors, work on a new deal is near the end.

But experts say it’s just the beginning because the automakers face a difficult future that the new four-year union contracts fail to safeguard against.

“I’m a little worried for the home team,” said Erik Gordon, professor at the University of Michigan Ross School of Business. “Neither the company or labor had the guts to get together to say, ‘OK, we’re going to stay viable. It’s going to cost you something and it’s going to cost me something.’ Now they all face the same future. They’re going to give up market share to other automakers and hope somehow they can get that back.”

The UAW ratified four-year contracts with GM and Ford Motor Co. weeks ago. Fiat Chrysler Automobiles reached a tentative agreement with the UAW on Saturday and is awaiting ratification.

GM and Ford said the contracts allow them flexibility to continue to invest in technology for electric and self-driving cars while protecting good-paying jobs for employees.

“Our goal was to reach an agreement that works for our shareholders, our employees and our company, as we confront the realities of a rapidly transforming industry,” GM CEO Mary Barra said during GM’s third-quarter earnings call with analysts. “Our contract does the right thing for our employees without compromising competitiveness or flexibility.”

The UAW has said the new contract offers its members job security because the automakers promised to invest billions in U.S. manufacturing.

But some industry experts say the contracts fall short of giving the automakers enough flexibility to retool factories or reduce labor to compete in a quickly changing world that’s headed toward electrification. And, with health care costs remaining the same, wage increases and a cap on temporary workers, pundits question the economic benefits for the automakers.

“All three face an unclear future as to what their companies will be five to 10 years from now,” said Marick Masters, a business professor at Wayne State University. “Is there enough consolidation in the industry? Do the companies have the financial ability to get a jump ahead on electric vehicles and autonomous driving? I’d look at them to consider more mergers and consolidations on a global scale over the next five to 10 years.”

Pivotal moment

The historic talks took place at a pivotal moment for the auto industry. It is on the cusp of moving from internal combustion engine cars to electric vehicles and ultimately self-driving cars, said Harley Shaiken, who teaches at the University of California, Berkeley. He specializes in labor issues.

The bargaining also occurred in the shadow of other changes at each automaker.

FCA is in the midst of a merger with French automaker PSA Groupe and now faces a lawsuit filed by GM in connection to a UAW corruption investigation.

GM endured a six-week strike at 55 of its plants in 10 states during its union negotiations that cost it $3 billion. GM closed three U.S. factories and cut more than 4,000 U.S. salaried jobs this year.

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Ford has been downsizing and has cut more than 7,000 white-collar jobs globally in the past year.

The UAW had its own distraction during talks. It has been embroiled in a federal corruption scandal reaching the top leadership ranks, forcing Gary Jones to resign as its president just as the union started talks with FCA.

Still, the work got done and the union and the car companies remain intact.

“The UAW won some critical gains within that context,” said Shaiken. “All three automakers are still poised to be profitable in an economic downturn and they have skilled and efficient workforces.”

Problematic future

The UAW won: wage gains, large ratification bonuses and the move toward unified pay and making temporary workers permanent. Union workers kept their health care benefits without a cost increase.

The automakers also had wins. GM kept three U.S. plants closed, but said it would invest $3 billion in Detroit-Hamtramck to build an electric pickup and other electric trucks, creating about 2,225 jobs. Ford won labor peace and the chance to focus on technology for its future, and FCA can move ahead with the PSA merger.

But the carmakers and the union each face a “problematic future,” said Masters. The automakers must acquire massive amounts of capital to fund the research into electric and autonomous cars and, “it’s unclear how they’ll go about doing that,” he said.

Gordon, at U-M, said both sides wound up with a deal that is “business as usual at a time when they had to make big changes.”

“The U.S. industry needed to face the fact that the future of car manufacturing is not going to be like the past and it needed to get flexible to make the changes and it needed to get flexible sooner rather than later,” said Gordon.

A better deal

The automakers face production capacity constraints in their U.S. plants, said Gordon. The union contracts further hinder GM and Ford in their ability to reconfigure the plants to build electric cars, he said.

The only flexibility GM got in the contract with the UAW was the ability to close the three plants: Lordstown Assembly in Ohio, and Warren and Baltimore transmission plants. Gordon calls retooling Detroit-Hamtramck to build electric trucks a “baby step” toward the flexibility needed to adapt to making wide-scale electric vehicles at a time when Japanese, Chinese and some European automakers “will take giant steps.”

Ford was able to close its Romeo engine plant.

FCA’s tentative agreement protects against it closing any of its assembly plants over the next four years.

“Instead of getting flexibility, the U.S. industry tied its hands for four more years,” said Gordon. “You’ll be OK for the next four years, but then the bottom will likely fall out.”

A better contract would have been one that allowed the carmakers to scale down the labor component at three to four additional U.S. plants over the next four years because electric vehicles require less labor, said Gordon. In return, the automakers would cushion the blow by offering buyouts to impacted hourly workers.

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Economic fails

Health care costs also are of concern. The auto industry is one of the few in the country where the workers do not pay a lot toward their health care. That remained unchanged in the UAW contract.

“From an economic perspective, I still have some concerns about their long-term labor cost competitiveness, and I don’t think they went far enough in obtaining cost offsets, in particular in health care,” said Colin Lightbody, who was Fiat Chrysler Automobile’s director of labor economics until he retired in 2018. He is now president of HR & Labor Guru Inc., a consulting firm in Windsor.

The health care costs will be unsustainable in the future and, “the companies did very little to mitigate those rising health care costs,” said Lightbody.

GM and Ford also should have pushed to use more temporary workers given temps make up about 20% of the hourly workforce at plants owned by foreign competitors who operate in the United States, said Lightbody. Instead, Ford has capped its temporary workforce at 8% and GM has kept it in the 10% range. The new contract allows the union a say in GM’s hiring of more temps.

Gordon said some of the economic impacts, particularly health care, are “disappointing, but when people look back at the industry 10 or 15 years from now, they won’t say, ‘The real botch-up was workers didn’t pay for health care.’ They’ll say, ‘They gave their competitors a four-year head start in getting the flexibility to reconfigure themselves for electric vehicles.’”

GM and Ford react

Not so, said a spokesman for GM.

“How could GM have given our competitors a four-year head start on electrification when we’ve been building the Chevrolet Bolt EV since 2016? And (Chevrolet) Cruise AV test vehicles in Orion since 2017? And the Chevrolet Volt before that from 2011 to 2019?” said David Barnas, GM spokesman.

He noted the plans for electric pickup and other EVs being built at Detroit-Hamtramck. GM is bringing battery cell production to Mahoning Valley in Ohio, which would create 1,000 jobs, Barnas said.

“So net-net … the ‘four-year head start’ commentary doesn’t make sense when you look at the facts of GM’s electrification efforts,” said Barnas.

During GM’s last quarter, GM CFO Dhivya Suryadevara said the agreement preserves GM’s manufacturing flexibility.

“We have maintained the mix of our North American manufacturing footprint, maintained the ability to adjust our workforce in response to changing industry levels,” said Suryadevara.

Barra told analysts that she expects GM to spend more research money on EVs than internal combustion engines over the next few years. But EV development does not automatically spell job cuts, she said.

“It’s simpler, from a component perspective, than it is from an internal combustion engine” to assemble, said Barra. “But one of the key things that we’ve done is worked on lightweighting because lightweighting is so important across every component. That lightweighting generally requires a little bit more labor. So overall, I think it’s somewhat less, but I think you’ve got to look a the whole vehicle, not just the propulsion system.”

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Likewise, Ford defends the contract.

“We have added flexibility to our operations while keeping labor costs in line with projected U.S. manufacturing labor inflation costs and still rewarded our workers for their important contributions to the company,” said Ford spokeswoman Hannah Jolly. “We build more vehicles in the U.S. than any other automaker and we employ more U.S. hourly workers than any other automaker — and we want to keep it that way.”

UAW’s troubles

Besides the car companies, the UAW’s future is also changing after the talks.

The UAW must restore its integrity after a federal corruption probe resulted in 13 union or company officials charged. While neither former UAW President Gary Jones nor his predecessor, Dennis Williams, have been charged, their homes were searched in August and they have since been implicated in documents filed in criminal cases against other union officials.

Many among the rank-and-file want reforms to rid the union of a “good old boys” culture that contributed to the corruption. Some have said a one-vote system would be more democratic than the current caucus process to elect leaders at the union conventions.

“The scandal is very damaging and it cuts to the heart of what the UAW has prided itself on for decades: This was a union that was a social movement as well as it was a union and it didn’t tolerate corruption,” said Shaiken. “What’s most important is how the organization responds.”

So far, the UAW has reacted. It appointed interim President Rory Gamble, who has moved fast to place strong protections for the future, said Shaiken. But, it will take more reform, he added.

U.S. Attorney Matthew Schneider, leading the corruption probe, said this week that the UAW reforms to date have not impressed him and that the union is not actively cooperating with the investigation. He wouldn’t rule out an effort in the future to impose government oversight of the union.

On Monday, Gamble announced the UAW will commission audits of operations at its Detroit headquarters and the union’s regional offices, political action committees and its remote resort and golf course in northern Lower Michigan. The UAW listed a series of other “stringent financial reforms,” including details of the audits being conducted by Deloitte.

The financial reforms pledge follows Gamble’s announcement Nov. 13 of ethics reforms.

But Masters said such actions should have happened sooner. The possibility of the federal government stepping in to oversee the UAW still “looms large.”

“There’s uncertainty for the industry, there’s uncertainty for the companies and there is uncertainty for the future of the union given the scandal it’s been involved in,” said Masters. “Even if you put that uncertainty aside, each side faces a problematic future. For the union, it means growing the membership sufficiently to remain a viable counterweight to the companies in the industry. They’ve had no luck unionizing the transplants.”





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