Wednesday, September 26, 2007

GM Vs The UAW ... What Was It All About?





At 3:05 this morning, a tentative agreement was reached between General Motors and the striking United Auto Workers. The tentative agreement ends the two day old strike and workers are expected to be back on the factory floor this afternoon for second shift. I have heard many of the business gurus on the radio breaking down the reasons for the strike, but they have it all wrong. The union had given GM everything they had asked for, so like all good negotiators, GM asked for more. The reason for the strike was simple. If the UAW had taken the agreement as proposed by General Motors, the union would have ceased to exist in 20 years. The strike was about job security and the guarantee that American cars would continue to be built in America. Without those guarantees, GM would have been free to close plants in the US and move them overseas where labor is cheaper.

Now, I am not the biggest fans of unions, but in this case they did a service to this country. If labor costs are higher here in the USA, then the corporations just need to find a way to overcome this obstacle with more productivity. They need to trim the fat at the corporate level and come up with better cars. I've been in the car business for over a decade now and one thing I can tell you is that if someone comes up with a "must have" vehicle ... the American consumer will buy it. When you have ho-hum products, then you have to have huge incentives (rebates and special financing rates) to "bribe" the consumers to buy your product. So General Motors, start making vehicles that Americans want to buy, and most of your problems are over. You have made a good start with the Buick Enclave, GMC Acadia, Cadillac STS and new 2008 Malibu, so we know you are capable of it, let's continue this new trend.

As for the United Auto Workers, UAW President Ron Gettelfinger, you are now the administrator of the Voluntary Employees Beneficiary Association (VEBA) and GM has just given you $36 Billion to fund it. This VEBA is now your responsibility and the health care of all GM retirees now rests in your hands. Please don't screw it up. In fact Ron, you have now become a major player in the world financial market. Where you invest this money, as well as the money that will be coming from Ford and Chrysler later on will make or break companies. If I were the head of a Union, I think that I would invest this money in American companies that employed Union workers in the United States. I might even use the money as a carrot to open up some factories to union workers. I just might target the Subaru factory in Lafayette, IN or the 6 Honda plants or the 16 US Toyota plants ... you get the idea.

Here is what General Motors got out of the deal. It got to fund the VEBA out of the pension fund (the pension fund had more money than was needed), so no operating capital was touched. GM pretty much does away with the jobs bank (this is a program where laid off workers are paid 90% of their pay and benefits. There is also no pay raise during the 4 year contract, though bonuses will be paid yearly (I don't know what the bonus payments are contingent on). New hires will be paid a lower starting wage in some jobs. Most of all, General Motors was able to cut into the $25.00 per hour wage and benefit gap between them and their foreign competitors.

Here is what the Union got out of the deal. Retirees will get a pension increase, though it would be offset by an equal increase in health care contributions. GM has pledged to produce cars at certain factories. Workers will be given a $3000.00 bonus upon contract ratification, then bonuses of 3%, 4% and 3% of their annual salaries during the final 3 years of the contract.

This initial agreement is contingent upon approval of the union members and then the VEBA must be approved by the courts and reviewed by the United States Security and Exchange Commission (SEC).

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21 comments:

Debbie said...

This is out of my areas of expertise, but I think I heard some time back, that the benefits paid by GM were so huge, it was putting a real crimp in their other financial areas. So I'm not sure, if that's true, how this new agreement will affect current workers, the bottom line of GM, and the retirees.

Tapline said...

Paul,
You are doing an excellent job with your postings of current events and your research into postings of interest. Debbie,,,I'm with you I know nothing of unions, other than the corruptions that follows them. When I was living in Indiana, I lived next to a Delco plant. Those union lineworkers were the highest paid workers in the area. Doubling or more what the going rate of a line worker in Mass. at at the time....Currently, Im out of touch. I will add however someone better be watching what is happening to our country. Especially, Economically. This internationalism doesn't cut it. We need to buy American again. That is completely American. I was listening to a report on the new requirements to be placed on businesses in California by Schznagger because of the reports on Global Warming. This will cause business to move to more business friendly states and if not possible then India or China will be their new homes. Not too bright when there is still so much controversy over Global warming. 30 years ago is was the scare of the coming Ice Age. If fact movies were made over this scare....I ramble...stay well...

lime said...

thank you. i appreciate your balanced approach here. too often people are ready condemn either side outright and see no positive contribution from the opposing viewpoint. i understand that unions can be really probelmatic. at the same time, i grew up with a mother who was a factory worker, in what amounted to a sweatshop. the owner siad if workers unionized he'd close the factory and move somewhere else. he kept his workers in poverty by cutting their rates retroavtively when they produced more than he wanted to pay them for.

and as yousaid, let's hope the union does right by it's members too. there have been enough terrible stories of retirements being lost. for anyone to work a lifetime and in good faith contribute to their own plans and have that snatched away is simply criminal.

In_spired said...

This strike is indicative of what can be accomplished by people uniting and pulling together. It's encouraging that the workers won over this humongous corporation. Most of what I've heard about unions in the past has been negative but in this instance, I'm glad they hung in there!
If retired teachers would agree and pull together, like the UAW, we would get a cost of living raise of which we haven't had since 2001!!

The Lowest Rated Blog said...

Unions

Not all of them are bad. I was a Union member on my younger years [prior to my military life], and some in my family are members of the SEIU. In this case, score one for the union, and it is now up the Voluntary Employees Beneficiary Association's leadership not to blow it. Have a fine evening!

cfs

Paul Champagne said...

debbie ... Back in the good ole days when GM was king, they were very generous to their employees. Now that they are struggling to avoid bankruptcy, they need the union to step up ... and it has.

tapline ... yes there has been some corruption in the Unions (but can you name one organization that corruption hasn't touched?). It is in the best interests of the Unions to keep jobs in the United States, and anything they do to help this gets my vote.

lime ... both my parents were in Unions, my mom in the UFT (United Federation of Teachers) and my dad in the Teamsters (I have no idea why ... he was a teacher too). But all I ever remember was them complaining about their dues being used to support candidates that they didn't like.

inspired ... this was not a case of either side winning. They both win in the fact that GM avoids bankruptsy and the workers still have damn good jobs. More importantly, the country won.

tlrb ... no, not all of them are bad, but most of them have lost their purpose. They have become political machines and deterents to businesses staying in the US.

Superstar said...

I hate strikes.

Here is what I want to know. As a GM owner, will my car EVER be worth a crap. 3 years ago the value of my POS GM car put me upside down due to all the "incentives" and cash back awards...

So, strike away, as long as the value issue gets better.

You know? Funny how you never hear of a Honda or Toyota plant "on strike"!!!

Frasypoo said...

Both sides of the coin,presented very well.
I believe that the US should start producing better quality cars here.I hate the fact that we lose out on that.

Frasypoo said...

I forgot to add
Thankyou for stopping by my blog

TRUTH-PAIN said...

... Not that this is the central theme of your great posting, but I've always been at a loss as to why the American car industry still finds itself playing catch-up with Japanese (and Korean?) automakers. I give it up for the Acadia,... a friend of mine has it and it is a sweet crossover-type SUV,... but it is few and far between. For every Acadia there is a dozen ____________(fill blank). Is it styling? media? hard-to-shake history? what the hell is it with my beloved country's auto know-how?...

buffalodickdy said...

Paul- I read a good editorial last night on this-from a Michigan point of view. The very fact that the U.A.W. struck G.M. even for a day, sent an international message to companies thinking about locating in Michigan-Don't! Businesses are moving out of here weekly. Non union companies won't take a chance on coming here. The governor(Dem.) in her wisdom about all the job and business lost here is to raise taxes significantly. We are last in growth among states, with no enticement to new business to relocate here. None of this UAW/GM contract will stop plant closings that are deemed necessary-they never have. It also revealed striking 2 plants can close 40 others thanks to J.I.T. and integrated production. They should have settled without striking- says a guy from Michigan!

In_spired said...

Time for a new lesson!

snowelf said...

Hey Paul,

I know I'm coming in late, but like your other readers, I always appreciate your objectivity and how you can state your opinion without shoving it down anyone's throats.

I think unions are a tad outdated... they served their purpose in a more productive way in their beginnings, but things have come a long way since then... although with all this outsourcing and the expanding global economy, I am wondering if they are going to start making more of a comeback. It's all very interesting.

In StL, the grocery store unions are HUGE and it's a big deal when one of them goes on strike. It affects the whole city!

On a side note, I absolutely love cars. I have no idea why, I just do, and I hate when companies don't make them with pride.

--snow

niki yokota said...

im into car business too.
the final 3 years bonus sounds good :)
thanks for remind me of hideki matsui!!

Incognito said...

Absolutely, if GM made better quality cars I wouldn't buy foreign. Even mechanics are the first to admit how shoddy the american car is.

As for Unions.. there are some Unions (like my actor's unions) that are there to legitimately help the member. Although we complain about ours, they do make sure that we get a fair deal, otherwise we would be working for 15 plus hour days for little pay.

Tapline said...

Paul,
I just thought I would stop by to inform you that "the rantings of a sandmonkey" is back blogging....He is located in Egypt and had to shut down for a period, because of threats from government and other clandestine activities, i guess, anyway, he is back and usually has a good read he is up to date on current events and happenings in Egypt, Turkey, and the rest of the
Middle East.....Just thought you'd like to give him a visit along with the rest of your following...stay well.....

WomanHonorThyself said...

I too did not know much bout this..thanks!

The Lowest Rated Blog said...

CAT FISH FISHING [or BFS]

The front page of this blog is SLOW to open [possible reason, all the active links]. No activity here for a week. I believe Paul is gone fishing, or is suffering from BFS [Blogging Fatigue Syndrome]. Best cure for BFS is to turn your computer OFF for a few days, or go on vacation as far as you can from Cyberland.

cfs

Paul Champagne said...

bambi ... you are quite right, used car values are lower if the new models have huge rebates. The reason for this is that there has to be a reason for someone to buy a used car. That reason is always price. If a dealer is offering $10,000.00 or more off of sticker on a new vehicle, then used car trade-ins have to take that 10K discount into account before they even account for depreciation. This should be getting better as GM started offering less rebates back in January of 2006. Since that time, residual values have gone up. You never hear of strikes at Toyota or Honda plants because they are not unionized.

frassy ... we are producing better cars (Buick just tied Lexus for most reliable car, ending Lexus' reign of being number one for 5 years), it's just that most people haven't noticed. It's easy to lose customers ... a lot harder to get them back.

truth-pain ... The Acadia is indeed a great cross-over. Even better is the Enclave. It is an Acadia that is even quieter and smoother to drive, with all those little extra Buick-styling cues. The cost is about $2600.00 more, but well worth it for the Enclave.

buffalo ... I think the union needed to strike to show that they were serious (not to GM, but to their members) I think this was a deal that benefited GM a helluva lot more than it did the worker. That being said, working at a GM plant is probably one of the best jobs you can get.

inspired ... the new lesson is up.

snow ... Pride is something I see less and less in the American worker. I may be showing my age, but when I got my first job (as a waiter at 1/2 minimum wage or $1.35 and hour), I was proud of my work and did everything the best that I could. Now when young people get a job, they try to do the least that they can, after all, "it's only minimum wage".

niki ... how could any one forget "Godzilla"?

incognito ... I carried a SAG card for a while (it was the only way to get work in commercials). The thing about the actor's union is that it is made up from top to bottom by actors. A lot of unions, while they have "shop stewards" at the local level that are actually on the job, the upper levels are filled with profesional bean counters.

tapline ... thanks, I'll check him out.

woman ... you're welcome.

tlrb ... haven't been around for a while because ... sometimes I actually have to work while at work. Sounds wierd I know, but I only blog when I don't have anything that needs doing. Lately we have been super busy keeping the American economy rolling along.

niki yokota said...

awww thank u paul-chan!!
i used to like Godzilla, but friends say hes ugly ugly, so i forgot about him :D

Paul Champagne said...

niki ... I hope you are not one of those people that judge a person by his or her appearance. I know plenty of really good looking people that I no longer associate with because their character is so ugly. When Matsui broke his wrist last year (diving to try to make a play in the outfield), he appologized to the fans for injuring himself and being unable to compete ... quite a refreshing break from the usual athletes.