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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