UAW and GM 2015

Nikole CunninghamCollective Bargaining – Independent Study ReportUnited Auto Workers and General Motors 2015

Labor Agreements between General Motors and the United Auto Workers –

A Review of Negotiations Influencing the 2015 Contract Agreements

Overview

Contract negotiations between General Motors and the United Auto Workers union began

with a handshake on July, 13 2015. Reflecting on the four years that have passed since the

contracts were last updated, General Motors has climbed its way out of a recession with the help

of a government bailout and is prospering in the year 2015. Sales in the United States alone for

GM were fast approaching 17 million vehicles and profits couldn’t have been more outstanding

(UAW, 2015).

In true UAW fashion, union members’ representatives were seeking increased job

security, wage increases, and accomplishing less of a pay gap between more experienced

workers and entry-level workers. The representatives of GM set their sights on reduction of

health care costs. Ultimately, the goal of both GM and the UAW was to continue down a

successful path together.

Both General Motors and United Auto Workers were very positive going into

negotiations. Prior to the sit-down, both sides told news reporters of their expectations. The

president of the UAW, Dennis Williams said, “Our goal is for GM to prosper, for shareholders

and consumers to win and for all UAW members to share in the prosperity of their achievements.

We can all win (UAW, 2015).” Mary Barra, GM’s chief executive, gave the following statement:

“We are truly going to listen to each other and understand the issues we need to work through


(Vlasic, 2015).” When reviewing the past two contract negotiations of 2007 and 2011, the same

confidence level was not so evident.

2007 Negotiations

General Motors

Quite a lot has happened between General Motors and United Auto Workers in the past

eight years since the contract negotiations of 2007. At that time, General Motors’ bargaining

subjects focused on the goal of becoming the leading automaker in the industry and eliminating

debts that had been accrued over time. GM entered negotiations in hopes of lowering its labor

cost in the U.S. to be more comparable to its competitors, Toyota Motor Corporations. In

addition to lowering labor costs, GM owed more than $50 billion to the UAW for their retiree

health care and was determined to remove the responsibility of that debt from the company.

It was very difficult for General Motors to keep up with its competitor Toyota in sales.

GM had a hard time converting from its reign of trucks to more fuel-efficient vehicles. Around

2005, the housing market started to deteriorate and gas prices started flaring up. GM did not have

the funds to expand their product line to be more fuel-efficient. The car manufacturer put so

much money into its retirement fund for union workers and allowed for 95% pay during idle

times at factories, coming up with enough money to make any major changes was impossible.

General Motors strongly believed that if they could eliminate some of their expenses that

they contributed to the union, they would be able to recover from their shortcomings and focus

more on keeping up with competition. Monetary issues that GM had with the UAW were not


only in retirement health care, but also starting wages for union employees, guaranteed positions

in case of lay-off, and payouts if GM needed to downsize in unprofitable areas (Welch, 2009).

United Auto Workers

For the UAW, job security and a new trust fund for union members’ healthcare were top-

of-the-list bargaining subjects. GM’s overseas operations had been doing well for the company,

but the success overseas created more risk for jobs in the U.S. GM had resorted to paying-out

union members in order to downsize unprofitable locations.

Up until negotiations began, the union members had confidence that their benefits would

include, “a solid pension and lifetime health care (Lyden, 2007).” Unfortunately, GM had

expressed their disinterest in continuing their contributions to the retirement health care plan due

to the desire to invest the company’s money in more defensive resources against competitors.

The United Auto Workers’ bargaining committee was confident that the idea of a trust fund ran

by the union would be beneficial and allow for the highest amount of union control.

Sceptics in the union worried that the trust fund would “dry up” due to the ever-changing

stock market, and retirees would have no choice but to pick up the slack out-of-pocket. With the

union taking on the entirety of the trust fund, all responsibility fell on their shoulders. Any and

all shortcomings would no longer be monitored and reimbursed by General Motors.

Job security was a huge bargaining subject because it affected both GM and union

workers in different ways. General Motors desired to expand production overseas to areas with

cheaper labor and materials. In order to remain competitive, GM believed that the expense gap

between itself and its main competitor, Toyota, needed to decrease considerably. The smartest


move for GM at the time would be to close down production plants that were not earning a

profit, and use that money to expand globally.

The United Auto Workers union realized that the jobs of its members were at risk. Short

from shipping American workers overseas, there would be no way that union members would be

able to keep their jobs. Union members at this time had a great deal of benefits from GM and

they understood that the amount of money that GM would save on production overseas, they

would also save from the lack of health care, retirement benefits, and pay for idle times (which

seemed to be increasing).

The UAW knew that General Motors desired that the increasing debt of the retirement

health care program be relieved from their care. In order to gain more security for American

jobs, the UAW was willing to take on the health care program in exchange for new product

designs and materials to strictly be manufactured in the United States. General Motors was not in

agreement with the UAW on this subject, and because of the inability to come to an agreement,

the UAW union members of GM went on strike.

The Strike

The strike of United Auto Workers members involved the picketing of around 73,000

workers nationally (Maynard, 2007). The union’s president, Ron Gettelfinger, justified the strike

by stating, “…there comes a point in time where you have to draw a line in the sand.” This

comment came from GM’s unwillingness to break from the idea of a cost structure that is more

compatible, and a work force that is flexible enough, to compete with reigning automakers

overseas.


General Motors had already taken steps towards global production and was selling more

vehicles from locations such as Canada, Mexico and China than from its U.S. locations. In fact,

prior to negotiations, GM had forced over a dozen of its factories in America to close and cut

thousands of jobs by offering money for workers to leave or retire.

An expert in manufacturing, James P. Womack, claimed the strike to be, ‘…really a

defining moment,” because GM’s maneuvers in the past were always based around playing-it-

safe and never taking advantage of defining moments. Womack believed that this time, GM had

decided to make the big move towards a new era which focused more on adapting to the

changing auto market.

Morgan Stanley analyst, Jonathan Steinmetz, believed that General Motors could endure,

“several weeks” of a strike, but not more than that. Stanley estimated that within a month’s time,

investors of GM would grow weary of the stand-off and start to consider pulling back their

resources from the company. This information, on top of other factors, puts the strike almost

entirely in the UAW’s favor.

Mark Oline of Fitch Ratings, a nationally recognized statistical rating organization,

confirmed that the United Auto Workers has the ability to strike far beyond the “several weeks”

that General Motors can withstand. According to Oline, the union payed each worker, “$200 a

week in strike pay if they take shifts on the picket line,” and the UAW had, “…nearly $900

million in its strike fund.” But even with the odds in their favor, union president, Gettelfinger,

showed his discomfort with the strike by saying, ‘Nobody wins in a strike.’

The newsworthy two-day strike (September 24th – 26th, 2007) broke a 31-year streak of

strike-free negotiations, but ultimately pushed for an agreement that removed the Voluntary


Employees Benefits Association, or VEBA, health care plan from GM and into a trust fund,

relocating the weight of the approximately “$51 billion unfunded retiree health care obligation,”

to a trust ran by the UAW. Also achieved by GM, was reduction in pay and benefits for new

workers. General Motors was optimistic that the money saved through this agreement would help

them be more competitive with their biggest competition, Toyota.

The Aftermath of 2007

Following 2007 negotiations, 2008 was not a good year for GM. Drops in America’s

housing market were preventing people from purchasing new vehicles and Toyota officially took

over as the world’s biggest carmaker. According to numbers on an article from online news site

Treehugger.com, “…the final total (was) 8.972 million vehicles for Toyota and 8.356 million for

GM (Richard, 2009).” For a company that once sold over 9 million vehicles a year, this was a

large drop and a huge disappointment. General Motors’ liabilities far exceeded its assets, and

selling the company’s stocks just wasn’t enough to cover the gap. The only other option was to

plead to the United States government for a bailout (The Bankruptcy of General Motors: A giant

falls, 2009).

On June 1, 2009, General Motors filed for chapter 11 bankruptcy. The US government

handed over a whopping $50 billion to help the once-profitable car manufacturer recover. In

return, the government received 60.8% of GM’s stock. The Canadian government, who also

chipped in $9.5 billion, received 11.7%. By July 10, 2009, GM was no longer in bankruptcy and

in November of 2010, it becomes a public company once more (Woodyard, 2013).


2011 Negotiations

Contract negotiations in 2011 started out on a positive note. With General Motors back

on its feet from the ground-shaking bankruptcy, the UAW and GM seemed to be on good terms.

Jim Graham, the president of Lordstown’s UAW, made the statement,

“We learned a lot three years ago. We came to the realization that management is

not the enemy; the enemy is the competition. Management and the UAW have the same

goals now. We still have our issues with the company, but we resolve them like a

business (Shapiro, 2011).”

Not all was well between the United Auto Workers and GM, however. Many union

members sacrificed during the bankruptcy with intense pay cuts and having to relocate to plants

far away from home in order to maintain normal wages. Union member Todd Siglow, like many

others, had to decide between working 400 miles away from his family and taking a pay cut of

50-percent. Siglow stated, “They are so proud of their image: the new GM, the new UAW. They

preach (about) brotherhood, solidarity, whatever…My family is ripped apart. Nobody is helping

me… (Shapiro, 2011).”

On the surface, the negotiation process seemed to be mainly about maintaining the peace.

Beneath, many union members are wondering when and how they will be reimbursed. When

considering the two-tier wages agreed upon by the UAW in 2007, union members fear that the

first-tier wage for entry positions would become the new norm. Many of the union workers were

forced to accept the demotion to the lower rate or move to another plant during the bankruptcy.

With the UAW seeming to put the most importance on preserving a positive relationship with


GM, union members were afraid that the first-tier pay would continue to decrease as the UAW’s

new bargaining option (Shapiro, 2011).

Regardless of conflicting views, a tentative agreement was reached on Friday, September

16 of 2011. Positives for the UAW included in the agreement were rehiring a large amount of

workers who lost their jobs during downsizing, guarantees on investments and products for U.S.

plants, improved profit sharing payments, increased wages for starting workers, and a signing

bonus for the approximately 48,500 UAW workers (Isidore, 2011). For General Motors, the

2011 contract eliminated the “Job Bank” that had guaranteed laid-off workers nearly full pay,

eliminating pension increases, and getting the UAW to agree to an incentive program that assists

in getting underutilized workers to retire (Visnic, 2011).

GM CEO Dan Akerson had described the agreement as a, “win-win” for both GM and

the UAW. General Motors was able to create savings by offering buyouts of $75,000 for skilled

trades who are willing to retire before April of 2012. This saved the company an estimated $30

million. Profit sharing was also capped at $12,000 per year for employees instead of the previous

non-capped program. In an effort to eliminate more liabilities, GM decided to close the

Shreveport, Louisiana location, who did not have enough business to sustain (Dziczek, 2011).

The United Auto Workers union was successful in resurrecting jobs to around 6,400

previously terminated employees. The settled agreement also guaranteed 1,300 new apprentice

positions and increased cross-training for employees. As far as investments in the U.S. go, GM

had confirmed $7.1B in investments including new products and technology (Dziczek, 2011).

Unfortunately, the increase in entry-level position wages did not change as much as union

workers had wanted them to, and the rates rose to between $14.78 and $19.28. All union workers


hired prior to 2006 were capable of making a maximum hourly wage of $28.12. This is a $2.52

decrease from the 2007 maximum of $30.64 (Ferla, 2011). Graphs of the wage changes and

anticipated decreases for 2015 are displayed below.

Maximum hourly wage for veteran workers over course of contract period

Year All workers hired prior to 2006 Those workers hired after 2007 (the “new normal”)

1961 19.72 n/a

1970 24.75 n/a

1982 22.55 n/a

1990 27.85 n/a

1996 27.30 n/a

2007 30.64 16.72

2011 28.12 18.28 -19.28

2015 25.94 16.86 - 17.79http://www.remappingdebate.org/map-data-tool/putting-new-gm-uaw-contract-historical-context

Even though the contract was not 100-percent what all union members were hoping for,

the agreement still passed with 65-percent of General Motors production workers and 63-percent

of skilled-trades workers voting to approve the deal. Joe Ashton, the union VP in charge of

negotiations stated with great confidence, When GM was down, our members sacrificed and

Hourly wage for newly-hired workers

Year Rate at start of employment(“entry rate”)

Maximum rate attainableover course of contract

1961 18.97 19.72

1970 23.58 24.75

1982 19.17 22.55

1990 23.66 27.85

1996 19.11 27.30

2007 15.25 16.72

2011 14.78 - 15.78 18.28 - 19.28

2015 13.63 - 14.55 16.86 - 17.79


saved GM. Now that GM is posting strong profits, our members, as a result of this agreement,

are going to share in the company’s success (Bunkley, 2011).”

2015 Contract Negotiations

Since 2011’s negotiations operations had been on the up for both General Motors and the

United Auto Workers union. About 10,000 jobs were added, North America showed a profit of

about $6.6 billion in 2014, and GM invested millions into new equipment and facility upgrades

as well as new vehicle programs. GM and the UAW really had created a “win-win” situation for

themselves up to the 2015 negotiations by combining a focus on the competition as well as focus

on employees in the United States (UAW, 2015).

As stated previously, 2015’s contract negotiations focused on mandatory bargaining

subjects including wages and benefits. Voluntary bargaining subjects were also discussed and

comprised of keeping plants inside the U.S. instead of continuing to spread to other countries. As

upbeat and united as GM and the UAW were when negotiations first commenced, both sides had

strong desires to reach their goals.

The Tentative Agreement

General Motors and the United Auto Workers had reached a tentative agreement on the

25th of October, 2015. Although 55.4 percent of the hourly workers had approved the contract,

59.5 percent of the skilled trades workers were not in agreement. When investigated, reasons

behind the worker’s concerns were connected to, “…local trade agreements, reclassification of

trades, number of apprentices, concerns over outsourcing or loss of jobs, and absence of cost of

living increases and buyouts (Burden, UAW ratifies four-year GM contract, 2015).”


GM and the United Auto Workers union agreed that pipefitters, toolmakers, millwrights

and machine repairists could keep their classifications, even though they might be cross-trained

to help GM be more flexible. The skilled trade workers also believed that in clarifying the

language, their seniority rights would be better protected. Additional changes included allowing

pipefitter, millwright, toolmaker, and machine repair to apprentice classifications. The UAW

decided to ratify the agreement, even though not all skilled trades workers’ concerns were met.

GM’s skilled trades workers are not eligible for an early retirement incentive of $60,000 that is

being offered to nearly 4,000 other employees (Burden, UAW ratifies four-year GM contract,

2015).

The Union

The proposed agreement provided much satisfaction to the United Auto Workers union

representatives. The UAW understood that it could not get 100-percent what they wanted and

was willing to bargain most for higher wages and job security. In the end, the contract included

wage increases starting at $16.25 but maximizing at $19.86 (a .58 increase from 2011), an

$8,000 signing bonus for traditional and in-progression team members and a $2,000 signing

bonus for temporary employees. In addition, lump sums of $1,000 for eligible workers would be

administered in each of the next four years (Committee, 2015).

In efforts to keep jobs in the U.S., GM agreed to investments in twelve different plant

sites and created or retained 3,300 jobs. An additional win for the UAW involved

implementation of traditional health care for in-progression employees and a new health care

program for temporary employees. In efforts to preserve the overall increase in income, the


UAW was also able to continue the profit-sharing formula based off of $1,000 per $1 billion

profits in North America (Committee, 2015).

General Motors

The 2015 negotiations was all about giving back for General Motors. With the tentative

agreement keeping labor costs within an acceptable rate, GM was willing to give the UAW what

they wanted, at least to a certain point. The United Auto Workers were aware that they couldn’t

ask for higher wages without risking job security, and vis-a-versa.

General Motors did agree to increase wages for entry-level workers, but the wages for

veterans had not changed. Veteran worker wages were still well above entry-level workers,

breaking over $25 an hour. The lump sums that GM agreed to pay out were in in exchange for

the ability to keep starting wages down (Burden & Wayland, UAW to push for rich deal at GM,

2015).

Although the UAW had been concerned with GM pulling operations from the U.S. and

bringing them overseas, GM had already planned on $6.4 billion in investments in North

America. The tentative agreement showed General Motors promising $1.9 billion additional in

U.S. plants (Priddle & Snavely, 2015).

General Motors allowed for the creation/retention of 3,300 jobs for their new projects.

Along with job openings, GM made an agreement with the UAW to cross-train current

employees for multiple areas in the company. This not only provided more insurance for union

jobs, but also cut down costs for GM including benefits and wages (Committee, 2015).

Overall Assessment


General Motors is being very generous in the 2015 negotiations compared to those of

2007 and 2011. The main reason behind this is the high profit following the company’s recent

bankruptcy and the current success of their new vehicles. Even in the midst of their generosity,

GM managed to find a way to reduce costs and limit the increase of starting wages. I believe that

during the next contract negotiation in 2019, GM will have to be more restricting on their

bargaining in order to save the company more money.

The United Auto Workers union is always going to want higher wages and greater job

security. Especially because the overseas plants are doing so well and cost the company so little

compared to the United States. The UAW knows that the U.S. plants are still highly valuable to

GM’s success and that is why a peaceful relationship between the UAW and GM is so desirable.

In previous negotiations, specifically 2007, the UAW got the short end of the stick with

the two-tier pay system and the VEBA transfer to a trust fund. These were both big moves by

GM to unload a large amount of debt and save more money. The result were disgruntled workers

that believed neither their company, nor their union had their best interest in mind. Another large

sacrifice was the UAW’s no-strike clause during GM’s government bailout when many union

members’ wages were cut in half and others had to move far from their families for work

(Modica, 2012).

It seems as though General Motors attempted to make up for its shortcomings previously,

however not all union members are satisfied with GM’s idea of reimbursement. The stall in the

passing of the tentative agreement of 2015 shows that there was a divide in the union. The fact

that the UAW decided to ok the contract agreement anyways has created a strain in the union.

This case is similar to the 2011 agreement where many union members did not believe that GM’s


compensation was enough to correct the wrongs done to them (wage cuts, discontinuing jobs,

and closing plants) during the government bailout.

The UAW seemed very satisfied in the result of the 2015 negotiations, but I do not

believe they should anticipate future negotiations to be so positive. If the union continues to push

for higher wages and more job security, they better hope that North America’s sales continue to

be positive and that GM still feels like its overseas development is not more valuable.


ReferencesAnonymous. (2009, June 4). The Bankruptcy of General Motors: A giant falls. Retrieved from

economist.com: http://www.economist.com/node/13782942

Bunkley, N. (2011, September 28). G.M. Contract Approved, With Bonus for Workers. Retrieved from The New York Times: http://www.nytimes.com/2011/09/29/business/uaw-approves-four-year-contract-with-gm.html

Burden, M. (2015, November 21). UAW ratifies four-year GM contract. Retrieved from The Detroit News: http://www.detroitnews.com/story/business/autos/general-motors/2015/11/20/uaw-ratifies-gm-four-year-contract-effective-monday/76130684/

Burden, M., & Wayland, M. (2015, October 22). UAW to push for rich deal at GM. Retrieved from The Detroit News: http://www.detroitnews.com/story/business/autos/general-motors/2015/10/22/uaw-gm/74407652/

Committee, U.-G. N. (2015). UAW General Motors Contract Summary. UAW, 24.

Dziczek, K. (2011, November 29). What's In the 2011 Detroit 3 - UAW Labor Contracts. Retrieved from cargroup.org: http://www.cargroup.org/assets/files/labor.pdf

Ferla, A. (2011, September 21). Putting the new GM-UAW contract in historical context. Retrieved from Remapping Debate: http://www.remappingdebate.org/map-data-tool/putting-new-gm-uaw-contract-historical-context

Isidore, C. (2011, September 17). GM, UAW reach deal. Retrieved from CNN Money: http://money.cnn.com/2011/09/17/news/companies/gm_uaw_agreement/

Lyden, J. (2007, September 22). Health-Care Talks Make UAW Retirees Wary. Retrieved from npr.org: http://www.npr.org/templates/story/story.php?storyId=14623509

Maynard, M. (2007, September 25). 73,000 U.A.W. Members Go on Strike Against G.M. Retrieved from The New York Times: http://www.nytimes.com/2007/09/25/business/25auto.html?_r=0

Modica, M. (2012, January 30). Was UAW No-Strike Clause Another GM Bailoiut Deception? Retrieved from National Legal and Policy Center: http://nlpc.org/stories/2012/01/27/was-gm%E2%80%99s-uaw-no-strike-clause-another-fabrication

Priddle, A., & Snavely, B. (2015, October 28). GM-UAW deal Highlights: Wage hikes, signing bonuses. Retrieved from Detroit Free Press: http://www.freep.com/story/money/cars/general-motors/2015/10/28/general-motors-deal-uaw-highlights/74764178/

Richard, M. G. (2009, January 21). Toyota Beats GM in 2008, Now #1 Carmaker by Sales Volume. Retrieved from Treehugger.com: http://www.treehugger.com/cars/toyota-beats-gm-in-2008-now-1-carmaker-by-sales-volume.html


Shapiro, L. (2011, August 25). UAW Divided As Workers Seek Payback In Contract Negotiations. Retrieved from Huffpost Business: http://www.huffingtonpost.com/2011/08/25/uaw-contract-negotiations_n_936873.html

UAW. (2015, July 13). UAW, GM Open 2015 Contract Talks. Retrieved from UAW.org: http://uaw.org/uaw-gm-open-2015-contract-talks/

Visnic, B. (2011, September 28). GM, UAW Agree On New Labor Contract. Retrieved from edmundsAutoObserver: http://www.edmunds.com/autoobserver-archive/2011/09/gm-uaw-agree-on-new-labor-contract.html

Vlasic, B. (2015, July 13). G.M. Is First of Big 3 to Open Contract Talks With the U.A.W. Retrieved from The New York Times: http://www.nytimes.com/2015/07/14/business/gm-is-first-of-big-3-to-open-contract-talks-with-the-uaw.html

Welch, D. (2009, June 2). The General Motors Debacle: A View from the Back Seat. Retrieved from Spiegel Online International: http://www.spiegel.de/international/business/the-general-motors-debacle-a-view-from-the-back-seat-a-628070.html

Woodyard, C. (2013, December 9). GM bailout played out over five years. Retrieved from USA Today: http://www.usatoday.com/story/money/cars/2013/12/09/gm-bailout-timeline/3929953/

Documents

UAW and GM 2015