GM CEO Barra: Detroit-Hamtramck plant layoffs prepare automaker for an all-electric future

Biggest issues facing UAW, Detroit 3 as contract deadline nears

GM CEO Barra: Detroit-Hamtramck plant layoffs prepare automaker for an all-electric future

UAW President Gary Jones and General Motors Co. Chairman and CEO Mary Barra open 2019 contract talks for a new national agreement with a handshake on Tuesday, July 16 at the Detroit Marriott Renaissance Center 2019. (Photo: Kathleen Galligan, Detroit Free Press)

At the stroke of midnight Saturday, contract negotiations between the UAW and General Motors will come to a head.

The current contract, negotiated in 2015, will expire then, and if no tentative deal is reached and the contract is not extended, a strike at GM plants is possible. 

Here are some of the key issues and top-of-mind facts surrounding this year's negotiations:

UAW's top demands

UAW members seek job security, protecting their benefits and a base wage boost.

  • According to the Center for Automotive Research, average hourly wages in the U.S. auto industry peaked in September 2010 and since then have slid 2.1% and plummeted 16% in inflation-adjusted terms. Even senior UAW workers have seen just two 3% wage hikes in that time frame.
  • In November 2018, GM angered workers when it “unallocated” product to four U.S. plants, indefinitely idling them and affecting thousands of union jobs — though one of them, Detroit-Hamtramck, continues to operate. Most of the workers at the other factories have had to transfer to GM jobs, sometimes in other parts of the country, if they want to stay with the automaker.
  • The UAW has vowed to fight to get GM to assign new vehicles to the four plants: Lordstown Assembly in Ohio, Detroit-Hamtramck and transmission plants in Warren and Baltimore.
  • The union also wants the automaker to create a path for temporary employees to become permanent.
  • The union has long loathed the tiered wage scale. It wants to create an equitable pay scale for all workers by shortening the gap it takes for a worker hired after 2007 to catch up with the wages of those hired before 2007.
[ Following the GM strike? Download our app for the latest news. ]

More: UAW members: What we really want in our new contract with the Detroit 3

More: UAW, GM officials offer differing views of contract talk progress

Automaker concerns

  • Detroit's automakers want to control costs amid uncertainty over future fuel-economy standards and trade policy. Tariffs, for example, are inflating the prices to import parts and raw materials.
  • Health care costs are a key issue. Ford and GM said that they spend more than $1 billion per year on health care for active UAW workers. Government data for all union workers show that the average cost of health care benefits is more than $6 per hour, the Center for Automotive Research reported. But the report showed the UAW Detroit Three's health care cost is roughly 150% of the U.S. average. The average UAW worker pays about 3% of his or her health care costs compared with 28% paid by the average U.S. worker, CAR said. Note: Some of the money for CAR's research comes from automakers including GM, Ford and FCA. 
  • UAW members are protective of their health care benefits because their jobs are physically demanding and they need health care to function and stay healthy to do the jobs.
  • Automakers also worry about an economic downturn foreseen by some economists as the car companies face high costs to develop electric vehicles required in China and Europe and to prepare to compete in a future with more shared services and autonomous travel.
  • “The industry has seen record profits and volume sales, but this contract will cover the next four years, and the probability that there will be an economic downturn in the next four years is pretty high,” said Kristin Dziczek, vice president of Industry, Labor & Economics for CAR.

GM said the average full-time UAW worker makes about $90,000 a year.

“The $90,000 a year is a bit of an illusion,” said Harley Shaiken, professor at the University of California, Berkeley. He specializes in labor issues and has studied the various wage tiers, profit-sharing payouts and overtime hours of workers at Detroit's car companies.

That $90,000 includes overtime and fat profit-sharing checks. Last year's GM profit-sharing was about $10,800 per employee. Ford's was $7,600; FCA's was $6,000.

CAR data said that since 2011, UAW-Detroit Three profit-sharing checks averaged about $6,600 per worker at each of the companies. That's equal to about an additional $3.18 an hour. 

The automakers prefer such contingent pay plans as profit-sharing because they are not locked into higher base wages if the market weakens, said Dziczek.

But because that lump sum is profits, it could be zero, which is why union members want a base wage increase.

Here are the full-time hourly wages at the Detroit Three, according to Shaiken and company documents:

  • A newer-hired production worker, called “in progression,” makes about $17 an hour.
  • A legacy worker earns $28 to $33 an hour.
  • A skilled trades worker,  about 15% of the Detroit Three's workforce, is closer to $35 to $36 an hour. They often get heavy overtime.

GM's $90,000 average is a blend of all the pay levels, a company spokesman said.

The temporary employee, said Shaiken, earns about $15 an hour. 

Autoworkers in Mexico earn an average $2.70 an hour, in part because it’s nearly impossible for them to form an independent union. In late 2014, GM said it would commit $5 billion to Mexican plants through 2018, creating some 5,600 jobs. That's a sore spot with the UAW. 

What UAW workers really make

When a 40-hour work week, the real annual pay of a full-time UAW worker is far less than $90,000, said Shaiken.

He uses the $33 an hour as an example. For 52 weeks at 40 hours each, that's 2,080 hours a year. That puts the base annual earning at $68,640, said Shaiken. Adding in a $14,000 profit-sharing bonus last year, it is $82,640.

For a GM worker to earn $90,000, they'd have to work 140 hours of overtime during the year at time and a half, said Shaiken.

GM could not quantify how common it is for its UAW workforce to get overtime. A spokesman said: “Many full-time autoworkers do work some level of overtime during the course of the year. But it is heavily dependent upon which facility they work in and their role in that plant. Overtime is driven by such things as product demand, parts availability and even things weather.”

Why these talks are tense

  • Many union members are angry with GM since the company declared in November it planned to idle four U.S. plants. 
  • A cloud hangs over the UAW as a long-running corruption investigation that started with the union's joint training center with Fiat Chrysler has spread to a UAW worker in the GM Department. Current union President Gary Jones' suburban Detroit home was raided late last month, as was the California home of Jones' predecessor, Dennis Williams. Jones' successor as regional director, Vance Pearson, was charged Thursday. Some rank-and-file members have lost at least some trust in leadership after learning millions intended for worker training was spent on personal goodies. 
  • About 7-10% of GM's workforce in the United States is made up of temporary workers. The union wants the automakers to create a path for them to progress into a permanent job.
  • There is longstanding tension over different pay scales for similar jobs.
  • The UAW will push to shorten the eight years it now takes for new hires to earn what the legacy production worker standing next to them earns. 

“There is no sense of solidarity if you’re making $30 on the line and someone next to you is making $17,” said Shaiken.

Lead-up to expiration

Nearly all contract negotiations have gone right up to a minute before the midnight expiration time, labor experts said.

“You have to go all the way to the end and sometimes beyond to prove you got everything for the membership,” said Dziczek.

What happens at midnight

If the talks go perfectly, the UAW and GM will have a tentative new contract. After that, here is what happens, according to CAR's Dziczek:

  • The union will produce a “white book” with the pages marked up that they changed to the contract.
  • The UAW will produce a 12- to 16-page flyer that highlights the key changes and summarizes the deal for members.
  • The local union leaders will schedule meetings with members to review the contract.
  • The rank-and-file will vote in about two weeks to ratify it or reject it.
  • UAW negotiation team will take a ratified contract to FCA and Ford to use it as a template for deals with them.

What if there is no deal?

If the talks are going well but no tentative deal is reached by midnight, negotiators could agree to extend the current contract while talks continue. It's often during the last few days when the really tough decisions and exchanges get made, labor experts say. 

Conceivably, the UAW could change horses, said Dziczek, and choose to craft the first deal with Ford or Fiat Chrysler instead of GM. The UAW has threatened that in the past, and the threat was enough to get a deal done.

“Automakers want to be the first company to get a contract because they can craft that agreement so it is particularly beneficial to them, or especially harsh to cross-town rivals,” said Dziczek.

For example, if the UAW negotiated with Ford or FCA first and got a boost for retiree pensions, it would hurt GM because GM has the highest number of retirees.

When they strike

If the two sides are at a standoff and a tentative contract cannot be agreed to, then the UAW could call for a strike. That could happen right after Saturday's midnight deadline or it could happen after an extension if the parties remain at an impasse, said Dziczek. 

It also could happen Monday, when a strike would get more media attention than on a weekend.

wise, the UAW could call for all of GM's 46,000 UAW workers to strike or it could strike select plants that paralyze the company, said Shaiken.

“Nobody knows which one that would be,” Shaiken said. “But either one would create real economic issues for GM. You could have a strike that paralyzes operations in Mexico because the parts to build a product there come from the U.S.”

GM assembles the new Chevrolet Blazer SUV at its plant in Ramos Arizpe, Mexico — to the displeasure of the UAW, which had pushed to get the vehicle into a U.S. plant.

The different engine offerings in the Blazer are made at U.S. plants. The 2.5-liter engine is made in GM's Tonawanda Plant in Buffalo, New York, and the 3.6-liter, V-6 engine is made at GM's Romulus Powertrain facility. If the 2,700 people working at those two plants were to strike, that would cripple Blazer production.

More: GM removes made-in-Mexico Chevy Blazer from Comerica Park display after controversy

“There are no textbook examples on how a strike plays out,” said Dziczek. “GM had a two-day strike in 2007, Chrysler went out for six hours. The whole point of withholding labor is it causes pain on the worker side, but it's supposed to cause more pain for the company.”

If the UAW tells its members who work at GM to strike, the union has a strike fund prepared and will pay members $250 a week while they strike.

Historical nationwide strikes

  • The first strike during U.S. national negotiations was in 1955 at select locations, Dziczek said in data she shared. It lasted for six days at Ford locations, then 15 days at GM facilities. 
  • The union called several strikes in the 1960s, with the longest being in 1967, lasting 65 days against Ford.
  • In 1970 UAW members went on strike for 67 days against GM when national negotiations stalled. UAW workers have not had a nationwide strike since 2007. 

Trump and new NAFTA

Finally, the impact of the talks will extend beyond Detroit and could even influence the 2020 presidential election, said labor experts. 

“The pivotal dimension of Trump's victory in Michigan and Pennsylvania was that he would bring the jobs back,” said Shaiken. “He said, 'I know how to do this. You'll get those jobs.

' He goes to Lordstown after the second shift was laid off and he said, 'Don't sell your houses.

' If the jobs come back because of union negotiations, Trump may lose votes because 'jobs' was his collective signature.”

The talks are also taking place after the renegotiated North American Free Trade Agreement, Shaiken said. The new NAFTA — renamed the United States-Mexico-Canada Agreement — requires more vehicle content be produced by workers making higher wages. That should mean a boost for American workers, but other aspects of the deal between the United States, Canada and Mexico muddy the waters.

Under the deal, automakers can qualify for zero tariffs if 75% of their vehicles’ components are manufactured in the United States, Canada or Mexico, which is an increase from 62.5% under NAFTA.

Starting in 2020, the agreement requires that 30% of vehicle production must be done by workers earning an average production wage of at least $16 per hour. That's about three times the pay of the average Mexican autoworker, and in 2023, the production percentage rises to 40.

More: Our trading relationship with Mexico is broken. The new NAFTA won't fix it.

“USMCA directly impacts issues of job security and the contract negotiations in Detroit,” said Shaiken. “What happens here will be closely watched throughout manufacturing elsewhere and it has national implications on the trade debate and ly the 2020 presidential race.”

And expect President Donald Trump to tweet about any developments.

“It seems highly ly that he will weigh in with his opinion given his interest in the auto industry,” said Dziczek.

Contact Jamie L. LaReau at 313-222-2149 or Follow her on @jlareauan. Read more on General Motors and sign up for our autos newsletter.

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GM to halt production at 5 plants in U.S. and Canada, cutting up to 14K jobs

GM CEO Barra: Detroit-Hamtramck plant layoffs prepare automaker for an all-electric future

DETROIT — General Motors will lay off up to 14,000 factory and white-collar workers in North America and consider closing up to five major plants as the auto giant restructures to cut costs and focus more on electric vehicles and autonomous cars. The company-wide restructuring was announced Monday.

GM said it would halt production at three assembly plants: Lordstown Assembly in Warren, Ohio; Detroit-Hamtramck Assembly in Michigan and Oshawa Assembly in Ontario, Canada. It also plans to close transmission plants next year in White Marsh, Maryland, and Warren, Michigan, the company said in a news release.

Most of the affected factories build cars that won't be sold in the U.S. after next year, including the Chevrolet Volt rechargeable gas-electric hybrid. They could close or they could get different vehicles to build. Their futures will be part of contract talks with the United Auto Workers union next year.

“The actions we are taking today continue our transformation to be highly agile, resilient and profitable, while giving us the flexibility to invest in the future,” GM Chairman and CEO Mary Barra said in a statement that projected $6.5 billion in cost cuts in 2018. “We recognize the need to stay in front of changing market conditions and customer preferences to position our company for long-term success.”

The reduction includes about 8,000 white-collar workers, some of whom will take buyouts and others who will be laid off. That amounts to roughly 15 percent of GM's 54,000 salaried employees in North America. More than 6,000 factory workers could lose jobs in the U.S. and Canada, although some could transfer to truck and SUV plants.

GM's stock price rose nearly 6 percent, signaling investors' approval of the company's move to cut costs.

Challenger, Gray & Christmas

“The total number of hourly employees affected is approximately 6,000,” a GM spokesperson said by email. “However, many of those could be reassigned to other plants. There will be a number of retirements, layoffs and work reallocations associated with these actions.”

The GM announcement will more than double the number of job cuts announced by U.S. companies in the auto industry in 2018, according to tracking by global outplacement and executive coaching firm Challenger, Gray & Christmas.

GM, the largest automaker in the U.S. and includes the Chevrolet, Buick, Cadillac and GMC brands, said the moves will save $6 billion in cash by the end of next year, including $4.5 billion in recurring annual cost reductions and a $1.5 billion reduction in capital spending.

In October, GM offered buyouts to 18,000 white-collar workers as part of a cost-cutting initiative. The company said it is aiming to save $6.5 billion in “cost efficiencies” through 2018. GM has yet to say how many workers accepted buyouts, or if it's close to meeting the staff reduction goals it set to better withstand leaner times.

Cutting costs while pivoting to “clean” cars

In recent years GM has worked to slash costs. The company has scaled back production at its plants, with its hourly workforce down by 4,000 people in 2017, according to GM's annual report. The automaker in June ended the second shift at its factory in Lordstown, Ohio, cutting 1,500 workers.

GM is shedding cars largely because it doesn't make money on them, Citi analyst Itay Michaeli wrote in a note to investors.

“We estimate sedans operate at a significant loss, hence the need for classic restructuring,” he wrote.

The company's main competitor, Ford, said earlier this month that it would reduce its salaried workforce by the second quarter of 2019. 

The Monday closure of GM's plant in Oshawa, Ontario, was first confirmed late Sunday by the Associated Press, which cited an official familiar with the decision. The official spoke on condition of anonymity because they were not authorized to talk publicly ahead of the announcement.

GM workers have been part of the heart and soul of Oshawa for generations – and we’ll do everything we can to help the families affected by this news get back on their feet. Yesterday, I spoke with @GM’s Mary Barra to express my deep disappointment in the closure.

— Justin Trudeau (@JustinTrudeau) November 26, 2018

GM needs to reshape the company as it shifts its focus to lower-emitting hybrid vehicles, technology that is not at the forefront at the Canadian plant.

Barra said GM is still hiring people with expertise in software and electric and autonomous vehicles. Many of those who will lose jobs are now working on conventional cars with internal combustion engines.

The company, she said, also is investing in newer architectures for trucks and SUVs so it can cut capital spending while still raising investment in autonomous and electric vehicles.

The factories up for closure are part of GM's effort “to right-size our capacity for the realities of the marketplace,” as consumers shift away from cars to trucks and SUVs, Barra said.

Among the facilities that may be closed are the Detroit/Hamtramck assembly plant, which makes the Buick LaCrosse, the Chevrolet Impala and Volt, and the Cadillac CT6, all slow-selling cars. LaCrosse and Volt production will end March 1, while CT6 and Impala production will stop June 1.

The plant in Lordstown, Ohio, which makes the Chevrolet Cruze compact car also is on the list, and Barra said the Cruze would no longer be sold in the U.S. Production will stop March 1.

Political blowback?

Industry analysts are already plotting out possible targets for GM, including its sprawling Lordstown plant in northeastern Ohio. The car produced there is also is built in Mexico. The once-bustling factory already has lost two of its three shifts and 3,000 union jobs since the beginning of last year.

But moving that car, the Chevrolet Cruze, south of the border brings the risk of provoking a backlash from President Donald Trump. And GM also isn't sure whether he'll make good on threats to impose 25 percent tariffs on vehicles imported from Canada and Mexico.

Mr. Trump said he told Barra that GM should stop building cars in China and open a new factory in Ohio, the Wall Street Journal reported. “They better damn well open a new plant there very quickly,” Mr. Trump told the paper on Monday. 

What's more, the Cruze plant just outside Youngtown is in a Democratic and labor stronghold, where Trump won over a surprising number of voters two years ago by reaching out to what he called America's “forgotten men and women.”

At a rally near the plant last summer, Trump talked about passing by big factories whose jobs “have left Ohio,” then told people not to sell their homes because the jobs are “coming back. They're all coming back.”

Altogether, GM has five car factories with plenty of unused capacity in Kansas City, Kansas; Lordstown; and Detroit-Hamtramck, Lansing, and Orion Township, Michigan.

Robocar announcement 02:09

GM opened its factory in Oshawa, near Toronto, in 1953. The plant is used to make the Cadillac XTS and Chevrolet Impala sedans as well as the Chevrolet Silverado and GMC Sierra trucks.

A GM spokesman declined to comment. GM had been expected to close plants because of struggling sales.

Unifor, Canada's largest private sector union, said in a prepared statement that it does not have complete details of Monday's announcement, but it has been informed that there is no product allocated to the Oshawa plant past December 2019.

” commitments made during 2016 contract negotiations, Unifor does not accept this announcement and is immediately calling on GM to live up to the spirit of that agreement,” the union said in a statement on its website. “Unifor is scheduled to hold a discussion with General Motors (Monday) and will provide further comment following the meeting.”

Oshawa Mayor John Henry said he had not spoken to anyone from GM. Jennifer French, who represents Oshawa in the provincial legislature, said she finds the news “gravely concerning.”

“If GM Canada is indeed turning its back on 100 years of industry and community — abandoning workers and families in Oshawa — then this is a callous decision that must be fought,” she said in a statement.


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