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GM to add jobs, hike Tier 2 wages, expand profit sharing under new UAW pact

2011 LABOR TALKS
GM to add jobs, hike Tier 2 wages, expand profit sharing under new UAW pact
Workers eligible for $5,000 signing bonus upon ratification
From staff, wire reports
Automotive News | September 16, 2011 – 11:14 pm EST
UPDATED: 9/18/11 9:50 p.m. ET

DETROIT — General Motors agreed to add jobs, hike Tier 2 wages, and offer buyouts for skilled trades workers under a tentative, 4-year labor pact reached with the UAW.

Upon ratification of the deal, eligible workers will receive a $5,000 signing bonus – a move that will cost GM about $242.5 million, Bloomberg reported.

The union — in a statement — said the accord also enhanced profit-sharing and successfully resisted major changes sought by GM that would have weakened the automaker’s retirement plan for hourly workers.

Under the agreement, GM will recall workers on layoff, create new jobs and transfer jobs from overseas to U.S. factories, the UAW said.

A source familiar with the matter said GM also agreed to restart production at an idled assembly plant in Spring Hill, Tenn.

New products have also been promised to plants in Romulus, Mich.; Warren, Mich.; and Wentzville, Mo., several media outlets said.

GM’s assembly plant in Janesville, Wis., will remain on standby status, but will not close, the Associated Press reported.

GM also sought major concessions in health care, but the UAW said it protected health care benefits and made some significant improvements to benefits.

“This is a wage gain in an economy that is cratering in some places,” said Harley Shaiken, a labor professor at the University of California at Berkeley. “It’s an important symbol.”

Shaiken called the tentative agreement “impressive” in a tough economy.

The agreement, covering some 48,000 workers, came together late Friday after a final, 14-hour bargaining session.

Specific terms of the deal were not released, but the union said in a statement it “will get our members who have been laid off back to work, will create new jobs in our communities and will bring work back to the United States from other countries.”

GM’s hourly retirees will see no reduction in benefits, but no significant gains, the Detroit Free Press said.

The agreement marks another milestone for GM’s turnaround.

Some critics said Detroit’s automakers wouldn’t or shouldn’t survive the Great Recession and plunge in U.S. car and light truck sales in 2008, followed by the bankruptcy filings of GM and Chrysler in 2009.

“In these uncertain economic times for American workers and faced with the globalization of the economy, the UAW approached these negotiations with new strategies and fought for and achieved some of our major goals for our members, including significant investments and products for our plants,” UAW President Bob King said in the statement.

Sharing in comeback

In the two years since its controversial government-supported restructuring, GM has unveiled investments of over $5.1 billion and created or retained almost 13,000 jobs throughout its U.S. manufacturing operations.

And in a weak economy, GM’s U.S. light vehicle sales have climbed 16 percent this year through August, compared with an 11 percent gain for the overall market. The automaker earned $5.7 billion in the first half of 2011 and is on pace to recapture the global sales crown this year from earthquake-hampered Toyota Motor Corp.

The UAW also credited and paid tribute to President Obama’s indirect role in the talks and the auto industry’s recovery.

“None of this would have been possible without the efforts of President Obama, who invested federal funds to help turn the company around, protect the auto supplier base and keep good-paying jobs in America,” King said.

The union, without providing specifics, said the agreement also includes an improved and more transparent profit-sharing plan — a key goal of GM management as well.

Several sources said profit-sharing payouts will be more closely tied to quality and other performance measures – another priority for the company.

The Detroit Free Press, citing a person familiar with the deal, said the new profit-sharing formula will also now include income from GM’s entire North American operations, not just U.S. plants.

With the new formula, the average profit-sharing check from last year’s $5.7 billion profit in North America would have been between $5,000 and $6,000, instead of the $4,000 workers received, the source told the Free Press.

Future profit-sharing payouts will be determined by a simple chart that provides ranges of profits and corresponding payments, the paper said. Payouts will also be capped.

GM must make at least $1 billion in North America to pay a UAW bonus, Bloomberg reported, citing a GM source. The profit-sharing checks would roughly equal $1,000 per $1 billion in North American profit, Bloomberg said.

Shared sacrifice

“When GM was struggling, our members shared in the sacrifice,” UAW Vice President Joe Ashton, who directs the union’s General Motors Department, said in a statement released last night. “Now that the company is posting profits again, our members want to share in the success.”

GM officials said the deal will help improve the automaker’s competitiveness.

“We used a creative problem solving approach to reach an agreement that addresses the needs of employees and positions our business for long-term success,” Cathy Clegg, head of labor relations for GM, said in a statement.

“We worked hard for a contract that recognizes the realities of today’s marketplace, enabling GM to continue to invest in U.S. manufacturing and provide good jobs to thousands of Americans.”

Signing bonus

Industry experts expect the signing bonuses at each of the Detroit 3 to be at least $5,000 per worker. That may be sufficient to persuade a restive rank-and-file member to ratify an agreement despite the prospect of another four years without a raise.

Signing bonuses — lump sums paid in cash and distributed when workers ratify a new pact — averaged $3,000 in 2007 and averaged about $1,000 per worker in earlier contracts.

The UAW’s 112,000 workers at the Detroit 3 have not had a wage increase since 2003.

GM says it provides the typical UAW worker with about $56 an hour in combined wages and benefits, or $116,480 a year.

King has been careful in public appearances not to promise that workers will have their cost-of-living allowances restored.

However, the UAW sought a pay hike for entry-level employees, also known as Tier 2 workers, who earn about $14 to $16 an hour in wages alone under the landmark 2007 contract that established two levels of pay for UAW workers. That’s half of what traditional UAW members at GM, Ford and Chrysler earn in wages.

The Detroit News and other sources said base pay for Tier 2 workers will be increased to $16-$19 an hour, depending on where they work, under the proposed contract.

Analysts estimate GM has around 2,000 workers earning the lower, entry-level wage.

Pattern bargaining
GM is the first of Detroit’s three automakers to settle with the union. It is unclear how much of the pact will serve as a template for new contracts at Chrysler and Ford.

In the past, the union has identified an automaker to secure the best deal, and persuaded the remaining two automakers to accept similar terms or face a strike.

King has indicated that so-called pattern bargaining — designed to provide equal wages and benefits for Detroit 3 workers — may not be possible this year because the automakers’ hourly compensation rates vary from $58 an hour at Ford to $49 an hour at Chrysler, including wages and benefits.

The UAW has extended its current four-year agreements with Chrysler and Ford, allowing negotiations at those two companies to continue.

The negotiations — the first since the recession and GM and Chrysler restructured during bankruptcy — have been closely watched.

GM attempted to avoid an increase in its hourly labor costs and tie more hourly compensation to profits and other results, such as quality.

Formal talks between the union and the Detroit 3 began in late July.

The new settlement with GM — reached two days after the current contract expired — came in sharp contrast to 2007. Then, the automaker and the UAW negotiated for 10 days beyond a strike deadline before the union staged a two-day strike to secure an agreement.

The UAW faced delicate talks with GM this time because the U.S. government still holds 26.5 percent of the automaker, and an independent trust set up by the union to provide health care for retired auto workers controls 12.8 percent of the automaker.

“We have had, and will continue to have, some real differences with GM,” King said in a statement. “We were able to work through our differences and put together an agreement that is good both for our members and for the company.”

Health care costs

GM also entered the negotiations looking to trim its health care costs, despite spending just a fraction of the amount it once did on health benefits.

The automaker unloaded most of its annual health care obligations onto the Voluntary Employees’ Beneficiary Association, or VEBA, which pays health care obligations for UAW retirees. It was established in 2007 and took effect last year.

Last year, GM spent $665 million on health care for its 48,000 active UAW workers and their dependents. In 2006, it spent $4.8 billion on health care for 1.1 million active and retired employees and their dependents. GM’s hourly workers now pay roughly 7 percent of their health insurance costs — a contribution rate well below other industries.

King sought higher signing bonuses and enhanced profit-sharing — giving workers a greater share of the Detroit 3’s newfound profits without driving up their labor costs as compared with Asian and European rivals with U.S. plants.

The union — battered by a steady decline in members that has accelerated in recent years — also pressed for more car and light-truck models to be built in the United States.

GM, Ford and Chrysler have idled or closed U.S. assembly plants in recent years as they have battled to survive, and the union is eager to reopen some of them as the automakers rebound.

Buyout offers?

Timothy Denoyer, an analyst at Wolfe Trahan, believes the new contract will keep GM’s labor costs essentially flat over the next four years. Any cost increase from a bump in the entry-level wage, he says, would be offset by an increase in Tier 2 workers and fewer higher-paid workers.

That could result in a boost to GM’s credit rating, he says, which would make it cheaper for the company to borrow money.

GM and the UAW also agreed to a new buyout plan for skilled tradespeople under which the automaker would pay seasoned workers to leave, The Detroit News reported. That will allow GM to replace them with entry-level workers at a lower hourly rate.

GM is eager to thin the ranks of skilled-trades workers who repair and maintain plants and equipment. GM provides the typical skilled-trades worker about $61 an hour in wages and benefits.

About 25 percent, or 12,000, of GM’s hourly workers are skilled tradespeople, according to the Center for Automotive Research in Ann Arbor, Mich.

That’s the highest percentage in the industry and contrasts with the 15 percent rate at most Asian and German automakers with U.S. plants. The average age of a skilled tradesperson at GM is 53 with an average length of service of 25 years.

About half of GM’s skilled-trades workers are eligible for retirement.

Mike Colias, David Barkholz, David Phillips, and Bloomberg contributed to this report

UAW PRESS RELEASE: UAW and General Motors reach tentative agreement

DETROIT – The UAW is pleased to announce that the UAW General Motors National Negotiating Committee, made up of elected representatives from UAW GM locations across the country, reached a tentative agreement with General Motors Co. today at approximately 11 p.m.

“In these uncertain economic times for American workers and faced with the globalization of the economy, the UAW approached these negotiations with new strategies and fought for and achieved some of our major goals for our members, including significant investments and products for our plants,” said UAW President Bob King.

“First and foremost, as America struggles with record levels of unemployment, we aimed to protect the jobs of our members – to guarantee good American jobs at a good American company. And we have done that. This contract will get our members who have been laid off back to work, will create new jobs in our communities and will bring work back to the United States from other countries,” King added.

“When GM was struggling, our members shared in the sacrifice. Now that the company is posting profits again, our members want to share in the success. To be clear, GM is prosperous because of its workers. It’s the workers and the quality of the work they do, along with the sacrifices they made, that have returned this company to profitability,” said UAW Vice President Joe Ashton, who directs the union’s General Motors Department. “The wages and benefits we negotiated in this tentative agreement reflect the fact that it was UAW members who helped turn this company around.

“We wanted a contract that provides our members with a real share of the success of the company and ensures its continued success. Our members cannot succeed unless the company succeeds, and we are strongly committed to that joint success, as this contract demonstrates,” Ashton added.

Details of the proposed agreement are being withheld until UAW members have had the opportunity to review it. While not providing specifics of the tentative agreement, a few things are worth highlighting:

• The UAW bargaining committee successfully fought back efforts to make major changes – and weaken – our retirement plan.

• The company proposed major concessions in health care, but the UAW is happy to report that the union not only fought for and protected the health care benefits of its members, but also made some significant improvements to health care benefits. In both pensions and health care, the UAW was able to convince GM that far greater success could be achieved working together than by cutting pensions or health care.

• In addition, the agreement includes improved profit sharing with far greater transparency than in the past.

“We’re proud of this agreement and are happy that it truly recognizes that the success of the company is tied to the success of the workers,” said King. “As everyone knows, we have had, and will continue to have, some real differences with GM. It’s the union’s job to fight for workers and protect our members, and we will continue in that fight. To the credit of both parties, we were able to work through our differences and put together an agreement that is good both for our members and for the company. This agreement demonstrates to the anti-collective bargaining crowd that collective bargaining is a positive force for society that benefits both workers and employers.

“We prove again today that through the collective bargaining process, we can provide decent wages, benefits and employment rights for workers while ensuring quality products and healthy profits for employers. We stand recommitted to our goal of organizing and fighting for all workers in the entire U.S. auto industry,” added King.

For decades the UAW played a central role in building America’s middle class. At one time, all American auto workers were members of the UAW.

“We are proud of this tentative agreement and what we have achieved, but as long as unionized workers are being forced to compete with nonunion workers who in most cases receive lower pay and benefits – many in temporary jobs – there will continue to be a downward pressure on the wages and benefits of all autoworkers,” King said. “The pathway to rebuilding America’s middle class and creating long-term job security for all American autoworkers must include organizing workers at the foreign-owned automakers operating without unions in the United States. We stand recommitted to that goal today.”

“Finally,” King said, “let’s be completely clear about this: None of this would have been possible without the efforts of President Obama, who invested federal funds to help turn the company around, protect the auto supplier base and keep good-paying jobs in America.”

The UAW represents approximately 48,500 GM workers in the United States.

Further details about the tentative agreement between the UAW and GM will not be released at this time. The media will be notified when details are released.

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