Big profits could cost GM, Ford in UAW talks – USA TODAY
General Motors and Ford Motors may be enjoying boom times for the auto industry, but it’s likely to cost them in driving a new contract with the United Auto Workers union.
Ford is expected to report that earnings per share have nearly doubled when it reports quarterly earnings Tuesday. GM beat analysts’ expectations last week in reporting that it earned $1.4 billion in the third quarter.
While those kind of results cheer shareholders, they could be even better for union negotiators who will point to them in trying to hammer out new four-year pacts with Ford and GM. On Sunday, the UAW had set a midnight deadline after which it could call a strike, but the focus was on whether a tentative agreement could be reached.
Memories linger of negotiations more than a decade ago when generous contracts during the last sales boom — fueled by big sales of profitable SUVs and pickups — were followed by a sales bust. Automakers were saddled with expensive labor contracts even as losses piled up. Ford squeezed by and GM and Chrysler reorganized in bankruptcy.
But now, with large vehicles popular again due to low gas prices, momentum has once again shifted to the union.
“They are in a stronger bargaining position to negotiate a better deal with GM and Ford, but I would not expect it to be phenomenally better,” says Marick Masters, head of the Douglas A. Fraser Center for Workplace Issues at Wayne State University in Detroit.
The UAW comes to GM and Ford bolstered by having approved a new contract last week with Fiat Chrysler, which also reports quarterly earnings this week, by a strong 77% voting margin on the second try. Fiat Chrysler is the smallest and financially weakest of Detroit’s Big 3. That leads to the prospect that the union will shoot for bigger raises at GM and Ford.
Also, Fiat Chrysler has the most workers being paid at second-tier wages compared to first-tier workers. Closing that gap has been a big goal for the union.
“They are three very different situations” when it comes to each of the automakers, says Kristin Dziczek of the Center for Automotive Research. GM has 20% of its workforce laboring at the lower wage, while it’s about 29% at Ford and 45% at Fiat Chrysler.
The lower wage was instituted in previous contracts as Detroit automakers complained that their labor costs weren’t competitive with the non-union U.S. factories of Asian and European rivals. To try to maintain their flexibility if sales fall again, automakers have turned to profit sharing. GM, which has 52,700 workers represented by the UAW, paid $9,000 a worker last spring, $2,400 more than it was required to pay under the 2011 contract.
If the deal with Fiat Chrysler is the model, Dziczek says GM’s overall package is going to have to be richer. It is likely “they are going to have to give a bit more,” she says.
Contributing: Greg Gardner, Detroit Free Press