General Motors and the UAW
“What makes you think this group of Executives have any ability to make cars that will sell? Fire Rick – Fire John – Fire them all. Not only have they ripped off the unions, but they have also ripped off the shareholders and the customers in many cases”
Sean McAlinden, Chief Economist and Vice President, Research, Center for Automotive Research (CAR)
General Motors and the United Auto Workers (UAW) have been meeting for weeks now and, according to a General Motors employee, will continue to meet with the UAW as long as they are making progress. The meetings are meant to open up the 2003 contract and renegotiate the health care benefits and pension costs that are pushing the company further into the red.
There is a little talked about the contractual agreement that the UAW has with the Big 3 – General Motors, Ford Motor Corporation, and Daimler Chrysler – and some auto suppliers, mainly Visteon and Delphi. The agreement is known as Job opportunity Bank Security System (JOBS) or “job banks”, or Guaranteed Employment Numbers (GEN). Its a job security program that was first negotiated in 1987, and was designed to give employees who might otherwise be laid off job security.
General Motors won’t talk about it at all. According to Stefan Weinmann, spokesperson for General Motors, “Were not discussing details of jobs banks for competitive reasons”. When asked why they would discuss health benefits and pension costs openly, Weinmann said, “That is public information that can be found in our financial statements, job banks aren’t.” According to another source, “this is not the hill General Motors is going to die on in the upcoming negotiations. They are looking for concessions on health care and pensions. In each negotiating period, certain concessions are focused on.” In 2003 there was just pattern bargaining, no one company was focused on and a blanket agreement was made by all.
According to a document sent to www.carlist.com, the basic guarantee from the 1987 agreement is that no eligible employee will be laid off over the term of the agreement, except for the following reasons:
- Reduced customer demand, a maximum of 42 weeks over the life of the agreement (commonly known as loss of marketshare)
- Acts of God or other conditions beyond the control of management
- Conclusion of an assignment known in advance to be temporary
- Plant rearrangement or model changeoverEligible employees cannot be laid off because of:
- Introduction of new technology (such as robots)
- Sourcing decisions
- Company-implemented efficiency actions after existing seniority rights, eligible affected employees are placed in a “Protected Employee” status where they receive full wages and benefits. While in protected status, employees may be assigned to:
- Training programs or to replace other employees who are in training
- Certain non-traditional jobs
- Openings at other Ford locations (they only have to accept them if the job is within 100 miles of their home, otherwise they can stay in job banks)
- Other assignments were consistent with the intent of the program. According to Sean McAlinden, Chief Economist and Vice President, Research for Center for Automotive Research, and ex-UAW employee, “the UAW was trying to prevent outsourcing. They believe that profit is something you negotiate – something that is shared. the job banks part of the contract is about 100 pages of an over 500-page contract. In 1987 there was $2 Billion guaranteed for the project, by 1990 it was fully funded. It was thought that Lloyd Reuss was fired because of the spending on the job banks. People are protected, but not the jobs. When a person retires their job is eliminated. Job banks don’t protect the UAW. The UAW is down by 57 percent. Back in 1985, General Motors had 464,000 union members, at that time they were as big as the U.S. Army. In the end, 2004 General Motors UAW members were down to 111,000 members; a 77 percent decrease in membership.”Currently, UAW membership is 710,000, down from about 1.5 million in its heyday. As of March 2005, General Motors had decreased its union worker membership to 109,000.
- My sister is a union member in a telecommunications business. She will retire in four years with full health care benefits, with no premium, and a pension that is commensurate with her full salary. If she doesn’t get fired. With 24 years under her belt, she still worries that she could be fired if there is an economic downturn. She would lose the benefits she had worked most of her adult life to achieve and would go on unemployment for 48 weeks and then she would need to find another job at the age of 51 that would let her live her life as she knows it now. The company would be able to reduce the variable cost of her salary and benefit’s down to reflect her no longer working at their company.Not so, for automotive workers in the UAW and other auto manufacturer unions. There are upwards of 10,000 people who are not working but collecting a salary and benefit’s and some are still accruing seniority. It was best said by John Novak, Morningstar analyst, in a Chicago Tribune article on June 19, 2005, “Essentially, what they are doing is making labor, which in most industries is a variable cost, into a fixed cost. In most businesses, when demand declines, you can downsize your workforce, and your costs also shrink.”
According to McAlinden, there are three types of layoffs;
- temporary layoffs – you know your return date. This might happen if there is a temporary shutdown in a plant.
- Indefinite layoff – this is supplemented by unemployment benefits. You get 48 weeks of on unemployment benefits and a supplemental from your company to equal 100 percent of your salary.
- Job banks – After 48 weeks you are reemployed by General Motors (or another group) at which time you receive 95 percent of your salary. You don’t get seniority, but you do continue to receive health benefits. Lindsey Williams, Corporate Affairs for Delphi, a Tier One Supplier that was spun off from General Motors, for automotive manufacturers, explains the Job Banks dilemma, “When the current job security language was negotiated between the UAW, GM, and Delphis negotiations team, the competitive landscape was very different. The landscape has changed dramatically and we must re-evaluate any and everything that adversely impacts the bottom line and hinders the company’s ability to be competitive in a global marketplace. Employees assigned to the JOBS bank report to work, however, may not work on productive jobs and in some instances are idle. We (Delphi) currently have approximately 3,000 employees assigned to the bank with an associated cost penalty of approximately $300 million. This is a cost that many of our competitors do not face.”Williams goes on to say, “It’s important to note that while we are clearly challenged in the current environment, our problems are not with our people, nor our unions, rather the structure upon which we currently operate. The current structure — conceived at a different time and under different circumstances — does not allow us to react to a convergence of numerous factors (i.e. – pension contributions, commodity price increases, health care costs, etc.) in a timely manner.”McAlinden says that General Motors’ job banks cost more per person than Delphi, more on the lines of $120,000 per person per year. The number in job banks is being reported as 3,500 people, but industry insiders believe that number is way low, especially with the closure of the Linden, Baltimore, and Lansing assembly lines. At the Lansing Car Assembly line there were 2,900 hourly (or union) members “laid off”, in Linden and Baltimore there were 950 and 1,000 union members, respectively, laid off. That would total 8,350 employees without jobs, but that doesn’t count the people who retired, took a package, or were deployed to other factories.If the whispers are correct, then General Motors has closer to 7,000 people that are in job banks or will be soon. That would mean that General Motors is looking at closer to an $840,000,000 hit to their bottom line, versus the $420,000,000 speculators were saying. General Motors will not confirm any of these numbers.
Things are looking brighter, at least for Delphi. The UAW-Delphi supplemental agreement was negotiated in May 2004 and runs through September 2011. Generally speaking, the wage and benefit package for employees hired under this agreement is roughly 60% of that earned by the current “traditional” employee. New hires average an all-in wage and benefit level of $24-25 an hour, compared to the all-in $60-70 an hour currently being earned. Additionally, there are no JOBS security provisions for employees hired under this agreement.
General Motors does not have a “two-tier” agreement with the UAW. Only Visteon and Delphi have signed this agreement, meaning that the Big 3 still pays their new hires the same rate, and the new hires still have JOBS security.
Expect the job banks’ issue to be on the agenda in 2007 when the UAW opens their negotiations with the auto manufacturers. The discussion will probably center around whether it is the responsibility of one company to finance volunteers, or workers that just sit idle in a hall for eight hours, and keep the local economy going, or whether their efforts and their money, might be better spent keeping their business as a going concern.
The UAW was contacted several times and never responded.