New Labor Deal Ratified by GM’s UAW Workers
And GM got an even better deal than we thought…
By Brendan Moore
Chrysler and UAW used up all the headlines yesterday, but something else important happened – the UAW workers employed by General Motors fully ratified their new tentative labor agreement. The UAW said 66% of its GM production workers voted in favor of the deal and 64% of the skilled trades voted in favor. The contract covers about 74,000 hourly employees at GM.
As we mentioned last month when the tentative agreement was hammered out, the agreement will considerably change the dynamic between GM and its salaried workers. But we didn’t realize just how far-reaching the changes will be until we saw some detail yesterday.
Something that didn’t come out in the details released previously regarding the agreement is the language around pensions and employee healthcare for new hires. The new agreement allows General Motors to require almost every new hire that comes in the door to participate in a defined-contribution plan (i.e., 401k plan) in order to fund their own pension and healthcare costs. The current employees get company-funded healthcare and pensions that cost GM a whopping amount of money every year. What does that mean, exactly? Well, what it means is that pretty soon GM will have generations of new employees that will be paid just about the same as the workers at Toyota or Honda in the United States. In other words, parity in labor costs.
This is very, very important to General Motors. And if it’s in the Chrysler-UAW agreement, it will be just as important to them. Ditto for Ford.
It is a cataclysmic re-jiggering of the domestic auto companies’ future labor costs and it fundamentally changes their competitive abilities going forward.
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