New Labor Deal Ratified by GM’s UAW Workers

And GM got an even better deal than we thought…

By Brendan Moore

10.11.2007

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.

COPYRIGHT Autosavant.net – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

Share This Post On

5 Comments

  1. I would love to believe that what you say is true, and futhermore I would love to believe that this means that GM will now make better cars as a result.

    BUT!

    GM has a history of over-promising and dreadfully under-delivering. Let’s just see what they do with the savings per car. Let’s see if it goes back into the cars, into R&D, etc., or, some short-term dividend to the stockholders or the executives.

  2. Well, it can’t be a bad thing. It can only be good for the big three. The questions is, how good?

  3. A sleeping giant is rousing itself from the stupor that it’s been in for decades and will soon be a monster again. Watch out, Toyota!

  4. Give me a break. GM will never catch Toyota and they won’t catch Toyota for the same reasons they lost the number one spot to Toyota. Toyota is just better. End of story.

  5. Don’t talk too soon hendersonhouse. I could said then Toyota was just better. Others begins to catch up and Toyota couldn’t stay 50 years on the top and I don’t include the coming of India and China.

Submit a Comment

Your email address will not be published.