By Don Shilling
Expect the UAW to extend its pay freeze to ease GM’s cash crunch, one observer says.
General Motors is widely expected to continue slashing jobs, but less clear is whether union workers’ paychecks will be cut as well.
Negotiators from GM and the United Auto Workers are talking this week about how to meet federal authorities’ demand that union concessions be part of the automaker’s restructuring.
Don’t look for the UAW to agree to cut wages, said Sean McAlinden, vice president of research for the Center for Automotive Research in Michigan.
He predicted union leaders will agree to freeze pay until GM is able to pay back the loans that it is accepting from the federal government. He thinks the payback could take six to eight years but noted that union workers already have a pay freeze in place through 2011 under a contract signed in 2007.
A pay freeze would have to be ratified by union members.
Benefit concessions will be minimal, McAlinden said. The UAW already has said it will suspend its jobs bank, which pays laid-off workers once other state and company benefits expire.
Other concessions won’t affect workers as long as they remain on the job, McAlinden said. The union may agree to reduce supplemental benefits for laid-off workers, and it may accept noncash payments, such as promissory notes, for half the amount that GM is to pay to a new fund for retiree health care, he said.
UAW officials will deal with other issues with vague statements, such as the promise to talk to local union leaders about changing work rules, McAlinden said.
Another observer, Dennis Virag, president of the Automotive Consulting Group in Michigan, is not willing to rule out the possibility of pay cuts or reduced benefits.
“It’s too early to rule anything off the table,” he said.
UAW leaders want to protect pay and benefits, but they also know that the corporation must survive for union workers to have their jobs, Virag said.
He noted, however, that there are reports that UAW leaders are pushing for President-elect Barack Obama to remove demands for concessions from the UAW once he takes office. Also, House Democrats are supporting a bill that would strip concession demands out of the federal loan package.
Virag said he doesn’t think such efforts will succeed because lawmakers know that many nonunion workers are faced with cuts and expect the UAW to accept cuts as well.
“It’s a sore point for everyday American voters, and that causes a lot of pressure,” he said.
Under the terms of the $17.4 billion granted to domestic automakers last month, the companies have until Feb. 17 to find a way to bring their labor costs in line with those of foreign-owned auto plants in the U.S. GM and Chrysler need to include those concessions as part of restructuring plans they must submit by March 31. If the deadline is not met, the government can demand its money back.
McAlinden said Toyota pays workers at its older U.S. plants up to $26 an hour and Honda pays $25, while the UAW rate at auto plants is $28.
He also noted that workers at foreign-owned plants pay 20 percent of health-care premiums, while UAW workers pay 7 percent.
The foreign-owned plants also have fewer job classifications, which allows them to operate with fewer skilled-trades workers because they can be cross-trained for more jobs, McAlinden said.
Both McAlinden and Virag expect large reductions in the number of employees at the domestic automakers.
In coming years, McAlinden expects GM to reduce its hourly employment from 65,000 to 50,000. He said he thinks Ford will reduce hourly staff from 42,000 to 35,000 and Chrysler will cut its work force from 32,000 to 17,000.
GM has provided buyouts to workers twice in the past three years, but those will not be given now that the automaker is receiving federal aid, McAlinden said.
He said he thinks GM can reach a reduction of 15,000 people over four years through normal attrition.
The cuts mean a second tier that provides lower pay and benefits for new hires will not help the automaker, he said. Because of recent layoffs, few new hires remain employed, and there won’t be a need to hire more workers as the automaker cuts its staff, he said. The second tier was created in the 2007 labor contract.