Union Faces Tough Sell on GM Deal -- WSJ

Date : 10/19/2019 @ 7:02AM
Source : Dow Jones News
Stock : General Motors Company (GM)
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Union Faces Tough Sell on GM Deal -- WSJ

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By Mike Colias and Nora Naughton 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 19, 2019).

United Auto Workers leaders, who earlier this week voted to extend a more than monthlong strike at General Motors Co., now face a critical task: selling a new labor deal to rank-and-file members with high expectations.

The proposed contract struck by UAW and GM negotiators on Wednesday includes some significant gains, including better wages, longer-term job security for temporary workers and a record $11,000 signing bonus if the deal is ratified.

But GM will proceed with closing three now-idled U.S. plants, including a major assembly operation in Lordstown, Ohio, and it made no commitment to relocate Mexico production to the U.S. -- a change the UAW had pressed for during talks.

During a meeting in Detroit on Thursday, nearly 200 union-hall leaders from across the country spent six hours studying the details of the 351-page agreement, according to people who attended the meeting.

Many of the local union officials were upset the UAW couldn't prevent the closure of Lordstown plant, and some were concerned the $7.7 billion in new investment GM committed to U.S. factories would fall short in securing future work, these people said. There also was much discussion about whether the agreement provided enough safeguards for temporary workers, they said.

The attention to detail in the six-hour meeting underscored the tough sell that lies ahead for factory-level union officials in pitching the agreement to the UAW's more than 46,000 GM workers. Voting on the new four-year labor pact begins Saturday at dozens of GM facilities and is expected to wrap up about a week later. A majority must approve the deal for it to go into effect.

With the nationwide strike now stretching into a second month, workers say they have high hopes their time on the picket lines will be rewarded.

"We've been out here for a long time. Was it worth it?" said Chad Fabbro, a financial secretary at the UAW's local in Flint, Mich. "There are a lot of pluses in this contract, but people did expect more. Half the membership is excited and half is not."

The rare decision to stay on strike even after reaching a tentative agreement will prolong the pain for both sides.

By the time final ballots are in on Oct. 25, GM's losses could grow by an additional $700 million roughly, surpassing $2.5 billion since the strike began, analysts estimate. The average full-time worker will have missed take-home pay of about $6,000.

The strike also has disrupted production at GM operations in Canada and Mexico. On Friday, GM said it suspended production of the Chevrolet Blazer SUV in Mexico because of strike-related parts shortages.

Still, Wall Street analysts said the terms of deal shouldn't significantly change GM's financial outlook. RBC Capital pegged the cost increase from the contract at around $100 million annually, along with a nearly $500 million outlay for the signing bonus.

"The financial implications of the deal don't look too onerous for GM," RBC Capital analyst Joseph Spak wrote in an investor note Friday. Moody's Investors Service said the contract should allow GM to shift more of its production to trucks and sport-utility vehicles, which carry healthy profit margins.

Ratification isn't assured, analysts said. In 2015, skilled trade workers at GM initially rejected the tentative deal, even though production workers approved it by a narrow margin. Negotiators had to go back to clarify some language before the deal was fully approved.

Heading into contract talks, the UAW leadership was already mired in a corruption scandal that was eroding confidence from some members.

Workers could also be upset the union was unable to persuade GM to relocate production to the U.S. from Mexico, said Arthur Wheaton, a professor of labor studies at Cornell University.

In the days before the tentative deal was reached, UAW leaders publicly slammed GM, claiming the company was resistant to shifting more production to the U.S. from foreign countries.

"It's not a slam dunk," Mr. Wheaton said of ratification.

Many workers are still on the fence, saying they will focus their attention on plant investments and job security when they cast their votes.

"This labor movement wasn't about bonuses, it was about job security in the U.S.," said Chrissy Defelice, who works at GM's casting plant in Bedford, Ind. "I'm not doing anything until I see what job security we have in the contract."

About $3 billion of the $7.7 billion slated for U.S. factories under the deal would go toward retooling a Detroit plant to make electric pickup trucks and vans, securing a future for a facility previously targeted for closure.

GM also said it would spend an additional $1.3 billion on projects that fall outside the contract terms, including a new facility near the Lordstown plant that will make battery cells for electric vehicles and be staffed by UAW-represented workers.

"We're hoping that these electric and battery investments will secure jobs," said Holli Murphy, president of a UAW chapter that represents workers at a GM pickup-truck factory in Fort Wayne, Ind. "But that's a hard pill for our membership to swallow, because it's betting on the unknown."

Write to Mike Colias at Mike.Colias@wsj.com


(END) Dow Jones Newswires

October 19, 2019 02:47 ET (06:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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