By Nora Naughton and Mike Colias 

General Motors Co. and the striking United Auto Workers union are dueling over two main issues: how fast to move newer hires up to the top wage and how soon temporary workers should qualify for full employment.

As the union's walkout at GM closes out a third week, the UAW is pushing to shorten the eight-year time period it takes for a new worker at GM to reach full pay of about $30 an hour, according to people close to the talks. The auto maker has resisted the demand because it could add to its labor costs, they said.

The eight-year timetable has frustrated UAW workers who say it creates a situation where many union-represented workers are earning less for performing the same job as more-veteran colleagues -- a pay disparity that is at odds with the union's core belief that workers should earn equal pay for equal work. New hires start out at about $17 an hour and get yearly raises until they reach full pay.

The UAW is working to lock in a new four-year labor contact for tens of thousands of hourly workers at GM before turning its full attention to negotiations with Ford Motor Co. and Fiat Chrysler Automobiles NV. Contract talks, which continued Friday, entered a critical phase in the previous week as UAW and GM bargainers moved onto bigger economic issues, such as wages and benefits.

Talks will continue into the weekend, according to a letter from UAW Vice President Terry Dittes to GM workers. While many major differences remain unresolved, Mr. Dittes said the sides are making progress on health care and temporary workers.

The strike, now the longest nationwide walkout at GM since 1970, has halted production at more than 30 company plants in the U.S. and suspended work at about two dozen GM-owned parts warehouses and distribution centers.

GM has also proposed giving temporary workers a formal path to full-time employment, addressing one of the UAW's key demands heading into contract talks. Absent a formalized process, workers at GM can remain on temporary status indefinitely.

The Detroit auto maker has roughly 3,000 temporary workers, or about 7% of its total workforce, a number that fluctuates based on production schedules. These employees are also represented by the UAW.

Company bargainers told the union earlier this week that GM was willing to give any temporary worker with three consecutive years of service full-time status, people familiar with the matter said. But the UAW pushed back, saying the proposal still doesn't provide enough job security and lacks language that would prevent GM from laying workers off before they hit the three-year mark, the people said.

The two sides have moved closer on the issue and are now negotiating over how to calculate the time served, the people said.

Health care, a major sticking point heading into talks, is largely settled, according to people familiar with the negotiations. In an early offer, GM proposed having UAW workers pay up to 15% of health-care costs out of pocket but the union quickly shot it down and the out-of-pocket obligation will remain unchanged at around 3%, the people said.

GM also offered earlier this week to remove a $12,000 cap on profit-sharing checks handed to workers each year but made it contingent on the UAW giving up other bonus money. That proposal was rejected, the people say. Under the current formula, workers get paid $1 for every $1,000 the company makes in North America. Profit-sharing checks in recent years have approached $12,000.

While GM and the UAW keep negotiating, contract talks with Ford and Fiat Chrysler have progressed on some topics, according to letters sent by UAW leaders to members this week. But on large economic issues, such as wages and benefits, negotiators at those two companies will wait until a deal is struck at GM and then use it as a template, as is typical in pattern bargaining.

GM, Ford and Fiat Chrysler have relied on new hires earning less than veteran workers as a way to keep their labor costs competitive with foreign rivals who operate nonunion plants in the U.S. South.

But the eight-year timetable, implemented in the union's 2015 contract, has been a source of contention and workers want to see it shortened or eliminated completely.

"You've got people working on the line making $8 or $9 less [per hour] than the person next to them doing the same job," said Andrew Pinchen, an electrician at a GM transmission plant in suburban Detroit. "People understand the concept of some grow-in period, but eight years is a long, long time."

All three U.S. car makers are trying to keep their labor costs in check in this round of contract talks, wary of a potential downturn in the U.S. car market following years of strength. Those costs have crept up in recent years as the union made progress in winning pay and benefits lost in previous rounds of bargaining, particularly around the recession.

GM and Ford's all-in labor costs, including wages and benefits, have topped $60 an hour for the first time since before the recession. Fiat Chrysler's hourly rate reached $55 this year. By comparison, foreign car companies, which don't have unionized factories in the U.S., spend an average of $50 an hour on labor, according to the Center For Automotive Research in Ann Arbor, Mich.

While labor accounts for only about 5% of the cost of building a vehicle, it is one of the few cost components the companies can control, labor experts say.

Deutsche Bank analyst Emmanuel Rosner in a note Friday raised concern that GM's eventual UAW contract could result in higher fixed costs than investors had expected. He said the impact is difficult to quantify but has reduced his earnings-per-share estimate for GM in 2020 to $7.05, from $7.40.

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

 

(END) Dow Jones Newswires

October 04, 2019 17:56 ET (21:56 GMT)

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