Fighting Out of a Tough Spot

Last week, the UAW struck General Motors. The first thing I did when I got home was to checkout my hometown papers from Detroit. Naively, I thought I’d find some sympathy. Rather, all I witnessed were some familiar old saws about how the union was harking back to the 1970s (the last national GM strike) and how GM was just trying to do those things it needed to do to compete in today’s marketplace. In the articles and comments, there was a lot of schadenfreude (why should auto workers have it so good, when so many other blue collar workers have been forced to accept such bad conditions) and a general sense of worker powerlessness that casts strikes as things of the past.

The strike is over and the details are coming out. The UAW appears to have done pretty damn good by going on strike, thank you very much.

There’s relentless pressure for the US automakers to slash labor costs and offshore assembly to Mexico and Brazil for the US market. Wall Street, with allies in the intelligentsia and media, had browbeaten the union and demanded that they accept massive cuts in their pay and security. In the face of that, the UAW negotiated cash bonuses for its core workers over the life of the contract and agreements to hire temporary workers as union members (insourcing not outsourcing), and only accepted reduced wages for new workers in some non-core positions. There are some small plant closings in the deal, but the contract also includes several new important investments like a new engine plant in Flint (many engine plants have been closed in the US) and a commitment to build a new electric car in the United States.

The UAW has agreed to establish a Voluntary Employee Benefit Agreement (VEBA) trust fund. This would allow GM to offload all its retiree health costs from its books with a one-time cash payment to an organization run by the union and trustees. The VEBA is a risk to the union, but the bottom line is that UAW retirees have a mechanism to keep their health care when they retire.

So, the naysayers should apologize to the UAW for dismissing them so easily. GM seemed to be playing cat and mouse, asking for the VEBA and trying to string the UAW along on other issues. Maybe they thought the UAW wouldn't go on strike. There was risk in doing so - GM could have jammed the UAW and fought them on job security and wages to the bitter end. Instead, the UAW used the strike to wake GM up and get a workable deal done. With it workers could go back to work on reasonable terms, and put the pressure on management to design marketable cars and rebuild ceded market share.

The focus was on the core fight – keeping decently paid middle class jobs in the United States, while making compromises that need to be done when negotiating with a struggling company. Given the role of the auto sector in defining the middle class, it was a bigger fight than just the UAW. Lets give credit to a modern labor union that balanced confrontation and pragmatic compromise.