Back to the future

Departments - Editor’s page

December 5, 2019

The longest United Auto Workers (UAW) strike in two generations ended in a contract that will provide nearly equal pay for all General Motors and Ford workers by 2023 (see Infographic).

So, welcome back to 2006.

During contract negotiations in 2007, GM, Ford, and Chrysler LLC (the short-lived version of the company between DaimlerChrysler and Fiat Chrysler Automobiles [FCA]), Detroit’s major automakers needed help. Without knowing that the Great Recession was coming in a year, the producers argued that they could no longer afford high healthcare costs, high labor rates, or invest billions in new vehicles.

All three were losing money as large, profit-heavy SUVs were falling out of favor as gasoline prices climbed. Then UAW President Ron Gettelfinger, who earned an accounting degree while working on Ford assembly lines in Louisville, Kentucky, asked to see the books, and Detroit’s Big 3 provided them.

What followed was the most concessionary contract the UAW ever approved – lower wages for new hires, retiree healthcare benefits shifted from the automakers to the union, and the freedom to close several plants. Workers hated the contract, but they ratified it because union leaders said the changes were vital to keeping U.S.-based producers afloat.

And the concessions didn’t work.

Automakers had argued for decades that without legacy healthcare costs and high wages, they could produce better cars and be more competitive with Asian and European rivals. Instead, the Great Recession rolled in, and two of the three companies went bankrupt less than two years into the deal that was supposed to create new prosperity. UAW members took further concessions.

The sense of regret was immediate, and UAW members fought to get back to 2006 levels as soon as possible. Workers rejected deals negotiated by union leaders in 2011 and 2015, forcing lengthy renegotiations. The No. 1 priority was returning to the mantra of equal pay for equal work.

The UAW’s 2015 contract eroded 2007’s two-tier wage structure, but pay scales didn’t reach parity, and the contracts allowed manufacturers to continue using low-paid temporary workers almost indefinitely. The biggest win for the union was a guaranteed path to full-time status for those long-term temps.

Today, as companies are pulling in near-record profits, workers were unwilling to listen to arguments that readopting a rigid pay structure would hamper growth and success. GM negotiators fought back efforts to reopen some unprofitable plants but acquiesced to the wage demands.

Though dramatic, 2019’s deal was similar to industry watchers’ predictions. For the next four years, more temporary workers will become permanent employees and receive commensurate raises. Labor costs will increase at a steady, predictable rate.

The deal isn’t a complete 10-year backward leap as retiree healthcare benefits remain the union’s responsibility, workers hired since 2007 receive 401(k) savings programs instead of pensions, and several plants have closed.

But, workers will know when they look down assembly lines that every one of them is making the same wage for doing the same job.