It’s not necessarily the additional compensation but the form in which it will be paid that is hanging up contract talks between the auto company and its striking employees.
When nearly 50,000 United Auto Workers walked out of General Motors plants on Sept. 16, it was the hope of both management and labor that the strike would be a short one.
Unfortunately, it wasn’t. In the 24 days that have passed, both sides have lost hundreds of millions of dollars.
While there have been intermittent rumors that the two sides were close to reaching an agreement on a new contract, the two sides are not there yet, and there’s no sign they’ll make a deal anytime soon, even though they may.
Differences surround the usual issue — compensation. But it’s not compensation per se, but the form of that additional compensation.
It’s important to remember that General Motors went bankrupt in 2009, and that experience was a searing event for both employer and employees.
Union members were forced to make dramatic concessions on pay to help GM reorganize and emerge from bankruptcy as a highly profitable company. So it’s no surprise that the union wants to make up for lost ground by undoing some of the key concessions it made years ago by eliminating or dramatically modifying the dual compensation strategy that separates longtime employees from new hires.
At the same time, management maintains it’s extremely important to maintain flexibility in the pay of union workers so that it doesn’t get itself into the same mess that drove it into bankruptcy.
In that sense, GM’s management fears that resorting to the way it once went about its business guarantees future failure.
Union members, naturally, scoff at that claim, and they have some reason to do so. GM has been hugely profitable in recent years, due to both a resurging economy and wage concessions by the unions.
But there are no guarantees that the good times of the past and present for auto manufacturers will continue in the future. After all, if anything is clear about the auto industry, it’s that it’s cyclical in nature.
One year — or even one decade — it booms. Then along comes an economic slowdown and, suddenly, the auto sales go in the dumper.
GM is looking for flexibility to meet an industry slowdown, pushing for pay bonuses in good times rather than wage increases. Union members want a permanent pay increase, pushing the risk off themselves and onto the company.
News reports indicate that management and labor have reached agreement on tricky issues like health care coverage for employees and moving temporary workers to full-time status.
But compensation — specifically who will bear the risk when hard times come — has proved impossible so far.
In the meantime, GM has lost a reported $600 million in revenue, union workers are receiving $250 a week in strike pay but forfeited a collective $412 million in lost wages, thousands of employees of smaller companies that provide GM parts have been laid off or are in danger of being laid off and businesses — restaurants, bars, retailers — that relied on those workers lost millions in sales.
Cumulatively, this episode represents an economic disaster that cannot be made up. But it can be curtailed and will be only when a deal is finally struck, as it inevitably must be.