Jeff Kowalsky/AFP/Getty
UAW members picket at GM site in Flint, MI, Monday, Sept. 16, 2019.

GM, UAW have tentative deal; 'nightmare scenario' still looms

Oct. 17, 2019
The costly, month-long strike may be over, though UAW members can vote it down as confidence in union leadership wanes in the wake of a federal corruption probe.

(Bloomberg) -- The good news is General Motors Co. has a tentative agreement with the United Auto Workers to end a 31-day strike that has cost the company an estimated $2 billion. The bad news is 48,000 striking workers could stay out during a ratification vote that could last another two weeks.

The union’s local presidents and chairman -- roughly 200 officials -- plan to meet at 10:30 a.m. local time in downtown Detroit to decide whether to put the tentative deal to a vote of the entire membership and if workers will return to their jobs before ratification.

Even if fast-tracked, a vote could take a week to get all the ballots in and ratify the deal. At a cost of $100 million a day in lost profit, that could be another half a billion hit to GM’s bottom line, based on calculations Bank of America Merrill Lynch analyst John Murphy made earlier this week.

GM shares pared a decline of as much as 0.9% to trade down 0.6% to $36.42 as of 9:37 a.m. in New York.

Here’s how the process will work:

  • The UAW will bring its local leaders in on Thursday for a briefing at 10:30 a.m., at which point they will hand out and explain the highlights of the agreement
  • The local leaders will vote on whether to take the deal to a ratification vote of the full membership
  • They also will collectively decide whether to go back to work while voting or to keep workers on the picket lines
  • The process can be cumbersome; Local leaders -- along with representatives from the union’s international headquarters -- will conduct meetings in GM plants to brief members and answer questions
  • Since some plants have two or three shifts of workers, they will schedule multiple meetings at different hours
  • Voting will take place in the plants and during working hours to ensure the highest turnout, a key to ratification

The wild card in the process is a widening federal corruption probe that has implicated UAW President Gary Jones. Workers who have lost faith in the union leadership may vote the contract down on principle.

“The scandal is hanging over it,” said Art Schwartz, a former GM labor negotiator who is now a consultant in Ann Arbor, Michigan. “It’s unavoidable and the leadership is very aware of what’s going on and they’re trying to be very transparent to the membership for that reason. So it’s got to have an effect.”

Typically, a membership vote takes about two weeks, but could be expedited, he said.

‘Nightmare Scenario’

The decision on whether to keep workers out on strike or send them back into the factories may signal how confident the union’s leadership is in the deal. Keeping them on strike earning just $275 in weekly pay would be painful, but possibly prudent with so much on the line.

“What you don’t want to happen is to end the strike, take the vote, lose the vote and go back out on strike,” said Arthur Wheaton, director of the Worker Institute at Cornell University. “That’s a nightmare scenario for both sides, UAW and GM, because now you have no confidence as a bargaining team. So any new contract could be worse instead of better.”

Either way, GM’s stock price will likely be impacted by the results of both votes. Shares rose 1% Wednesday on news of the tentative deal, but are down about 6% since the walkout started.

Temp Issue

A contentious issue in the proposed agreement is treatment of temporary workers, some of whom have worked as long as four years at half pay and with fewer benefits than full-timers. They’ll get to vote on ratification.

People familiar with the agreement have said that the tentative agreement includes a clause that lets workers become full-time employees after three years of temp service. But there may be a loophole in the fine print that gives workers pause, said Harley Shaiken, a professor or labor relations at University of California at Berkeley.

If the three-year grow-in period starts all over when temps are sent home due to scheduled downtime at a plant, then it will be relatively easy for GM to keep them from being hired as full-timers, Shaiken said.

“That would make a deal difficult to ratify,” Shaiken said. “These so-called ‘perma-temps’ have become an emotional issue among UAW members.”

About the Author

David Welch and Keith Naughton

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