GM And The UAW: Sanity, At Last

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GM’s (NYSE: GM) bankruptcy was cause by three things, and one of those was labor costs. The car company and the UAW have set a reasonable agreement as they finish contract negotiations and it may be the first sane one in decades.

GM was taken down by a poor economy, awful decisions by management about products, and labor costs which no manufacturing company could carry. The average earning of a worker prior to GM’s Chapter 11 filing was $75 when salary and all benefits were factored in. By most estimates this was about three times what the typical manufacturing worker in the US earned then.

The new GM-UAW agreement gives the union some concessions that allow the organization’s management to take back to workers..something which shows they have forced the profitable auto-maker to pass on its prosperity to those who work on the assembly lines. The average entry level worker will make $2 to $3 more than under the last contract, according to media reports. This will lift the entry level wage to about $16.

The next aspect of the new contract is a bribe of sorts. If a majority of the union votes in favor of the deal, all members will receive a $5,000 bonus. GM would have been smarter to only give the $5,000 to those who vote for the deal. That would make the bribe process complete. Unfortunately, the vote is secret. Bloomberg says the bonus will cost GM a paltry $242 million based on a union membership of 48,500.

GM will also re-open a plant in Tennessee which made vehicles that bore the failed Saturn brand badge. It is an irony that the UAW should gain something from one of GM’s most terrible mistakes.

Douglas A. McIntyre