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PRESSURES FROM BOTH SIDES CREATED - AND RESOLVED - GM STRIKE

The situation between General Motors (GM) and the United Auto Workers (UAW) seemed a "perfect storm" for a labor dispute.  GM's profits have reached high levels in 2016 and 2017, before falling last year, with expectations for further downturns in U.S. auto sales.  The investment community had the opinion that GM coddled the UAW, and thus avoided necessary cost cutting measures.  The UAW, on the other hand, is experiencing a major membership decline from 1.5 million in the 1970s to around 400,000, partially resulting from lay-offs in Detroit and moving more work to Mexico.  The UAW has been notoriously unsuccessful in attempting to organize foreign-owned car plants in the U.S., such as Nissan, Toyota, and Volkswagen.  The UAW's newly-elected President was inexperienced in labor negotiations, and is himself the subject of a Justice Department investigation into corruption, along with many other UAW officials, some of which have already been convicted of various forms of embezzlement.  The union president is under investigation for a "lavish lifestyle" that includes long stays in luxury lodgings, golf outings and state dinners with champagne and cigars.  In the government raid of his suburban Detroit home, federal investigators seized golf clubs and $30,000 in cash.  Even President Trump played a role by publicly criticizing GM for not building more in the U.S.  It didn't help that the industry was shifting toward electric vehicles and self-driving cars.  The union also resented concessions during the previous GM bankruptcy and wanted pay-backs.

GM was trying to require union members to pay some portion of the healthcare costs, which is currently a ridiculously low 4%, well less than something like the 25%-30% industry average.  The UAW was trying to reduce the current eight-year progression to reach the pay level of $30, as new hires start around $15 and go through a progression.  The UAW also wanted to reduce the number of temporary workers and contractors. 

The situation resulted in a strike of almost 50,000 workers, and occurred at a time when public approval of unions is the highest in 50 years.  The strike is one of the biggest ones in many years.  Over 30 factories in the U.S. were directly affected, resulting in problems for many suppliers as well.

The union seemed begging for a fight and increased its strike pay from $200 to $250 a week, and seemed desperate to show toughness to its membership.  GM, in its effort to hold the line on costs, aggressively publicized its proposals to the entire workforce, a tactic designed to appeal directly to workers. 

Finally, after over a month of striking, a tentative deal has been reached.  GM has apparently promised to invest more monies in the U.S. factories and to keep some of them open that would otherwise have closed or been reduced.  The agreement reportedly includes wage increases of 3% for two years of the contract and a 4% bonus payment in the other two years, and further provides a path to full-time employment for temporary workers.  The healthcare cost issue remains unchanged, and new hires will get improved pay and faster progression to the top rate. 

As usual, everybody lost in the strike.  Some estimate GM's losses as much as $1.5 billion, and the union strikers lost wages that they will never regain.


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