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Sources: GM offers raises in UAW contract, ends health care

Detroit Free Press logo Detroit Free Press 9/17/2019 Jamie L. LaReau

General Motors stopped paying for health care coverage for striking workers Tuesday, the company confirmed.

That means striking GM union workers are eligible for union-paid COBRA to continue their health care benefits.

"We understand strikes are difficult and disruptive to families," GM said in a statement. "While on strike, some benefits shift to being funded by the union’s strike fund, and in this case hourly employees are eligible for union-paid COBRA so their health care benefits can continue."

The latest development added to tension as GM and the UAW returned to the bargaining table Tuesday morning. The two sides negotiated until about 9 p.m. Monday, sources said. 

Meanwhile, more details emerged about GM's offer to the UAW. Two sources familiar with GM's offer said it called for a 2% wage increase for the first and third year of the four-year contract and 2% lump sum payments the second and fourth years.

“Two percent is nothing," said a local union leader who saw the deal. "We have not gained back anything we gave up during the bankruptcy."

The local union leader said UAW members want a wage increase that will offset any changes to health care coverage. 

GM, which on Sunday made public an overview of its offer that did not include pay specifics, declined to comment the offer beyond that overview.

More: UAW national strike against GM begins as union backers flood into Flint

Issues such as wages and health care, along with narrowing the pay gap between various workers, are among the sticking points in negotiations, sources said, who said the atmosphere in the negotiating room remained tense. 

Rumors had swirled late Monday that striking UAW members were no longer covered by company health care, the cost of which is a major issue in contract talks. To ease the concerns, Terry Dittes, vice president for the UAW's GM Department, sent out a letter saying GM would continue health care benefits through the end of the month for all UAW-represented employees "as provided for in the contract."

But Dittes later told members he received a letter from GM on Tuesday "confirming that our striking members' health care coverage has been cut off by General Motors. During this period, the UAW will provide medical assistance or a COBRA option, if necessary, for you and eligible family members. If you have any questions, please direct them to the auditor assigned to your location by the secretary-treasurer's office. Additionally, this answer provided by GM, today, will be reviewed by UAW Legal to see if any further action is required." 

The UAW said online that "the UAW Strike and Defense Fund covers certain benefits such as medical and prescription drugs. Benefits not covered include: dental, vision, hearing and sick and accident. These benefits are either paid directly by the (strike) Fund according to the company’s current plan or by having the Strike and Defense Fund make COBRA payments to the company plan."

The union had $721 million in its strike fund in 2018 and temporarily increased dues in March this year to boost it to $850 million. That fund also will pay striking workers $250 a week. 

GM faces high costs, too; analysts say the strike is costing the automaker $50 million to $100 million a day. 

Despite high tension, both sides were focused, realizing the importance of reaching a tentative contract as soon as possible. 

"Everything I hear, the atmosphere isn’t real great in the bargaining room," said Harley Shaiken, a professor at the University of California, Berkeley, who specializes in labor. "But everybody there is a professional and they know they have to focus on where they can bridge the gaps.”

White House role denied

Politico reported Tuesday afternoon that the White House was stepping into the talks to broker a deal that would include reopening the Lordstown Assembly plant in Ohio, which GM idled in March.

The article said chief economic adviser Larry Kudlow and White House trade and manufacturing adviser Peter Navarro are involved in the effort, which is still in early stages. 

But GM, the UAW and the White House all denied it. 

“The White House has no involvement in negotiations," GM spokesman Pat Morrissey said.

"The UAW cannot comment because this is the first we've heard of it," said UAW spokesman Brian Rothenberg.

“This story is false. The Trump administration, including Larry Kudlow and Peter Navarro, are not involved in the negotiations between the UAW and GM. As President Trump has said, we would like to see a fair and speedy conclusion to these talks," said Judd Deere, deputy press secretary. 

Picket line talk

The 46,000 UAW workers at 55 GM facilities across the United States went on strike at midnight Sunday after the UAW let its contract expire the night before.

The UAW, which represents about 150,000 workers at GM, Ford Motor Co. and Fiat Chrysler Automobiles, chose to negotiate first with GM and use any new contract as a template for talks with the other two. 

"I've got everything I need. These young people need support," said James Toor, 67, a toolmaker at GM's Romulus Engine plant who was picketing. "Some have been here five years without getting hired in." 

Several UAW workers said they believe the automaker is trying to "break the union," in part by resisting creation of a path to make temporary workers permanent and close the wag gap among workers.  

Here are the full-time hourly wages at the Detroit Three:

  • A newly hired production worker, called "in progression," makes about $17 an hour, and can rise to $29 an hour after eight years.
  • A legacy worker earns $28 to $33 an hour.
  • A skilled trades worker,  about 15% of the Detroit Three's workforce, is closer to $35 to $36 an hour. They often get heavy overtime.
  • A temporary worker earns about $15 an hour. 

Shaiken said GM has the money to withstand a strike of at least a couple of weeks and remain profitable and competitive.

"But historically GM has understood the workforce was vital to get through a downturn and now they seem to be dismissive of that, so I can see why union workers would think they’re trying to break the union," said Shaiken.

But he doesn’t think that is the case.

"GM has taken a very hard line that is difficult to undo," said Shaiken. "They’ve been most successful when they’ve tried to work together with the UAW. They’re here today not by the brilliance of their managerial strategies that drove them into a ditch. The workers were vital to drive GM out of that ditch and that doesn’t seem to be apparent anywhere.”

UAW members are emotional after GM moved to shutter U.S. plants, so the fear that the automaker wants to break the union is understandable to Marick Masters, business professor at Wayne State University who specializes in labor.

But he said, it's not realistic.

“If that were the case, they could take more draconian measures, such as hiring other workers, encouraging people to break the line and go back to work or GM could have had a workforce ready to hire before this even started,” said Masters.

GM likely knows it will have a union for the foreseeable future, which is why it is structuring a contract that allows it to be more cost competitive against nonunion automakers, he said. That means having the ability to have a larger temporary workforce and multiple wage tiers is crucial to the carmaker.

But the two sides must reach an agreement in short order for several reasons, he said.

“The auto industry is not a particularly attractive industry to invest in to begin with, so Wall Street will lose patience with GM quickly if there is still no agreement in a few days,” said Masters.

If the strike is prolonged to say 54 days, he said that would amount to GM losing $2.7 billion, about 25% of GM’s free cash.

“That a good chunk of money to lose,” said Masters. “They have huge investment needs and very little to spare.”

Finally, a long strike increasingly sours relationships with workers.

“GM is in the business of trying to recruit and hire the best talent they can get,” said Masters. “People see the strike and they ask, ‘Is that a company I want to work for?’ GM has likely the worst reputation among the automakers due to the legal problems it’s had, and it’s known as ‘Government Motors.’ It has a reputation as a huge bureaucracy. Strikes are pretty rare today and so for the average person who looks at this, they think this is everything that is wrong with the industry.”


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