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UAW Reaches Settlement in American Axle Dispute
19 May 08
The leadership of the UAW union has agreed a contract with American Axle that slashes wages and closes plants, but ratification from a disgruntled workforce is less than assured.
Global Insight Perspective | | Significance | The United Auto Workers (UAW) union has announced that it has reached a tentative agreement to end the strike against American Axle Manufacturing, which has lasted for nearly three months. The new contract includes dramatic cuts to wages and benefits, several plant closures, and sizeable compensation for buyouts and buy-downs. | Implications | The union leadership itself is reportedly not pleased with the contract, but it is presenting it to members as the best option available. The general reaction from the striking workers has been one of disappointment, but many seem to have accepted that this is the best deal they can hope for. | Outlook | Ratification of the new contract is far from guaranteed, but with many workers resigned to accepting any contract as long as it ensures them a job, the vote could go either way. |
After nearly three months of contentious on-and-off negotiations, the striking United Auto Workers (UAW) union has announced that it has reached a tentative agreement with supplier American Axle on a new contract. The announcement came over the weekend (17-18 May), and it has raised hopes of an end to one of the longest strikes in the UAW's history, which has resulted in the shutdown of dozens of General Motors (GM) plants and affected countless suppliers. Details of the new contracts were relayed to workers yesterday at several locations: - Most wages at the Detroit plant would be reduced from US$28 per hour to US$14.35-26.00 per hour, depending on the position. Wages at the Three Rivers (Michigan) plant on the west side of the state would likely be even lower. The maximum production-line wage rate would remain at US$18.50 per hour, with factory support workers earning US$14.35 and machine operators garnering US$18.00 per hour. Some wages at the plant would drop to just US$10.00 per hour.
- Buy-downs would be offered in return for the wage cuts of US$90,000-105,000, paid over three years. Buyouts up to US$140,000 for workers with over 10 years’ seniority would be offered.
- Three plants would close: a forging plant in Detroit, another in Tonawanda (New York), and a plant in Buffalo (New York). A plant in Cheektowaga (New York) would remain open, as would the Three Rivers (Michigan) facility.
- A signing bonus of US$5,000 would be paid to workers upon ratification of the contract, which would expire on 25 February 2012.
- General Motors would contribute US$218 million to fund buyouts and buy-downs, and to provide supplemental unemployment benefits for laid-off workers.
Outlook and Implications The initial reaction from workers has been far from positive, as the new contract can only truly be described as a victory for American Axle. Given the massive wage cuts that have been agreed (US$10-26 per hour, almost across the board) and the closure of several facilities, American Axle has basically got what it needed to remain competitive. The harsh reality of the situation, however, is that for many of the company's employees, the wage cuts will mean dramatic changes in lifestyle. As a result, the workers' initial reaction to the tentative agreement has been overwhelmingly negative, meaning that union bosses may have a difficult time selling the new contract to the membership. Interviews in local Detroit newspapers have painted a picture of dissatisfaction with the new deal. "Why did we go out on strike in the first place", one union official, who asked not to be identified, told Automotive News. "That's not the best we can do", he added. On the other hand, many workers, who have been living on US$200 per week from the union's strike fund, may just believe that this is the best deal they can hope for in the current climate. If the new contract is ratified this week, it will not be a moment too soon for General Motors, which has now had very limited production of its full-size trucks in place over the last three months. Truth be told, however, even had production not been hindered by the American Axle strike, GM would likely have severely curtailed output of its big trucks anyway in response to a drop in demand for such vehicles. GM has lost well over 200,000 units of production since the strike began, and it looks unlikely that much of that deficit will be made up, provided that the American Axle workers actually ratify the contract and get the supply chain moving again by the end of the week. The strike has thus far cost GM billions of dollars in lost revenue, and it is difficult to see how such a drop in revenue will fail to affect the company's turnaround plans for the year. Thus far, the company has weathered the strike surprisingly well from a corporate standpoint, shuffling the limited supply of axle products among plants in order to secure critical production of selected units, but at the dealer and distribution level the lack of new products has become troublesome. Inventory may be dropping significantly, but so are variety and flexibility in terms of trucks. If American Axle workers do go back to work soon, the biggest sigh of relief may actually come from dealer service departments, clamouring for repair parts.
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