GM, UAW agree to cut new worker pay by 50%

MICHIGAN: General Motors and the United Auto Workers agreed to a new class of jobs that would pay about half the current rate, breaking with the UAW’s tradition of equal earnings for union members, people with knowledge of the plan said.

Under a four-year accord reached September 26, all new employees would start in so-called non-core jobs such as janitorial and maintenance work and make about $28 an hour in pay and benefits, compared with $51 for present employees, The People said. They asked not to be identified because contract details haven’t been released.

The new hires would retain their non-core status until they obtain an assembly-line or other higher-rated job. The two-tier system, like an historic deal to transfer retiree health benefits to a union-run fund, marks another milestone in negotiations between the biggest US automaker and the UAW.

“This is a really big deal,” said David Lipsky, a professor of collective bargaining at Cornell University in Ithaca, New York. “The UAW has always prided itself in being an egalitarian organisation: ‘We all hang together, with equal treatment for everyone.’”

The lower-paid jobs, along with a shift of $50 billion in healthcare obligations to the union fund, would help GM chief executive officer Rick Wagoner narrow an estimated $25- to $30- an-hour cost gap with Toyota Motor’s US factory workers. GM pressed the UAW for concessions after $12.4 billion in losses for 2005 and 2006.

UAW leaders are to be briefed Friday in Detroit on details of the proposed contract, reached after a two-day strike. Union workers must ratify the agreement for it to take effect. GM spokeswoman Katie McBride declined to comment on the terms, and UAW spokesman Roger Kerson didn’t return phone calls.

GM shares have risen 19% this year, in part on the expectation that the company would win more labour savings. The shares fell $1.18, or 3.1%, to $36.46 in New York stock Exchange composite trading Thursday.

Wagoner previously won an agreement from the UAW to close 12 North American facilities by next year, persuaded 34,400 union workers to accept early retirement or buyouts and for the first time required union retirees to pay health-care premiums. Those changes cut $9 billion a year from GM’s costs.

The Detroit-based automaker’s current assembly workers get $31.75 an hour in pay, including overtime and bonuses, and $19.25 in benefits, according to an analysis by Laurie Harbour-Felax, president of Chicago-based Stout Risius Ross. Adding pensions and other retiree costs raises the total to about $73.

Toyota’s US workers cost about $47.25 an hour, including $31.50 in pay and $15.75 in benefits, the study found. Toyota doesn’t have additional expenses for retirees because so few of its US factory employees have reached retirement.

While new employees promoted to assembly-line positions would get an increase to the same wages as a traditional UAW worker, their benefits would stay at a lower level, the people said. They weren’t able to provide a breakdown between wages and benefits.
The new structure would bring back to GM some work that had been outsourced to suppliers, a provision sought by the union in return for the lower pay, the people said. GM will offer buyouts to entice existing workers who would be classified as non-core to leave, and the new pay structure would apply to their replacements, The People said. Current workers wouldn’t have their pay cut.

“The company likes it because it cuts compensation costs and the union can swallow it because the people affected aren’t going to vote because they don’t exist yet,” said Richard Block, a labour professor at Michigan State University in East Lansing. It isn’t clear how many of GM’s 73,000 current UAW — represented positions would be considered non-core jobs, and the total varies by facility, the people said. They said they expect local unions will negotiate the final number.

“If it’s not 5,000 to 6,000 workers, Wall Street is not going to be impressed,” said Sean McAlinden, a labour analyst at the Centre for Automotive Research in Ann Arbor, Michigan. A local union official, who asked not to be identified, said the rate at his plant may be as many as one out of five workers.

At the Lansing, Michigan, complex that makes Cadillacs and other vehicles, about 100 of the 3,000 workers, or 3%, would be considered non-core, said Art Baker, president of UAW Local 652. The plant has fewer such workers because it was built under a strategy of reducing non-assembly jobs, he said