December 7, 2018

GM's union talks could spare some workers at risk of layoffs

GM chief executive Mary Barra traipsed around Capitol Hill this week, meeting lawmakers about the company's plans to shut four plants in Michigan, Ohio and Maryland. She got a lot of questions about why she couldn't save thousands of jobs.

If any of those workers are spared, it will most likely happen as part of GM's negotiations with its labor unions --- not in discussions with lawmakers in Washington.

Barra told Congress that GM (GM) is very concerned about the fate of the hourly workers at the four plants. She said the company is doing what it can to relocate them or give them new positions.

"Many hourly employees at the impacted US plants will have the opportunity to work at other US GM plants and ... we are committed to working with them to minimize the impact on the communities," Barra said in a statement after meeting with congressional representatives from Michigan on Thursday.

Those jobs will become a major topic of discussion when GM sits down with the United Autoworkers next year to discuss a new four-year labor deal.

GM, along with Ford and Fiat Chrysler, has contracts with the UAW that are set to expire next September. The fate of the four plants is likely to be a big part of the negotiations over new labor deals.

This is how it could work: GM agrees to spare some of the jobs and build new vehicles in the plants it said it would close. The union, in turn, gives in on matters like pay scales, profit sharing formulas or other benefits.

"The announcement about plant investments happen every four years, like clockwork, because that's when there are labor negotiations," said Kristin Dziczek, vice president of industry, labor and economics for the Center for Automotive Research, a Michigan think tank.

The problem now is that GM has said it doesn't have enough demand for product to keep the four plants --- two assembly lines, two engine plants --- fully busy. Car buyers have shifted away from traditional sedans to SUVs and trucks. But it's not selling enough of those SUV or trucks to keep all the plants open. GM has capacity to build about 1 million more vehicles a year than it has demand to sell, Dziczek said.

Including the two assembly lines slated to close, GM has 12 assembly plants in the United States, half of which are operating at less than 80% capacity. That 80% target is generally the break-even point for profitability, Dziczek said.

GM has a number of new vehicles, including electric cars, in the pipeline that are not assigned to a plant yet. It will probably make more sense to put the new vehicles into other plants that are below capacity rather than continue to spread the product it has between all 12 plants.

Still Dziczek believes there's a good chance that one of the two US assembly plants could be saved in the upcoming labor talks.

GM has announced plans to build some new vehicles, such as the Chevy Blazer, at Mexican plants, rather than placing them at American plants. That has angered members of Congress and the union. But that is going into an existing Mexican plant that would be under capacity without the product. The company has not opened or planned any new Mexican assembly plants in the last 10 years.

GM has not ruled out that one or more of the US plants could be kept open. The company hasn't even definitively said it plans to close the four plants, just that those plants are "unallocated" --- they won't be assigned any products to make after next year.

"GM and the UAW will talk about numerous topics that affect our employees and our business during 2019 negotiations," the company said in a statement. "As always, our intent is to work with the UAW constructively to address our business challenges in a way that keeps the company competitive in these changing market conditions."

For the union, keeping those plants open --- and hourly workers employed --- will be a top priority.

"We have been clear that the UAW will leave no stone unturned and use any and all resources available to us regarding the future of these plants," said UAW President Gary Jones.

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