American Axle Strike: Was It Worth It?
May 19, 2008
By Michelle Krebs
DETROIT -- The United Auto Workers (UAW) union finally settled its 84-day strike against American Axle and Manufacturing Holdings Inc., a major supplier to General Motors, on Friday.
After holding information meetings Sunday described as "ugly" by one union official, the UAW is holding ratification votes, scheduled to begin Monday and run through the week at various plants. The contract requires a majority approval by the 3,650 striking workers, and there's no guarantee it will pass as many workers are angry about the large pay cuts.
The costs for this long and bitter strike have been high for all involved. For striking workers, it has been 11 weeks of lost wages and benefits. For American Axle, it has meant lost business. For GM, it has resulted in lost vehicle production and financial losses.
Was it worth it?
UAW Workers: Less Jobs, Less Pay
The outlook was never bright for the American Axle workers. Wage cuts were virtually guaranteed from the start. About the best that can be said of the tentative agreement is the cuts weren't as deep as they could have been - or as deep as American Axle wanted. The new contract calls for workers to take a $10 per hour wage cut, from $28 per hour to $18.50. The company had wanted $14 or less.
And the union saved one plant - one in Cheektowaga, N.Y., from closure now; in fact, it will expand, continue current program and add new differential gear programs. Two other plants - forge plants in Detroit and another near Buffalo, N.Y. - will close.
However, the cost was high. If one calculates what each worker lost in wages alone, based on $28 an hour for 84 days, that's more than $18,000.
Plus, veteran auto industry analyst David Cole made an intriguing point to local media outlets. If the tentative agreement is approved, the UAW contract with American Axle will be unique in that the union agreed to pay cuts with a company not in bankruptcy. Previous pay concessions had been granted only to supplier companies in bankruptcy.
Could this contract set a precedent?
So what did the UAW and its striking members get from their 84 days off the job?
According to the UAW's Web site and briefings to members on Sunday, workers receive the following:
New wages - Wages vary based on job title and location. At Detroit Gear and Axle, the largest striking plant, production workers will be paid about $18 per hour; skilled trades $26 per hour; non-production support workers $14.35 per hour. By comparison, wages at a Three Rivers, Mich., plant will range from $10 per hour for factory support to $25 per hour for skilled trades.
New hires - New production hires will be paid $11.50 per hour; new skilled trades hires will be paid $22 per hour. Those workers will receive a 50-cent or 51-cent per hour wage increase every 26 weeks until they reach the full senior level pay.
Bonuses - Workers will receive a $5,000 signing bonus upon ratification. Workers will receive annual performance bonuses equal to 2 percent of their annual earnings in spring. Workers will receive $500 Christmas bonuses starting in 2009.
Health care - Annual health care contributions will increase 3 percent in 2010 and 3 percent each year after. Workers will pay higher co-pays and deductibles.
Supplemental unemployment benefit - Benefits are capped at 42 weeks for those with 20 or more years seniority, capped at 34 weeks for those with 10 or more years seniority and capped at 26 weeks for those with less than 10 years, but at least 1 year seniority.
Buyout Packages - Workers with more than 10 years of experience are eligible for a $140,000 buyout. Those with less than 10 years may take an $85,000 buyout.
Buydown Packages - Workers who remain with the company will receive a bonus to ease the adjustment to lower wages. The maximum buydown is $105,000, paid over three years. The value of the buydown is based on a variety of factors.
Early retirement - Retirement-eligible employees may retire, receive a pension and a $55,000 payment. Workers within four years of retirement may take a paid, pre-retirement leave.
Plant investments - American Axle will spend $170 million to $200 million on plant improvements.
Was 84 days on strike worth it?
GM: Setting a Precedent?
Aside from the workers, GM looks to be the biggest loser in this. Since the strike started on Feb. 26, GM has been forced to close or partially close about 30 assembly plants, which employ about 28,000 people, due to a lack of parts from American Axle.
The strike and GM's responding actions had a domino effect. The closure or production reductions at those plants, in turn, forced the closure or cutbacks at other supplier plants that make parts for GM vehicles assembled at those plants.
Forecasting firm Global Insight estimates GM's loss of production totaled 302,000 vehicles, although GM may well have cut back production as many of the plants forced to shut down or cut back produced slow-selling large trucks and SUVs. Still, GM said in the first quarter alone, the American Axle strike cost it $800 million in losses. Its stock price, for the strike and other factors, fell 15 percent since the strike began.
The long and bitter strike against American Axle had another side effect. While no one will say so officially, it is generally believed that strikes and threatened strikes by workers at GM assembly plants over local contracts were actually efforts to support their American Axle brothers and sisters and force GM to intervene in the American Axle strike.
GM had desperately tried to stay out of the UAW-American Axle fray but was drawn in not only by the impact of that strike on its plants but by the local strikes or threatened strikes at plants producing some of GM's most popular models. GM just settled, after a month, a strike by workers in Lansing, Mich., who build the Buick Enclave, GMC Acadia, Saturn Outlook and the upcoming Chevrolet Traverse. The hot-selling Enclave and Acadia are in short supply. Similarly, workers in Kansas City went on strike, curtailing the production of the popular Chevrolet Malibu there. One can bet those GM local strikes will quickly be resolved if and when the striking workers accept a deal with American Axle.
In addition, the UAW-American Axle settlement took GM coughing up first $200 million and finally kicking in an additional $18 million to get the deal between the two parties done on Friday. The GM contribution will be used to cover some of the costs incurred by American Axle in the tentative contract, such as the unemployment benefits, early retirement packages, buyouts and wage buydowns.
Was enduring the American Axle strike and then its own strikes worth it to GM?
One could go so far as to wonder if GM now questions the worth of spinning off its former component operation to become the "independent" American Axle. Perhaps GM, which negotiated lower wages for non-assembly new hires in its last UAW contract, might be better off pulling inside work from outside contractors to avoid future costly strikes like the American Axle strike.
And could GM, with its financial contribution to settle the American Axle strike, have set a precedented as the UAW did? Richard Block, a professor at the School of Labor and Industrial Relations at Michigan State University, told London's Financial Times that the UAW might view GM's financial support as a precedent for negotiations with their suppliers.
American Axle: No Excuses
If there's a winner in this dispute, it is American Axle. While the supplier didn't every penny of the wage cut it wanted from the union, it got a big chunk of it. In addition, American Axle is said to have doubled production at its Mexico plant in short order and kept supplying some GM plants. The fact that it could do so demonstrates to the union that the company could move even more work to Mexico, close plants in the U.S. and eliminate more union jobs.
At the same time, however, the new contract puts pressure on American Axle to get competitive. As analyst Cole noted to the local press the new contract brings unionized suppliers nearly on par with non-union ones. "Now there are no excuses," he said. "Labor cost is not a reason to be uncompetitive."
Posted by Michelle Krebs at 9:02 AM under Commentary , Companies , GM | Comments (0) | digg this | Seed Newsvine
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