UAW workers applaud GM investment. (AFL-CIO Photo)

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GM GROWTH: Eliminate Two-Tiered Wage Structure, Union Official Urges

General Motors Pays Off Government Loans, Announces Expansion

December 17, 2013
By: Dave Rogers

Was the UAW an important factor in the revival of General Motors?

Or is the union, and others like it, just a drag on capitalism?

Those questions arose when General Motors announced this week it will invest nearly $1.3 billion in five manufacturing sites in Michigan, Ohio and Indiana, creating or retaining about 1,000 jobs.

The investment is aimed at producing new fuel-efficient engines and transmissions, enhance vehicle quality and streamline logistics.

The United Auto Workers union hailed the development as a confirmation of the value of the collective bargaining system, while Gov. Rick Snyder and supporters of the right-to-work movement were non-plussed.

It's the continuation of an age-old struggle between capital and labor that unfortunately only shows signs of accelerating.

Some UAW members booed when Snyder was introduced as a speaker, according to The Detroit News.

The investment report was only minutes old when the UAW's Norwood Jewell told the press the union would seek to wipe out the two-tiered wage system that was negotiated during the bailout in 2009.

The lower end of the two-tiered structure puts entry-level workers at or just above the minimum wage. Anyone who has ever worked in a factory knows how tough the environment there is for workers at any pay grade. The pay at the lower tier is not enough to support a family.

Jewell said the UAW wants to eliminate the separate wage scales over time, but first needs to organize auto workers in the South who work primarily for foreign automakers.

"If we don't organize them to bring them up to our standard, we're never going be able to totally eliminate the second tier," he said.

Nagging questions linger about the bailout that started under former President George W. Bush in December 2008.

The U.S. Treasury recently sold shares of GM common stock, further reducing the government's equity stake in GM to 0 percent, according to ProPublica, the public interest journalism site.

On November 21, 2013, Treasury gave J.P. Morgan Securities, LLC discretionary authority, as its sales agent, to sell, subject to certain parameters, the remaining shares of common stock, from time to time during the period ending on February 15, 2014 (or upon completion of the sale). Completion of the sale under this authority occurred on December 9, 2013.

The investments announced include GM plants in Detroit, Flint and Romulus, Mich.; Toledo, Ohio and Bedford, Ind. The improvements will support production of a new V6 engine, new 10-speed transmission and an existing 6-speed transmission. They will also fund assembly plant upgrades, including a new paint shop and logistics optimization center.

Since 2009, GM has announced investments of about $10.1 billion in its U.S. operations -- $2.8 billion in 2013 alone -- creating or retaining more than 26,500 jobs.

"GM is committed to a strong American manufacturing base and creating jobs in dozens of communities throughout the country. The announced plant upgrades continue the momentum of a resurgent auto industry," said GM Executive Vice President and North America President Mark Reuss. "More importantly, these investments add up to higher quality and more fuel-efficient vehicles for our customers."

Said UAW Vice President Joe Ashton, who directs the union's GM Department:

"Today's announcement is a win for American workers. The UAW is proud to be a part of this successful collaboration with GM that has helped rebuild the nation's economy, created good paying, union jobs in communities across the country, and brought manufacturing that was moved overseas back to the U.S. This is further proof that collective bargaining works."

Drew Winter, writing for Ward's Auto report, commented: "To these unhappy taxpayers I say: Relax, your $80 billion auto bailout loan is paid in full and you also have received handsome interest and dividends.

"I also would like to tell unhappy taxpayers that it is true hundreds of thousands of Americans, many belonging to the United Auto Workers union, did indeed keep their jobs because of the bailout. But hundreds of thousands of non-union blue-collar and white-collar employees at auto-related suppliers, dealerships and small businesses also kept their jobs thanks to the bailout."

Mike Hall of the AFL-CIO commented: "Another great win emerges from autoworkers and industry collaboration. General Motors Co. (GM) will invest more than $1.3 billion to upgrade and expand five manufacturing plants in Michigan, Ohio and Indiana that also will create or retain more than 1,000 jobs."

GM's nearly $1.3 billion investment includes:

*$600 million in Flint Assembly for facility upgrades, including a new paint shop;

*$493.4 million in Romulus Powertrain Operations, which includes $343.4 million for equipment to produce an all-new 10-speed automatic transmission and $150 million to increase capacity of a previously announced new V6 engine;

*$121 million in Detroit-Hamtramck Assembly for a logistics optimization center $30.6 million in Toledo Transmission Operations for increased capacity for an existing 6-speed transmission and tooling for a new variant;

$29.2 million in Bedford Castings, which includes $22.6 million to produce components for the 10-speed transmission and $6.6 million to produce components for an existing 6-speed transmission.

The 10-speed automatic transmission will contribute to improved fuel economy and performance. Details about this program and the new V6 engine will be announced later.

The U.S. government bailout of General Motors spared 1.2 million jobs in 2009 and preserved $39.4 billion in personal and social insurance tax collections in 2009 and 2010, according to a Center for Automotive Research study.

"Any complete cost-benefit assessment of the federal assistance to GM in its restructuring must consider the total net returns to the public investment," researchers Sean McAlinden and Debra Maranger Menk wrote in "The Effect on the U.S. Economy of the Successful Restructuring of General Motors."

They contend that the infusion of money into GM and Chrysler by the administrations of Presidents George W. Bush and Barack Obama avoided loss to the U.S. of $105.3 billion in transfer payments and personal and social insurance tax collections. Additionally, 2.6 million jobs were saved in 2009 alone and $284.4 billion in personal income was preserved over 2009-2010.

"If the U.S. government had refused to assist (GM and Chrysler)" in a financial crisis of unprecedented proportions, then the whole U.S. economy was operating without a safety net, with the exception of course, of the banking system," McAlinden and Maranger Menk conclude.

The center independently funded the new study as a follow up to a November 2008 analysis.

UAW Vice President Joe Ashton said: "Since the auto industry was on the verge of collapse during the Bush recession, car makers and the UAW have worked closely in forging a partnership that was instrumental in securing the financing in 2008 and 2009 that kept the industry alive. Working together not only kept the auto industry afloat and saved tens of thousands of jobs, the negotiated investments like Monday's GM announcement have opened the doors to good middle-class jobs.

Ashton notes that while income disparity grows in the country and the middle class declines, collective bargaining has created a ladder to the middle class for millions of America's workers.

"This announcement today is further proof that collaboration and collective bargaining works and will continue to be the way that we rebuild America's middle class."

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