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GM, Union Cut Historic Deal to Make Subcompact Car Profitably in U.S.

October 5, 2010
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The United Auto Workers negotiated a landmark local labor agreement with General Motors Co. that should allow the automaker for the first time to produce a subcompact car profitably in the United States.

The agreement calls for just 60 percent of all hourly workers at GM’s assembly plant in Orion Township, Michigan—where the Chevrolet Aveo will go into production next year—to receive traditional production wages of $28 an hour with full benefits, said Mike Dunn, shop chairman for UAW Local 5960.

The other 40 percent will receive a so-called Tier 2 wage equal to roughly half that of so-called legacy workers.

Effectively, that means about 900 of the 1,200 to 1,500 laid-off workers at the plant will be able to return at full wages and benefits, Dunn said. The remaining laid-off workers will have the option of coming back with Tier 2 wages and full benefits or seeking a transfer to another GM plant, he said.

GM built midsize cars at the Orion plant until last fall when it was idled to retool for the Aveo.

The wage agreement is expected to reduce GM’s labor costs enough that the automaker can make a profit on the small car, Dunn said.

“It’s an integral part of the plan,” he said.

GM and UAW officials reached a final agreement late last week, and plant workers were briefed on the plan Oct. 3.

GM spokeswoman Kimberly Carpenter confirmed on Oct. 4 that an agreement is in place but would not talk about the details.

“GM has worked closely with the UAW to create new and innovative contractual language that will allow this facility to be flexible and lean—essential elements in this highly competitive small-car market segment,” Carpenter said in a written statement.

Detroit’s automakers have had limited success hiring Tier 2 workers at U.S. plants, even though UAW contracts negotiated in 2007 and again in 2009 gave them the right to do so. Under those recent pacts, up to 20 percent of an automaker’s hourly workforce could be subject to the lower-cost Tier 2 wage scale.

But because of the sharp decline in industry sales along with numerous plant closings, Detroit automakers have been unable to hire new workers at lower wages. At the same time, many longtime UAW workers have been reluctant to retire or accept voluntary buyouts to create additional openings.

But the Orion plant has been a special case. The UAW’s 2009 amended contract with GM just before bankruptcy called for “innovative labor agreement provisions” that would allow GM to make a small car profitably in the United States.

Workers at Orion Township will not have an opportunity to ratify the new agreement, Dunn said. They effectively agreed to the terms when the majority of UAW-represented workers agreed to the 2009 GM contract that contained the general language related to a small car, he said.  

Filed by David Barkholz of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

 

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