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GM to UAW Let’s Cut Costs

April 16, 2007
Related Topics: Future Workplace, Benefit Design and Communication, Labor Relations, Latest News
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General Motors’ Lordstown, Ohio, assembly plant has become the test site for a companywide cost-cutting effort that could save hundreds of millions of dollars a year.

As part of an ambitious productivity strategy dubbed “True North,” GM is asking local United Auto Workers leaders at all plants to consider a variety of once-taboo efficiency measures.

In late February, GM opened negotiations with Lordstown’s union officials. GM wants the union to accept nonunion janitors, work 10-hour shifts without overtime pay, allow nonunion workers to replenish parts bins and let nonunion truckers deliver and unload parts shipments.

The unstated threat: If the workers reject GM’s proposals, production of the automaker’s 2009 Cobalt model might move to Mexico.

If the union allows it, True North could generate big savings. According to a source, the companywide use of nonunion janitors—who would earn about $12 per hour instead of $28 per hour—alone could save GM $300 million to $500 million a year.

Each UAW GM local would have to negotiate its own deal, but sources say the Lordstown talks could become an important precedent. Says a source close to GM, “The changes you see in Lordstown could foreshadow what you see in the rest of GM’s contracts.”

Traditionally, local union leaders negotiate each plant’s work rules in the same year the UAW bargains new labor contracts with GM, Ford Motor Co. and the Chrysler Group.

The national negotiations, which cover wages and benefits, get all the media attention. But local work rules have a big effect on each plant’s productivity. And this year Detroit’s Big 3 is demanding unprecedented concessions.

“There’s a lot of negotiating going on right now—not just at GM, but Ford and Chrysler as well,” says Laurie Harbour-Felax, a manufacturing consultant who is president of Harbour-Felax Group in suburban Detroit. “They need to get their … labor agreements to be as competitive as possible.”

A similar plant-by-plant cost-cutting program launched last year by Ford could generate more than $600 million in annual savings. An agreement signed last year at just one plant—Ford’s Rouge assembly plant in Dearborn, Michigan—will save $100 million a year.

A GM source confirmed True North’s existence, but declined to give an on-the-record interview. Lordstown appears to be a test site in part because it produces small cars—a product segment that has not been profitable for the Detroit automakers.

UAW Local 1112, which represents about 2,600 workers at the Lordstown assembly plant, already has accepted some changes on behalf of some members who make headliners for Lear Corp. The Lear workers accepted a five-year pay freeze and eased work rules, and agreed to $12 weekly benefit co-pays.

Those workers also agreed that skilled-trades workers would assume additional duties, such as sweeping the floors, without any change in pay.

But Rich Rankin, Local 1112’s Lear shop chairman, says he still is worried that Lordstown might lose the next-generation Cobalt.

“Everybody is very nervous and on edge,” Rankin says. “We’re just fed up. We keep giving and giving with no guarantees.”

Other plants face similar cuts. At the Fairfax assembly plant in Kansas City, Kansas, GM’s cost-cutting target is $54 million.

GM wants to shift about 20 percent of the work now performed by UAW members to outside contractors, says Jeff Manning, president of UAW Local 31. That would affect about 500 of the plant’s 2,500 union jobs, he said.

Outside workers would assemble doors, wheels and engines. Outsiders also would operate forklifts and handle janitorial jobs.

In exchange for the loss of those high-paying jobs, Fairfax would get a shot at a replacement vehicle when the plant stops producing the Chevrolet Malibu and Malibu Maxx and Saturn Aura in 2011.

Manning says the rank and file might not approve True North unless GM management shares the financial sacrifice. “It’s going to be tough,” he says. “It’d be far easier if management shared in the $54 million.”

GM has been cagey about its future plans for each assembly plant. Even if workers at Fairfax and Lordstown embrace True North, GM is not guaranteeing that those plants will stay open, union officials say.

GM has not threatened to shut Lordstown if the plant’s hourly workers refuse to budge. But UAW leaders know they’re in a predicament.

“They’re asking us to come up with these new work rules, but with no guarantee of a product,” says Dave Green, president of UAW 1714, which represents Lordstown’s stamping plant. “That’s one of the sticking points. Everybody is on pins and needles.”

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

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