Fueled by Broken Trust
The roots of the labor disruptions that have paralyzed General Motors’ operations in North America trace back to events that began four years ago. Documents filed by GM in U.S. District Court this week reveal new details of the chain of events behind the auto industry’s biggest labor disruption since 1970.
In 1994, according to the court filings, GM hired a consultant to assess the productivity of the Flint Metal Center, a stamping plant that makes hoods, doors, fenders and engine cradles for GM vehicles.
The findings were unsettling for the United Auto Workers. Unless the Michigan plant made significant changes, its prospects were dim. The union and GM began negotiations to improve the facility’s efficiency.
The result was a basic agreement reached in early 1995 under which GM would invest $300 million in new equipment and assign the plant new work in exchange for the union changing some inflexible work rules.
The agreement so pleased Joseph Spielman, vice president of GM’s stamping and manufacturing operations, that he wrote that it would provide “the foundation for the best stamping plant in the world.”
It didn’t work out that way.
Today, the Flint plant ranks near the bottom in stamping productivity in North America, according to a respected industry manufacturing report released this week.
Long aware of the plant’s poor performance, GM in February withdrew its promise of new investment and work for the facility. Events deteriorated rapidly from there, culminating in a June 5 strike by the plant’s 3,400 workers.
The walkout, accompanied by a strike by 5,800 workers at another Flint plant, has brought the world’s largest industrial company to a near standstill in North America. GM has closed 25 assembly plants and laid off 186,400 workers. Its strike losses are approaching $2 billion.
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GM filed the lawsuit in federal court in Detroit in an effort to force arbitration and end the strikes, which it says are illegal. The two sides agreed Friday to an arbitration hearing Wednesday.
In its filing, GM says the confrontation centers largely on an agreement reached in January 1995. In a letter to local UAW leaders describing the company’s commitment, Spielman promised no layoffs, future work allocations and 160 new hires.
The company said that from 1995 to 1997 it negotiated with the UAW to include work-rule changes as part of the deal.
Of particular concern was the elimination of so-called pegged rates that allow press operators in the engine cradle area to meet daily quotas. The operators are paid for a full eight-hour shift even though many can complete their work in four to six hours.
Because of the union’s promise of more flexible work rules, GM said, it invested $120 million in new equipment in recent years and even gave pay raises to some workers who would be required to perform additional tasks. However, the company alleges that the workers have refused to do the new jobs and that the union has repeatedly disputed the scope of the changes it agreed to.
The UAW responds that it is GM that has reneged on its promises, that the auto maker’s failure to fulfill its full investment in the plant has caused productivity to suffer, and that the work-rule changes were contingent on new work and investments.
“We have more than held up our part of the agreement,” said Richard Shoemaker, UAW vice president and chief negotiator.
The company maintains that the plant lost $50 million last year. And a report by James Harbour & Associates of Troy, Mich., released Wednesday ranks the plant 31st out of 36 facilities in productivity.
Donald Hackworth, vice president of GM’s car operations, said the Harbour report clearly confirms the continued “deterioration in worker productivity” at the plant, which he calls “a direct result of the noncompetitive work practices.”
GM continued to meet with the UAW in December and January in an effort to obtain work-rule changes. Unable to get concessions, it told the union Feb. 6 that it would cancel planned investments and future work in the plant.
At the time of the cancellations, there were eight union grievances pending against GM. In the next three weeks, that figure ballooned to 146 complaints of line speedups and health and safety violations.
Thomas Gottschalk, general counsel for GM, said the grievances were filed “as a pretext to strike.” The real issue, he argues, is the company’s withdrawal of investment and work from the plant, which are prerogatives of the company and not issues over which the union can strike, according to its national contract with GM.
As further documentation in its suit, GM filed letters from UAW Local 659 leaders to their membership. In a Feb. 20 letter, local President Duane Zuckschwerdt told workers that Spielman’s 1995 memo was a key “bargaining chip” to fight the move of new work to another plant.
“Due to this letter we have a negotiated commitment to future work,” Zuckschwerdt wrote. “We will hold management to their negotiated commitments by whatever means necessary.”
In early March, the local obtained strike authorization from the membership, and Zuckschwerdt indicated that although the union did not want to strike, it was “willing to do what it takes to resolve all of our issues.”
Negotiations continued throughout the spring, during which the union repeatedly insisted that GM live up to the Spielman commitments, the company says.
During Memorial Day weekend, GM removed dies from the stamping plant that were to be used to make sheet metal panels for the redesigned 1999 Chevrolet Silverado full-size pickup. The vehicle is considered GM’s most important because of its high volumes and profit. GM was concerned that a strike would interfere with the truck’s launch this fall.
The dies’ removal infuriated the UAW. Labor experts say the move was a direct and deliberate provocation that assured a strike. The walkout began at 10 a.m. June 5.
Six days later, UAW workers at another Flint complex went on strike. This walkout involved the Delphi East plants, which make a variety of low-technology components such as spark plugs and oil filters.
Delphi Automotive Systems, GM’s parts arm, began a major restructuring several years ago. As part of the process, it identified troubled plants that were told to become profitable or face sale or closure.
In August 1995, the Delphi East plants were put on the troubled list. But as a result of joint company-union effort, they were removed from the list in May 1996. The next year, however, GM told the union that it was concerned about the profitability of certain product lines and said some work would be moved to outside suppliers.
UAW officials allege that GM wants to cut 2,500 jobs and eventually close the plants. They say the auto maker’s actions show that even when the union makes concessions, GM only demands more.
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The union responded with a strike vote last Sept. 12. Talks between the two sides continued and some progress was made, prompting GM to agree in November to a three-month moratorium on a sale or outsourcing and the UAW to vow not to strike during the period.
GM then presented financial documents to the union outlining the competitive problems facing Delphi East and asked for the union’s help in solving them.
In mid-January, Don Beauchamp, chairman of Local 651, told members in the union’s newsletter that “the company is continuing with its plan of . . . outsourcing viable and profit-making product lines with no regard to the impact.”
“We will take a stand to protect our jobs,” he vowed.
GM alleges that the UAW said it would settle scores of outstanding grievances only if the company first put to rest the job security and sourcing issues. The union denies the allegation.
In April, the union put forth a proposal to improve operations, but GM promptly rejected it as inadequate. The stage was set for the second strike, which began June 11.
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Higher Costs
General Motors’ labor costs are higher than those of other big car companies because it takes longer, on average, for GM to make each vehicle. Labor-hours per vehicle (total labor and benefit cost per vehicle):
Nissan: ($1,189) 27.64
Toyota: ($1,368) 31.82
Honda: ($1,416) 32.93
Ford ($1,493) 34.71
Chrysler: ($1,957) 45.52
General Motors: ($2,000) 46.52
Notes: Labor and benefit costs are based on $43 an hour. Honda, Nissan and Toyota transmissions labor-hours are estimates.
Source: James Harbour & Associates
