A colleague forwarded a Wall Street Journal link to a 15 page document outlining changes the UAW, GM and the Auto Industry Task Force agreed to as part of GM’s restructuring efforts. Many of these changes involve supply chain, sourcing and product innovation practices that could, in the future, shape any OEM/labor agreement for any industry. Though the document covers a very broad range of topics (such as health care, pensions etc), we’ll focus on only those changes which deal with metal sourcing, product development and the supply chain. As an overview, the specifics of the changes in these relevant areas were developed to specifically address how GM will profitably enter the small car market segment, a very tough segment with lots of competition including Chinese imports (eventually). The UAW acknowledged that GM must maintain profitability to compete in this market segment.
The list below highlights the relevant changes:
- Assembly operations ” here GM will re-vamp an idled facility and re-tool it for compact and small car assembly. Provisions include an agreement that this plant would not produce any cars that are produced at other US plants (in other words, this would not involve a shut-down/start-up within the US for the same work), general assembly VAA work done in-house only. The agreement allows for 3rd party facilities management and the body shop work to be done in accordance with GM’s global strategy
- Stamping operations ” as with the previous point, a stamping operation will come from an idled operation with the focus on key stampings for this compact and small car market segment. Only the global core panels must be produced at a GM stamping operation, all other stamping decisions (e.g. make vs. buy) to be considered on a case by case basis
- Mexican operations ” no new investments or decisions with regard to production in Mexico will be made without the UAW having an opportunity to propose alternatives
- Added shifts at non-US plants that supply cars to the US ” will not be tolerated if an alternative US plant produces similar cars. The only exception includes cars for other markets in which added shifts are acceptable
- Insourcing vs. Outsourcing ” the agreement calls for the company to hire a third party to assist in the evaluation of work that can be done competitively within GM operations; the consultant will begin by identifying and evaluating those parts/products/assemblies for initial consideration
- Labor and management will review, on a quarterly basis, sourcing strategies, cost structures, technologies etc so that both parties can share knowledge and come to better joint-decision making
If nothing else, this agreement demonstrates an attempt by both parties to better share information, costs, and insight as to how strategic decisions get made. We have argued previously (most recently in the Boeing machinists strike) that inclusion of all stakeholders can lead to better decision-making. The outcomes may not change (the UAW and GM may jointly agree that for competitive reasons, some work can not go to UAW members and instead must go offshore) but at least all of the stakeholders can try to jointly solve various business issues.
The agreement covers many more topics of course. But the document opens with a letter from Ron Gettelfinger, President of the UAW and Cal Rapson, VP and Director of UAW-General Motors Department. Some of the statements contained include some additional points worth mentioning for example, “For active union members, these tentative changes mean no loss in your base hourly pay, no reduction in your health care, and no reduction in pensions. (Retirees will bear the brunt of many of the changes. In addition, for all salary employees and company executives, including the Board of Directors and the CEO are making sacrifices. Dealers, suppliers and bondholders are all contributing to this massive effort to keep the Corporation viable and sustain good jobs in the USA. [Ed. Note: we understand that salary employees all received pay cuts and cuts in benefits]
The UAW negotiated smart and hard to avoid any pay cuts for active union members. The new agreement will give them the opportunity to partake in strategic decision-making and see for themselves the difficulty GM has had in producing cars profitably. It’s about time. As a taxpayer, I like the idea of holding everyone accountable.