General Motors to lead contentious negotiations with UAW union

Key Points
  • General Motors will lead what are expected to be contentious contract negotiations with the United Auto Workers.
  • Going first in the negotiations is viewed as a positive that better allows a company to set its own terms.
  • This year's negotiations will set the wages and benefits for about 158,000 members and steer billions in investment plans.
United Auto Workers President Gary Jones and General Motors CEO and Chairman Mary Barra shake hands during an event on Sept. 3 to officially open contract negotiations in Detroit.
Source: General Motors

DETROIT — Amid growing concerns about an economic recession and volatile trade deals, General Motors will lead what are expected to be contentious contract negotiations this year with the United Auto Workers.

What company leads the negotiations is important because the UAW traditionally uses "patterned bargaining," which means the union negotiates a deal with the first company and then uses that contract framework to negotiate with the two other carmakers.

Although the contracts between the UAW and Detroit Big Three are tailored to each automaker, going first is viewed as a positive that better allows a company to set its own terms.

GM said in a statement it looks "forward to having constructive discussions with the UAW on reaching an agreement that builds a strong future for our employees and our business."

The talks are expected to be the most contentious in at least a decade amid "America first" policies and trade threats from the Trump administration; a tight labor market; and thousands of job cuts and cost reductions as the industry prepares for an expected economic downturn.

"(GM CEO and Chairman) Mary Barra said from the outset of these talks that we will stand up as we tackle a changing industry. We are ready to stand strong for our future," UAW President Gary Jones said Tuesday in a statement announcing GM as the target. "We are focused. We are prepared and we are all ready to stand up for our members, our communities and our manufacturing future."

This year's negotiations will set the wages and benefits for about 158,000 members. The outcome will also help steer investment plans for GM, Ford and Fiat Chrysler in the U.S. for the next several years.

FBI agents finish loading materials into a truck out of the home of United Auto Workers President Gary Jones on Wednesday, Aug. 28, 2019.
Michael Wayland / CNBC

An ongoing federal probe into corruption at the highest levels of the UAW also is expected to add to the tension. Federal officials raided Jones' Michigan home last week as part of a multistate sweep of six properties owned by the union or former and current union officials.

The possibility of a UAW strike at one or more of the automakers is high. A strike could significantly impact production and profits. The union announced additional funding for its "strike fund" earlier this year. As of last year, the fund totaled more than $721 million.

Shares of GM were relatively unchanged in trading Tuesday as the union announced the company would be the first to negotiate.

GM is expected to have the toughest negotiations with the union amid the automaker's plan to potentially close four U.S. facilities, including large assembly plants in Michigan and Ohio, as part of a corporate restructuring aimed at cutting $6 billion in costs a year by 2020.

"I could have made a case for GM or Ford to go first," said Kristin Dziczek, vice president of Industry, Labor & Economics at the Center for Automotive Research in Ann Arbor, Michigan. "GM is more difficult. They're taking the more difficult one on first."

GM's plans, which impacted roughly 14,000 U.S. salaried and hourly workers, were hailed by investors as a way for the automaker to address production overcapacity in the U.S. but were heavily criticized by union leaders and President Donald Trump, who demanded the company sell or reopen the plant in Lordstown, Ohio.

Trump tweet

Aside from the potential plant closures, GM faces other unique challenges during these negotiations, including addressing the underutilization of other U.S. plants and legal issues.

The UAW filed two lawsuits earlier this year against the automaker because of the idling of the plants, including its use of temporary workers and breach of contract.

Federal officials also appear to have turned their attention to the union's GM department as part of a multiyear probe into union corruption, which has led to the convictions of eight union and company officials affiliated with Fiat Chrysler.

Michael Grimes, a retired senior official with the union's GM division, was charged last month with wire fraud and money laundering for allegedly receiving $2 million in kickbacks from UAW vendors. He is the first person not affiliated with Fiat Chrysler to be charged as part of the multiyear probe.

The contracts between the union and automakers expire on Sept. 14, however, it's common for that deadline to be pushed back weeks, if not months.

Trump pressures General Motors to reopen its Lordstown, Ohio plant