Federal corruption probe, strike loom over UAW's voting on proposed labor contract with GM

Key Points
  • Membership approval of a leadership-approved deal has traditionally been a sure thing, but not any longer.
  • Fiat Chrysler workers four years ago voted down an initial contract and sent negotiators back to the bargaining table.
  • The union's roughly 48,000 members with GM will vote on the proposed deal through Oct. 25.
Adriane Hall, a United Auto Workers member of 12 years, screams as vehicles drive by honking in support of autoworkers in Flint, Mich. on Sept. 16th, 2019. The Flint Assembly employees are among the roughly 48,000 General Motors workers who have been on strike and picketing since Monday.
Michael Wayland | CNBC

DETROIT — The United Auto Workers strike will continue through at least Friday as members vote on the union's tentative deal with General Motors, but there's no guarantee the work stoppage will end once all the votes have been tallied.

Membership approval of such a deal has traditionally been a sure thing; however, Fiat Chrysler workers four years ago voted down an initial leadership-approved contract and sent negotiators back to the bargaining table. That's worrying both company executives and union leaders during this year's negotiations.

If the proposal with GM is rejected, the union's roughly 48,000 workers would be expected to remain on picket lines, adding to the automaker's roughly $2 billion in losses over the work stoppage and increasing the financial burden on workers.

"I don't think the UAW leadership wants to take the vote of the UAW members for granted," said Art Wheaton, a labor expert at the Worker Institute at Cornell University. "There is a chance they could have some pushback."

Why this analyst says UAW strike will weigh on sector for years

The union won several financial gains for members, including annual lump-sum bonuses or raises and $11,000 ratification bonuses, but it also agreed to not block the company's plans to close four U.S. facilities, including three plants and a parts distribution center.

Thousands of members of those affected facilities aren't likely to be too happy about the deal, adding to what was already expected to be a contentious vote amid a federal investigation into union corruption and the more than monthlong strike.

Despite those factors, Wheaton said he believes members will approve the tentative deal, which addresses several of the union's top concerns heading into the negotiations. "I'm fairly confident, but I'm always an optimist, that they will get it ratified," he said.

Bank of America Merrill Lynch analyst John Murphy agrees: "There is also some risk that GM UAW membership will reject the proposed contract," he wrote in a note Thursday to investors. "However, considering the length of the strike, the hard stances between the parties, and the substantial back-and-forth during the negotiation process, we believe ratification is likely in the next week or so."

UAW strike to continue till members ratify deal: Report

The deal, according to Murphy, is "relatively favorable" for the union but still provides GM "with some necessary flexibility."

Shares of GM have recovered some of the losses sustained since the strike but were still down by almost 7% since the picketing began Sept. 16, closing Friday at $36.17 a share.


Ratification of the deal could come down to how the union communicates the proposal to its members.

The union holds educational meetings with each local union across the country ahead of voting, however union leaders also use social media, emails and other means to be sure members are getting accurate information.

"It's really important," said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research. "Misinformation spreads like wildfire. They're going to want to be on top of that stuff."

The UAW, as stated by then-UAW President Dennis Williams, underestimated the influence of social media four years ago when members voted down the Fiat Chrysler deal. Following the rejected pact, the union turned to influential public relations firm BerlinRosen to help the union communicate its message with workers — specifically on social media.

United Auto Workers members on strike picket outside General Motors' Detroit-Hamtramck Assembly plant on Sept. 25, 2019 in Detroit.
Michael Wayland / CNBC

The UAW has at least one outside firm, SKDKnickerbocker, assisting it this year. Over the weekend, the union started its social media informational campaign by posting informational messages about the deal. For the past month, the union had been providing information about the strike, now in its 36th day, and updates on the negotiations through social media.

"I would expect members will be poring over the text of the agreement looking for any Easter eggs that GM won that aren't in the highlighter provided by the union," Dziczek said.

It's unknown how many, if any, educational meetings UAW Vice President Terry Dittes will attend through the Oct. 25 voting process. The union declined to comment.

Federal investigation

Adding to the contentiousness of this year's negotiations is an ongoing federal investigation into corruption of the UAW that has targeted its highest-ranking officials, including Williams and current President Gary Jones. Neither has been charged with a crime; however, federal agents raided both their homes in August.

FBI agents walking into the home of United Auto Workers President Gary Jones after removing materials from the location on Wednesday, Aug. 28, 2019.
Michael Wayland/CNBC

The investigation has led to the conviction of nine people, including six officials affiliated with the union. UAW Region 5 Director Vance Pearson, who recently took a "leave of absence" amid the contract negotiations with GM, also has been charged.

A former official with the union's GM department, Jeff Pietrzyk, also is expected to plead guilty to charges involving bribery and kickback conspiracy that defrauded union workers. Pietrzyk's attorney, Robert C. Singer, confirmed to CNBC on Friday that his client is expected to plead guilty.

Wheaton said the investigation will be a factor in the voting. But he said he doesn't believe it will have a significant impact, because the union got a lot of what it wanted and is being more transparent in keeping members in the loop on major developments in the negotiations.

"The more transparent, the better it is," Wheaton said. "They're going back to trying to become a more democratic decision."

As part of the tentative agreement between the UAW and GM, a jointly operated training center that's part of the federal probe would be dissolved.