Autos

UAW takes its fight to Ford and Fiat Chrysler after deal with GM

Key Points
  • GM struck a deal that pays a mix of one-time bonuses to union members as the company pushed to close four U.S. facilities.
  • The GM contract doesn't significantly increase its recurring fixed costs.
  • Ford and Fiat Chrysler, which aren't expected to try and close any assembly plants, may push to lower costs elsewhere to better align the economics of their deals.
United Auto Workers members on strike picket outside General Motors' Detroit-Hamtramck Assembly plant on Sept. 25, 2019 in Detroit.
Michael Wayland / CNBC

DETROIT – The approval of a new four-year contract between the United Auto Workers and General Motors on Friday ended a 40-day strike against the automaker, but the union's battles are far from over.

The UAW will use the GM deal as a "pattern" for negotiations with Ford Motor and then Fiat Chrysler, however there are no guarantees that the wins and losses from the talks with GM will carry over to its crosstown rivals.

GM struck a cash-rich deal that pays a mix of one-time bonuses to union members as the company pushed to close four U.S. facilities and maintain operational flexibility without significantly increasing its recurring fixed costs. Ford and Fiat Chrysler, which aren't expected to try and close any assembly plants, may push to lower costs elsewhere to better align the economics of their deals.

"It's expensive," Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research, said regarding the GM deal. "But they're also companies that have been doing fairly well … if anyone thought they were going to have lower labor costs, they were mistaken."

Many things will reset for negotiations with Ford and Fiat Chrysler, including the possibility of strikes and talks about company-specific issues around jobs, worker benefits and bonuses. Many major issues such as health care costs and pay traditionally are the same across the companies.

Under GM's deal, out-of-pocket health care costs remain unchanged at roughly 3% for workers, employees receive lump-sum bonuses or raises each year of the deal and a record $11,000 ratification bonuses -- something that isn't expected to be repeated at Ford or Fiat Chrysler. It also shortened the path for current employees to achieve top wages and created a system for temporary employees to become full-time workers after two years.

"There's a lot of lump-sum money involved," said Art Schwartz, president of Labor and Economics Associates and a longtime labor relations negotiator at GM. "It's a lot of cash but not anything that's going to really be built into the cost structure."

Spokespeople with Fiat Chrysler and Ford, which the union selected on Friday to negotiate with next, declined to comment directly on how the GM deal will impact their companies and talks.

Fiat Chrysler

While the Big Three Detroit automakers have recorded significant profits in recent years, they are each in different positions when it comes to employment, profit margins and U.S. footprint that will contribute to the talks.

Fiat Chrysler, for instance, is building a new assembly plant in Detroit and adding thousands of jobs instead of attempting to close operations like GM. But the Italian-American company's unionized workforce of 47,200 has the highest percentage of newer, or "in-progression," employees and temporary workers. The company, according to analysts, may push back on GM's commitment to ensure all "in-progression" workers achieve top pay in the next four years instead of eight.

"I think Fiat Chrysler is going to be a tough one, said Art Wheaton, a labor expert at the Worker Institute at Cornell University. "Fiat Chrysler has a lot more temps than Ford."

Fiat Chrysler also has traditionally been able to negotiate different structures for profit-sharing and other bonuses related to production goals. Such changes may be harder to achieve during this year's negotiations, according to Colin Lightbody, a labor consultant and longtime negotiator for Fiat Chrysler.

"In this environment, I think it's going to be more difficult for Ford and (Fiat Chrysler) to break pattern," Lightbody said.

Adding to the contention, particularly at Fiat Chrysler, is an ongoing federal corruption probe into the UAW. Ten people have pleaded guilty as part of the investigation, including seven union officials and three Fiat Chrysler executives. The probe has uncovered union officials accepting bribes and kickbacks.

It's unclear whether Ford and Fiat Chrysler will push to dissolve their jointly-operated training centers that have been at the center of the probe as GM did.

Ford

Heading into the talks, Ford's negotiations were expected to go smoother than its crosstown rivals, however the company is expected to try and address issues surrounding health care costs and underutilized capacity at its U.S. powertrain plants.

Health insurance cost for Ford's 55,000 hourly workers in the U.S. is expected to top $1 billion for the first-time next year, while GM and Fiat Chrysler are expected to be close behind. GM paid roughly $900 million for its hourly workers in 2018.

Despite GM not being able to negotiate increases for out-of-pocket costs, Ford and Fiat Chrysler could push for other cost-containment and quality-of-care improvement measures surrounding how workers use their health care.

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A simple example would be ensuring employees have and utilize a primary care physician instead of going to urgent care or an emergency room.

With little or no co-pays or deductibles, the auto workers only pay roughly 3% of their costs. That compares with the automakers' salaried workers, who pay roughly 20% to 30%, and the average U.S. worker at 28%, according to the Henry J. Kaiser Family Foundation.

Temporary workers, while a discussion, are expected to be less of an issue at Ford than GM or Fiat Chrysler. Despite having the highest UAW employment, it has the lowest percentage of temporary workers at 6%, thousands of whom they've already hired-in as permanent employees over the last four years.

How Ford plans to address its powertrain underutilization and whether that would mean plant closures or adding new work to the factories is uncertain.