Three years after General Motors won wage and benefit concessions from the United Auto Workers (UAW), the company has yet to realise savings from a key provision that cuts pay by more than half for new US hires, a newspaper report said.
GM’s deal cut the combined wage and benefit cost for a newly hired factory worker to US$25.65 an hour, compared with about $60 an hour for current workers. By comparison, the nonunion workers at Toyota’s US plants cost the company approximately $48 an hour in wages and benefits, the Wall Street Journal (WSJ) said.
But GM can’t add new workers at the lower wage yet because it still has 5,000 laid-off workers who, under their contract terms, have first chance for any union jobs that the company adds and most would return to work at the higher pay level.
Ford and Chrysler have similar union contracts allowing them to hire workers at the lower wage, but they also haven’t hired significant numbers of new workers, the report said.
“That’s probably one of the reasons the UAW agreed to [the lower wages]. They knew right off the bat there wouldn’t be a lot of leeway for the companies to hire new workers,” David Whiston, an auto analyst at Morningstar, told the paper. “There will always be this fundamental difference – that the Detroit companies have union shops.”
Nonetheless, GM on Monday announced first quarter operating income of US$1.2bn on revenue of $31.5bn.
GM also is saving about $3bn a year from another provision of the labour deal which shifted the cost of health care for retired workers to a union-run trust fund.
The labour contract struck in 2007 between the UAW and each of Detroit’s three automakers was intended to get the companies’ wage-and-benefit structure to match those of US factories run by foreign automakers such as Toyota and Honda.
The contract eliminated the so-called jobs bank, a programme in which union workers received almost full pay and benefits even if they were laid off. In the past, some workers went years without work but remained on the payroll, the WSJ said.
As part of the plan to phase out the jobs bank, GM agreed to provide some pay and benefits to laid-off workers – including the right to fill any new job opening – for up to two years. That’s where GM is now. The approximately 5,000 laid-off factory workers on GM’s payrolls now receive as much as 70% of their pretax pay for a year and then as much as 50% for up to another year, depending on a worker’s seniority.
The WSJ said GM has about 51,000 US factory workers and, before seeking bankruptcy protection, it hired around 2,000 at the new lower wage. But in the past few years, half of them were laid off as GM downsized and restructured.
As GM’s U.S. sales recover, the company is ramping up production by adding shifts and overtime at several factories. These moves will allow GM to bring back many laid-off workers, but GM spokeswoman Kim Carpenter told the WSJ the company doesn’t know when hiring will begin for the lower-wage jobs.
When it does, “it will be a competitive advantage for us,” she said.