Late last week, the United Auto Workers union (UAW) and Delphi signed a tentative contract. Even though the two sides spent 21 months wrangling over the deal, Delphi's remaining UAW workers have only a few days to ratify the agreement. To make sure they do, the UAW has dispatched "national leaders" to perform the requisite "sales job" on Delphi's denizens. Once again, as always, the union expects their membership to do as they're told. Only this time it may not work.
Delphi separated from GM in '99. The newly-independent parts maker inherited a hefty UAW-negotiated wage structure and 4K laid-off employees (drawing full pay in the "jobs bank"). When Delphi filed for bankruptcy in October 2005, the company had 185K workers on their payroll. Of these, roughly 25K were UAW members, averaging about $27 per hour plus benefits. The new management team wanted to kill the jobs bank, cut union wages by more than half and trim benefits.
Bankruptcy or no, the UAW wasn't having it. They threatened an industry-killing strike. Delphi responded by threatening to void the UAW's contracts in federal court. GM and Judge Robert Drain weren't having that. Negotiations dragged on, and on, and on.
Meanwhile, GM shifted away from Delphi as a supplier. Both companies used the interregnum to radically downsize their union workforce (with GM's cash), move production overseas and pay their executives large bonuses (despite ongoing losses) for their amazing management skills.
Cerberus then made a play to buy the smaller, more Eurocentric Delphi. The UAW balked at a deal that was worse than their current setup, but better than Delphi's demand. When Cerberus pulled out and bought Chrysler, GM finally stepped in and cut a deal that will cost them around seven of their borrowed billions, and just under a billion per year thereafter. The UAW left singing GM's praises but viewing Delphi CEO Steve Miller as the demon spawn of Satan.
Under the agreement, Delphi will cut all wages to the new-hire rate, about $14 to $18 per hour. Employees with seniority will receive $35K cash annually for three years to "make up" the difference. All workers' health benefits will change to match those of new hires, with higher out-of-pocket expenses. (Needless to say, nothing was said about decreasing union dues for workers experiencing pay cuts.)
The contract also calls for [more] drastic downsizing. Some 4k of Delphi's remaining 17k employees will be offered buyout payments ranging from $70k to $140K (depending on their seniority). Delphi will close up to ten plants, give three to GM (or a third party designated by GM), sell four and keep four.
Delphi's UAW members will now vote on the contract tomorrow (Thursday). It is NOT a lock. According to the Detroit Free Press, the mood at union meetings held at Delphi plants on Monday "ranged from relief to frustration." In fact, it may be less of a "range" and more of a "transition."
Initially, many union workers are happy they've still got jobs. The old union-bashing tool– accept our offer or we'll close this plant, move overseas and leave you without work–was in full force during the negotiations. Now that the plant issue has been resolved, the workers who've been spared obsolescence will breathe a sigh of relief, have a look at the fine print and say WTF?
For example, the $105K three-year "top up" offered to senior UAW members to compensate for the wage cut is really just a forced landing for GM-era members working at full pay. It also means those 4k higher-paying Delphi jobs are headed for extinction. Which leaves 13k [lower paid] newbies bumping up against a glass ceiling; these union members will NEVER earn the wages and benefits enjoyed by their elder colleagues.
Back when there were 45k UAW members at Delphi, it's highly unlikely this contract would have been ratified. The UAW– and by extension GM and Delphi– is counting on the malleability of a smaller, psychologically-weakened workforce: the "temps." By offering this majority job security, they hope to overwhelm the GM-era workers, who are looking at three more years of their current compensation before taking a 40 percent cut in their wages.
But the size of the remaining workforce cuts both ways; it makes it easier for a relatively small group of determined union organizers to mount a campaign against the agreement. The union knows this; hence the 21 month negotiation vs. four-day deliberation schedule. The UAW "Soldiers of Solidarity" splinter group– which published the contract on the Internet (thanks guys)– better watch their backs.
Anyway, why would the UAW agree to this kind of two-tier contract?
You could argue that the strategy reflects a new realism from the UAW bosses. It provides the union with an exit strategy from the gold-plated wage and health care deals that threaten their host's survival– without alienating their longtime, hardcore members.
Yes but– playing it down the middle is a risky strategy. If this blows up, all bets on the future of the American auto industry are off.
So is the pic the site of the “Delphi Oracle”?
This is like watching a real life horror film.
One is distant yet realizes the shrapnel could land…everywhere.
GM has more to lose than Delphi. Most (hourly and salaried where I work at Delphi) agree it will pass, whether due to the lower tier workers voting it in or the union leadership fudging the numbers, like many at Ford claimed was done when they voted to have their retirees pay for part of their health care.
If it does not, then they will come back to the table. Delphi management has two choices: negotiate or go to the judge and ask that the contract be made null and void. They have shown enough due diligence in negotiating that requesting that it be voided is a real possiblity.
GM will not have that, but Delphi management will say that’s all there is and there ain’t no more. With GM’s negotiations coming up, both GM and the UAW want this to be a done deal. The UAW will go back to their membership with scenarios of woe and chaos and will once again take another vote, which will pass somehow.
Then it’s on to round 1 of the UAW/automakers battle. That will be even more contentuous than the one with Delphi.
Having people doing the same job side by side with a 2 tier wage structure will be problematic to say the least. I would not want to be on that factory floor even if I was on the higher wage. I cannot understand how the union agreed to this. I am not pro or anti union but this seems to go against the fundemental principles of equality that unions have fought so hard to achieve in the workplace. It will be interesting to see if they sign and I would not be surprised if they don’t.
The writing had been on the wall for some time, that it was going to come down to a 2 tier / grandfathered settlement.
How many of the remaining 17,000 “Delphs” are eligible to vote on the contract?
At our GM plant there are now a high proportion of $20/hour “temps” who pay union dues but aren’t really represented members and won’t be eligible to vote on the 2007 agreement.
BTW these “temps” (assuming they maintain this status), receive no benefits and represent a VERY big cost savings in the plant as the replace “old GM” retirees.
“How many of the remaining 17,000 “Delphs” are eligible to vote on the contract?”
My understanding is all of them. They pay union dues, they can vote. If it passes, the temps will also be made permanent. Big incentive for them, based on some who I have talked to about this. Rule of thumb: the older employees who are making the big bucks are mostly against it, but the newer ones are mostly for it.
I had no idea the Job Bank was so big. Accoriding to the article, when delphi first broke away from GM they had 25K workers with 4K in the Job Bank? Is that right? 20% of the workforce is paid for not working! Everytime someone brings up the Job Bank, the UAW and GM always say that it’s a small thing and not to worry about it. But they can cut their labor costs by 20% with no cut in production (except for the possible strike)! This is something that management could leak to the mainstream press. I can’t believe anyone in America could support a UAW strike because they want to keep paying 20% of their workers not to lift a finger!
jolo:
Hmmm. Job security versus a glass-ceiling. So the UAW is counting on the “temps” (who pay union dues doncha know) opting for short term gain over long term prospects. Good bet.
But I’m confused about your statement that the GM-era guys and gals aren’t happy with the pay-off. Does that mean they’d prefer to keep working at their current salary and benefits beyond three years?
And the SOS site talks about some fudging in the fine print (e.g. a wage based increase instead of a COLA deal). Is the devil in the details?
RF, to answer your question, of course they want to keep their pay and benefits the same. The two I talked to real quickly said the same thing. They would rather send it back to the UAW with a no vote and if they don’t get a deal they have had in the past, then they should strike. They do not care if they put the salaried engineers out of work eventually (one said, and I quote, they can get a job anywhere, we can’t). They do not care that it would have a ripple effect on GM and maybe other suppliers and car makers. They want what they have and do not want to give it up.
Jolo,
It is pretty understandable that they have an all or nothing mentality. These people have built a life around the expectation of a certain income level. Halving their salary is hard to take for someone with a mortgage and a couple of car payments irrespective of whether they have earned it or not.
As for accepting a the two-tier wage system, my understanding is that has been around at Delphi for a while and that this is really just an expansion of that program.
Finally, as far as glass ceilings go, all jobs, and especially mfg jobs, have pay limits. this just lowers it. Kinda like changing the rules after you have asked for another card.
“Anyway, why would the UAW agree to this kind of two-tier contract? …
If this blows up, all bets on the future of the American auto industry are off.”
That is too bad. The only bet on the so-called “American auto industry” that a rational person should make is that it is dead. All the UAW can do is clean out the dead guys closet. There is nothing left for the heirs.
miked: Accoriding to the article, when delphi first broke away from GM they had 25K workers with 4K in the Job Bank They had a total of 185K workers, of which 25K were UAW members. And, yes, according to MSNBC, there were 4,000 workers in the jobs bank drawing full pay at the time GM spun off Delphi. There's going to be a ripple effect within other unions. Delphi also has workers represented by the IUE-CWA (International Union of Electrical Workers-Communications Workers of America) at other factories. There are only about 1800 of these workers, but it'll be interesting to see how the UAW agreement affects these negotiations.
So the net result of negotiations on wages is a reduction from $27/hr to $16/hr (average) ?! A 40% cut?!!!!
Mullaly and Wagoner have to be dancing the Happy Gilmore in their offices to this news. They’re probably doing lines with Maximum Bob and Mark Fields. Gotta be…
Frank — do you have the breadown of where the remaining 17k employees are located? Either by state or market, or even the names of the individual plants? 40% pay cuts are going to hit these areas HARD….not to mention the 4k layoffs.
Great editorial!
It’s amazing how hard people will fight to keep something they’ve got, but won’t work hard to get something they don’t have.
My guess (from waaaay on the outside) is that the old-line workers don’t want to give up a dime, and are content to strike with $900M in the bank to back them (see yesterday’s editorial). While the new guys – the temps who don’t have the benefits, the big wage, nor the prospect of a big wage – are just happy to keep the job they’ve got at the rate they’ve got because it’s better than last month when they didn’t have a job at all.
Just a quick question….How much are typical UAW union dues? I’ve never dealt with a union, so I don’t know what these guys are paying for representaion.
One note on two-tiered contracts:
Detroit Diesel has been operating under this type of contract since the early ’90s under Roger Penske. 10 years ago, one’s first four years were at $16/hr…and the 4th year bump took you to ~21/hr. I wouldn’t call myself an insider, but this type of contract has survived there for ~15 years now. Granted, the company has changed hands 3 times…but no strike in all that time. Though layoffs have been frequent…
What better way to get the union wages down that a two-tier system? It’s understandable that long time GM employees don’t want to give up what they’ve got. It’s also understandable that the new hires would rather have the job they have than nothing at all (or working at WallyWorld) Long term, the unions are going to have to give up something. This seems like a sensible approach.
I don’t know about tiers in manufacturing, but it is going to lead to real problems at the airlines.
It takes a lot of work and money to get the experience needed to become an airline pilot. So much so that now it’s not worth it. Seeing lots of people laid off before they got to start making that HUGE salary they were supposed to make at the end has made many junior pilots take on other careers, and there is going to now be a shortage of pilots.
Just as the airlines are making it back to profitability, the future is bleak again.
So, how many folks will take the lower paying job hoping to last long enough to get up to the higher pay? I think it simply stinks. How do you run a company this way? Does 4 years experience make all that much difference in your productivity? Seems to me the tiers are just an open admission that the whole scheme is plain screwed up.
Robert Schwartz: “That is too bad. The only bet on the so-called “American auto industry” that a rational person should make is that it is dead. All the UAW can do is clean out the dead guys closet. There is nothing left for the heirs”
Robert…I consider myself a rational person. Accordingly I placed my bet on GM vis-a-vis a stock purchase 16 months ago. It has paid out quite nicely for me (bought at 19 today trading at 37). I’m not very good at math…but I don’t think you really need to be to calculate that return.
I say this not to brag (I have plenty of loser stock picks to go with this winner)but rather to say I’m afraid the doom & gloom domestic haters have missed a big “pay out” opportunity due to blindness. I don’t think this ilk sees (maybe they don’t want to see) that GM is is making real progress on several fronts to rebuild their broken business. Remember..you don’t have to “buy” a GM to “buy” GM !
Jolo,
My brother-in-law is an engineer with Delphi. I’ll have to ask him about this as well.
The two I talked to real quickly said the same thing. They would rather send it back to the UAW with a no vote and if they don’t get a deal they have had in the past, then they should strike. They do not care if they put the salaried engineers out of work eventually (one said, and I quote, they can get a job anywhere, we can’t).
Which tells you just how much their worth. Not nearly what they are paid. The more that I hear about the unions the more disgusted I am.
This is a UAW classic. Twenty-one months of up and down rhetoric, posturing and negotiating…
Now, HURRY UP AND RATIFY WITH ONE WEEK NOTICE OR ALL THE JOBS AND THE COMPANY WILL DIE DIE DIE!!!
Gettlefinger and company should sell used appliances…
MgoBlue: So the net result of negotiations on wages is a reduction from $27/hr to $16/hr (average) ?! A 40% cut?!!!! Yes, but those getting that drastic cut are also the ones who get the $35K payout for the next three years. The starting salary was dropped to $14-18/hour for new employees in 2004 as mentioned in my response to a question about Delphi in yesterday's article. So anyone hired after 2004 is already getting paid at a reduced level. They'll just never make it to the pre-bankruptcy wage levels. do you have the breadown of where the remaining 17k employees are located? Either by state or market, or even the names of the individual plants? 40% pay cuts are going to hit these areas HARD….not to mention the 4k layoffs. From Tom Krishner, AP News: The pact would leave Delphi operating four UAW plants: Grand Rapids; Kokomo, Ind.; Lockport, N.Y.; and Rochester, N.Y. The union was able to get GM – or a third party designated by GM – to agree to operate the Flint East plant, Saginaw Chassis and the Needmore Road plant in Dayton, Ohio. Delphi plans to sell its Saginaw Steering plant and others in Adrian; Sandusky, Ohio; and Cottondale, Ala. It would close or consolidate into other facilities plants in Coopersville; Columbus, Ohio; two in Milwaukee; Anderson, Ind.; and Wichita Falls, Texas.
# miked:
June 27th, 2007 at 2:42 pm
“Just a quick question….How much are typical UAW union dues? I’ve never dealt with a union, so I don’t know what these guys are paying for representaion.”
2 Hours’ pay per month
The picture I get is that the typical UAW member has an enormous sense of entitlement. No matter what, even an employer’s bankruptcy, the flow of money and benefits to workers (and non-working workers!) must continue untouched. It’s like the story of the scorpion who persuaded a frog to carry him on his back across a stream. As the frog and scorpion were crossing, a little water splashed on the scorpion’s feet and the scorpion stung the frog. “Why did you do that?” the frog cried. “Now we’ll both die.” The scorpion replied “Because you weren’t keeping me quite as dry as I’d prefer.”
Now here’s my dilemma: I’m in the market for a car. Is a Fusion made in Mexico by workers happy with their jobs for that reason a safer bet than a Taurus built in Chicago by angry and resentful UAW members? Is almost any car made in a non-union plant a safer bet than a vehicle built by UAW members who hate their employers so much they’re willing to ruin all lest the company “win”?
50merc, I think virtually everyone these days has an enormous sense of entitlement. This isn’t limited to UAW members.
“At our GM plant there are now a high proportion of $20/hour “temps” who pay union dues but aren’t really represented members and won’t be eligible to vote on the 2007 agreement.”
Wow!
indi500fan: Are the Temps hired thru an outside company or are they direct GM hires?
Jolo … I think you have made a very necessary and reasonable point in the pro-UAW vs. anti-UAW debate. It’s not a question of the “worth” of the work that UAW members do, nor is it a question of their morality or personality, their sense of “entitlement.” As you, say “It is pretty understandable that they have an all or nothing mentality.”
The point is that wage cuts are extremely disruptive to people’s lives, especially to the lives of people who have made expensive but totally reasonable financial commitments (home ownership, children’s college tuition) with the expectation that their earning power would not decrease. Of course they’re trying to hold on to their earning power! Who wouldn’t? Can anyone say with a straight face that they would allow their earnings to be reduced by 40% and not fight it? It’s not like the average UAW member lives like Paris Hilton. The vast majority are decent, hardworking people, trying to get their modest slice of the American Dream just like everyone else. The decisions that they made (in some cases) decades ago were eminently reasonable at the time: working for one of the Big 3 was a perfectly logical way to further your own and your family’s fortunes. Now they’re finding that the rules have changed. Can you blame them for fighting it? I know I would, in their shoes.
So it’s not really about whether UAW members are “worth it.” And it’s certainly not about their sense of “entitlement,” as if a desire not to slip down the socioeconomic ladder were somehow a moral failing. They’re just people trying to make the best out of a bum hand that was dealt to them by forces largely out of their control.
In every facet of the automotive industry, the rules have changed. Everybody works a little harder for less money.
Its the “new automotive reality” anyone working in the automotive industry could see this coming.
Wwork a little harde, to be entitled a little less.
“Can anyone say with a straight face that they would allow their earnings to be reduced by 40% and not fight it?”
I can. I just never considered threatening my employer or my replacement as a winning strategy…Maybe I should reconsider.
If my employer cut my wage by 40% I would look for another job or start my own business…Is this not a proper approach? Perhaps I didn’t get the memo explaining proper conduct in a civil/free society.
50merc “Now here’s my dilemma: I’m in the market for a car. Is a Fusion made in Mexico by workers happy with their jobs for that reason a safer bet than a Taurus built in Chicago by angry and resentful UAW members? Is almost any car made in a non-union plant a safer bet than a vehicle built by UAW members who hate their employers so much they’re willing to ruin all lest the company “win””
Help me out here, why do you assume that the UAW worker is angry resentful and hates his employer.
I mean there have ben dire predictions on this forum that if the UAW struck Delphi that they would help put GM under. It has been disussed numerous times by many here that they could not see how the UAW could be so blind and stupid.
I am not one of those people. A deal was made, now people on this forum are wondering if the contract will be ratified. If the big union wants it to pass it will pass. GM is up in trading because analysts believe GM will get greater concessions from the UAW. I agree there will be no strike. Many here simply have never seen behind the scenes discussions from union leaders.
Although I am not an auto worker nor a member of the UAW I have been privy to private conversations with my union’s leaders in the past and frankly most do know what is going on in their industry. They can be quite frank and honest when they are not in a public spotlight. Oh and I have worked in a dual tier union job side by side with union represented coworkers making 25 percent less in wages as well as well as almost no benefits in comparison to my job. Were they angry? No, they didn’t like it, but thats what they signed on for when they were hired and they knew that.
In my opinion this will pass and further concessions will be granted and yes the UAW will give nasty fighting words in public.
…..and GM and Ford will continue to lose market share because they are still run by idiots
A prediction Delphi/GM wil vote yes by a slim 51%? margin.
The patern will fly through the suppliers,like wildfire.
The patern will loom heavy at the UAW/big 2.8 talks this
summer The big 2.8 see that agreement, as something they can live with.
I f we were asked to vote on that deal tomorrow ,they wouldn’t get 10% support.
Yeah now its getting interesting.
“The picture I get is that the typical UAW member has an enormous sense of entitlement. No matter what, even an employer’s bankruptcy, the flow of money and benefits to workers (and non-working workers!) must continue untouched. It’s like the story of the scorpion who persuaded a frog to carry him on his back across a stream. As the frog and scorpion were crossing, a little water splashed on the scorpion’s feet and the scorpion stung the frog. “Why did you do that?” the frog cried. “Now we’ll both die.” The scorpion replied “Because you weren’t keeping me quite as dry as I’d prefer.””
The very SAME EXACT statement can be made about the majority of executives in Corporate America.
“Now here’s my dilemma: I’m in the market for a car. Is a Fusion made in Mexico by workers happy with their jobs for that reason a safer bet than a Taurus built in Chicago by angry and resentful UAW members?”
This is one of the more interesting generalizations in the media. You should buy the vehicle at the place where the workers are ‘happiest’. Oh, and you shouldn’t buy a car on a Monday (hangover day) or a Friday (party day. All the best cars are made between 10:00 P.M. and 2:00 P.M., and only if they have the options the foreman likes.
“Is almost any car made in a non-union plant a safer bet than a vehicle built by UAW members who hate their employers so much they’re willing to ruin all lest the company “win”?”
As the Rev. Jesse Jackson would say, “If the VIN don’t say J, you shouldn’t pay.” Seriously, the union vs. non-union issue is a non-issue. The unionized NUMMI plant in Fremont CA was the highest rated plant in the US way back in the mid-1980’s. Since then a large number of union and non-union factories have won that honor.
The real issue taking place in this business is how the decontenting of vehicle components is leading to a long-term decline in vehicle quality and durability. But that’s a discussion for another day.