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GM Ups Plant Investment Offer in Bid to End Strike

Oct. 11, 2019
The latest offer offers $2 billion more in total plant investment compared with GM's offer last month.

General Motors Co.’s latest offer to the United Auto Workers union included $9 billion of total investment in U.S. plants, about $2 billion more than the carmaker proposed nearly a month ago, according to a person familiar with the matter.

GM made the offer Monday in a bid to end a strike that analysts say has cost the company more than $1 billion of lost profit. Two of the automaker’s senior executives have appealed to rank-and-file employees since then and portrayed UAW leadership as dragging their feet in responding to its proposals.

“We object to having bargaining placed on hold,” Scott Sandefur, GM’s vice president of North American labor relations, wrote Thursday to UAW Vice President Terry Dittes in a letter obtained by Bloomberg. “As we have urged repeatedly, we should engage in bargaining over all issues around-the-clock to get an agreement.”

The UAW’s walkout has halted production at 34 U.S. plants and disrupted output at factories in Mexico and Canada. While GM publicly released details of its first formal offer to the union on Sept. 15 -- the day the UAW called the strike -- the company had until this week kept a lid on public criticism of union leaders, who themselves are dealing with a credibility crisis. GM is now upping the pressure on UAW brass in a bid to clinch an agreement.

Showing Frustration

“GM is frustrated with the pace of negotiations,” said Art Schwartz, a former GM labor negotiator who’s now a consultant in Ann Arbor, Michigan. “They gave the union a comprehensive offer on Monday, and it’s Friday and they haven’t had a response yet. If I had members out on strike, I would be responding within hours.”

GM shares rose as much as 2.4%, paring their decline since the strike began to less than 9%. While credit-rating companies initially warned of risk to the automaker if the walkout lasted more than a couple weeks, they’ve been reluctant to downgrade.

“GM has adequate liquidity to contend with a strike of this duration,” Bruce Clark, lead U.S. auto analyst for Moody’s Investors Service, wrote in a report Friday. The carmaker would start to forgo significant earnings if the walkout extends into late November, he said.

Early Friday, GM went public with a broad outline of the offer made at the beginning of the week, saying it would boost wages and lump-sum payments while also preserving health care benefits. Gerald Johnson, GM’s executive vice president of manufacturing, wrote to employees that the company was prepared to enhance profit-sharing, including by lifting the cap on how much is paid out based on the company’s earnings.

UAW members also would receive bigger ratification bonuses than in 2015, when each worker was paid $8,000 signing bonuses. And the offer gives temporary workers a clear path to permanent status, Johnson said.

“The strike has been hard on you, your families, our communities, the company, our suppliers and dealers,” Johnson wrote to employees. “We have advised the Union that it’s critical that we get back to producing quality vehicles for our customers.”

Security Concern

The investment offer from GM was aimed at sewing up one of the union’s major remaining concerns -- that underused plants could end up being idled or closed during the life of the agreement. UAW Vice President Terry Dittes said in two letters this week that the union wanted the company to offer more job security.

GM’s initial formal offer made in mid-September included plans to build electric trucks at a plant in Detroit, which is scheduled to run out of work in January, and to construct a battery plant in Lordstown, Ohio, where the company has idled a compact car plant. Those two investments remain parts of GM’s plans, the person said.

“GM definitely has moved; whether the union has moved off their demands, we don’t know,” Schwartz said. “Maybe they’re not responding quickly because the leadership is worried about ratification. They’re probably more worried about ratification than actually getting the deal done.”

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