Week 8: Strike Breakthrough

Finally, after 40 days of idle factories, the strike of UAW workers at GM plants has ended. The strike, which has been a major storyline of this blog since week 3, officially stopped when UAW workers confirmed the new labor deal with a 57% majority. Nora Naughton of the Wall Street Journal reports that the new deal, “includes better wages, hefty signing bonuses and a commitment from GM to invest $7.7 billion in its U.S. manufacturing operations, securing 9,000 jobs,” (WSJ). On the flipside, the deal allows General Motors to continue its plans to close three factories in the United States. To recoup losses for both groups, “the car company will schedule overtime,” (WSJ). Overtime makes up for lost production and allows workers who have been without pay for weeks an opportunity to earn back these lost wages. The strike is estimated to result in a bottom line hit exceeding $3 billion, in addition to, “$100 million or more a year in higher labor costs,” coming as a result of the new contract (WSJ). However, the company secured a big win with the factory closings, which economist Kristin Dziczek tells the Wall Street Journal, “will save billions,” (WSJ). The UAW will now use this template to bargain with two other auto makers whose workers it represents, Ford and Fiat. However, these companies do not wish to close factories, which will complicate those negotiations. (Sadly, if you would like to follow these negotiations, you may have to find another blog, I will most likely only write about them if they are relevant to General Motors).

Naughton notes that the strike, “crippled GM’s U.S. manufacturing operations and rippled through the broader economy,” (WSJ). The disruption cost GM, “roughly 300,000 units of lost vehicle production,” and, “also cut deep for GM’s auto-parts suppliers,” (WSJ). The broader effects of the strike will continue to be felt by General Motors, its suppliers, and the Midwest Economy as a whole.

Image Credit: Wall Street Journal

So, after this whole saga, who won? In some ways both parties won, but in other ways, all parties lost. Such is the nature of compromise. Workers gained the following: “better pay for new hires, a path to full-time status for temps and no changes to the employee health-care contribution … they also will receive a one-time $11,000” bonus for approving the deal (WSJ). The company won because they will move forward with the plant closures. However, the company lost out on billions of dollars of production which hurts its revenue numbers and therefore, its value. This missed production will hurt the broader economy, especially with respect to GM suppliers. This ripple effect will most likely continue to the consumers, which include GM employees represented by the UAW. However, this temporary blip in earnings (both for employees and the company) will hopefully be made up for by the increase in employee wages and the decrease in operating expenses for General Motors.



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