Behind the GM-UAW strike: Two combatants with something to prove

GM executives were on the cusp of a downturn in the market and wanted to spend billions on new technologies. They decided they needed to make $ 6 billion in cuts – in six weeks.

From those broken corners, negotiations began in Detroit this summer, and collapsed on Sunday, as the UAW convened its first nationwide strike against GM in more than a decade. The action sent tens of thousands of factory workers to the picket lines and stopped production at more than 30 US plants.

The work stoppage is among the United States' largest private sector walkouts in many years. Analysts estimate that it costs GM $ 50 to $ 1[ads1]00 million per day in lost profits. GM's competitors –

Ford Motor
Co.

and

Fiat Chrysler Automobiles

NV – has a lot of riding on the result of this mortality. UAW will use the contract that GM agreed to as a template for talks with the other two US automakers.

It is a confrontation that has been building for several years, with the two major institutions, both under acute pressure, driven by divergent goals. Negotiations continue this week. Even after a contract is finally reached, the relationship may have changed permanently.

On the one hand is GM's CEO

Mary Barra,

trying to shed the carmaker's long-standing reputation for ignoring problems. She aims to show Wall Street that today's GM is leaner and more confident than the one that collapsed in bankruptcy a decade ago.

On the other hand is UAW, an organization that once ruled the automotive industry, but now confronts decline and dissent from within – partly driven by the popularity of President Trump among its members.

As sales in the US auto industry slowly, after a historic run, both sides are trying to lock in a new employment agreement that will protect their respective livelihoods in the years to come.

UAW leaders say they called the strike after negotiations for a new four-year labor agreement struck silence, with the two sides far apart on questions that ranged from salaries and health care to the use of temporary workers.

The tone had been set months before contract talks officially started. UAW executives met at a casino in Atlantic City in May to discuss tactics, and an air of anger permeated the meeting, people said.

Two months earlier, GM had shut down a major assembly plant in Lordstown, Ohio and let hundreds of people go, and the nation's largest car manufacturer had sales to close three US factories.

Gary Jones,

UAW president, told the Atlantic City gathering that GM's decision fundamentally changed the union's relationship with the company and would cast a shadow over the negotiations.

"They said it was a different feeling – a shift from upper GM leadership," he said

Dennis Earl,

a union leader from Toledo, Ohio, who attended the meeting. "It was arrogance."

GM leaders have defended the closure of the plant as the kind of bold move that the old GM would have thrown away. The two largest factories to close – the one in Lordstown and another in Detroit – sputtered with less than half their capacity, building cars that a dwindling number of people will buy.

Wall Street analysts applauded the decision, saying that GM was taking steps to protect itself from a downturn.

Many workers say they feel betrayed, after sacrificing wages and benefits when the company went into bankruptcy in 2009, only to be pummeled by closures a decade later, as the company posts some of its strongest profits in history .

President Trump has ignited tensions by publicly plunging GM into the closures and attacking automakers, both foreign and domestic, for failing to build more cars in the US

Ms. Barra, a former plant manager, worked well with UAW for much of his career. After a staggering 54-day strike in 1998 at GM's assembly plant in Flint, Mich., She was assigned an internal communications post to repair relationships between UAW members and the company.

However, under her CEO, she was frozen relations between GM and UAW.

In the last round of collective bargaining, in 2015, GM executives were upset about getting stuck in a contract that was more expensive than they originally predicted, people familiar with the matter said.

Union officials and GM dealers had been working together for several months in relative harmony, and GM leaders believed UAW leaders would choose GM as the leading company in the negotiations. Instead, the union chose Fiat-Chrysler, which agreed to a more expensive deal that GM then had to follow, the people said.

The same year, GM confirmed that it would import a small Buick crossover called Envision from China to the US Union leaders called the model "Invasion."

For much of her nearly six-year period, Ms. Barra has worked to fix GM's overseas operations, including the sale of the company's European business, which lost money for two decades.

In recent years, GM's profitability has increased as sales of the US car industry remained strong and customers switched to buying more expensive trucks and SUVs. – Long the company's sweet spot. GM posted a record profit of $ 12.8 billion in 2016 and again in 2017, before falling to $ 11.8 billion last year.

"You kick ass," analyst Morgan Stanley

Adam Jonas

told Mrs. Barra at an investment conference in January. “Private investors come up to me all the time and say 'Where does this come from? What GM is this? & # 39; ”

Barra has still had to fend off two separate activist investors and fight with a fixed share price.

Last year, GM intensified UAW workers by revealing that it would build a new Chevy Blazer, long a recognizable US nameplate, in Mexico – news that landed the same day the company laid off a shift of factory workers at the Lordstown plant.

In October last year, Barra's top management team convened at a conference space at GM's headquarters and said the company needed to prepare for a possible decline in US car sales, according to a person at the meeting. She gave her team six weeks to find $ 6 billion in annual cash savings, according to the person.

Newly appointed CFO

Dhivya Suryadevara

was to sharpen GM's focus on cash flow, believing it needed to better court investors, according to other people familiar with her role. With Ms. Barra's leadership team, she tried to tackle a problem that had long dragged GM's economy: for many North American factories that operated in just one shift.

The week after Thanksgiving, GM tried to work out a conversion plan: Four US factories and one in Canada were set to be "unassigned," meaning no vehicles will be built there in the near future. The move put more than 6,000 factory workers at risk of losing their jobs.

In a conference call with Wall Street analysts just after Thanksgiving, Ms. Barra and Ms. Suryadevara explained that the cuts would increase $ 6 billion in annual cash flow by 2020, helping GM finance electric and self-propelled vehicle technology, and to protect the bottom line in a downturn.

During the 22-minute call, the executives mentioned cash flow or cash savings more than a dozen times. They did not discuss how many jobs would be affected or the impact on employees.

President Trump blasted Barra for the decision. "They should damn well open a new facility there very quickly," he said in an interview with The Wall Street Journal on Monday.

That morning, in Lordstown, GM gave the news that the 53-year-old plant would soon be free – leaving many employees in tears as they worked their eight-hour shift.

In Detroit, where GM was to close a new factory, many workers returned to work after the weekend to hear the news – some only learned about it on social media or through press releases.

UAW's management was surprised to have been informed of GM's plans at the last minute. UAW Vice President

Terry Dittes,

the union's top negotiator with GM, called the move an argument for workers that he says were fixed by the company during the darkest days.

UAW membership, which last reached a peak of 1.5 million in the late 1970s, dropped to about 400,000 last year, the result of many years of downsizing and laying off of Detroit car companies and more work sent to Mexico , where labor is less expensive.

The union has tried to build development by trying to represent workers at the foreign owned car plants in the US south, but organizes stations at

Nissan Motor
Co.

,

Toyota Motor
Corp

and others have failed. This summer worked at 1 p.m.

Volkswagen
AG

The assembly plant in Tennessee voted to reject the union – UAW's second defeat there in five years.

Rank-and-file members are getting impatient, the profits GM is putting out and pushing for more in pay and benefits. Several workers are relying on President Trump, whose views on trade, tariffs and the revival of US production have reverberated. About a third of UAW members voted for Mr. Trump in the last election.

In June last year, the UAW elected as its president Mr. Jones, the union's former headquarters and a top official in the Missouri-based Region 5 office, which covers 17 states. Unlike many former UAW presidents, Mr. Jones was inexperienced in negotiations with the automotive industry and had not yet negotiated a national contract with one of the car manufacturers.

At a Detroit convention this spring, he made it clear that the union was ready to take a stand by using a confrontational tone that has not been heard in many years by a UAW leader.

"We are preparing for a conflict," Jones said amid cheering and blaring horns. He told members that the union increased the strike wage from $ 200 to $ 250 a week.

Mr. Jones is under pressure to show strength when a Justice Department investigation into leadership corruption belies workers' confidence in their top brass.

At Detroit's Labor Day parade earlier this month, a dozen unaffected UAW workers protested Mr. Jones's presence, asking for his resignation.

"I have zero confidence that they will get me a fair contract,"

Jeff Herrington,

a UAW worker at Ford's suburban Detroit transmission facility said before the parade.

Formal contract talks began in July with all three car manufacturers. In late August, federal agents searched the homes of Mr. Jones and his predecessor

Dennis Williams.

None of them are charged with a crime. The union has said that it cooperates with the investigation, and the search assignment was not necessary.

Trade union leaders pushed on with contract talks, and just after Labor Day, UAW GM chose to take the lead in the negotiations.

The week UAW's contract with GM expired, agents arrested another high-ranking union leader – this one closely related to Mr. Jones. The union leader has not responded to the charges.

GM executives asked UAW to extend the talks, and realized that union dealers would want to push the deadline back, people close to the discussions said.

Around 7 p.m. On Saturday, two hours before the existing contract expired, GM added elements to its offer to avert a strike. The proposal included salary increases, new jobs and a plan to salvage the Detroit plant, according to a person close to the negotiations.

UAW executives were unconvinced, and later told members in a letter that GM waited too long to make what they considered the company's first serious offer.

Instead of returning to the table the following day, more than 100 unions gathered in a windowless ballroom at GM's headquarters, where dealers had negotiated with the company, according to people close to the talks.

Mr. Yours, the union's main negotiator with GM, told them that the two sides "were miles apart and GM was not negotiating in good faith," said one participant.

They voted to strike. The proposal received a resounding "yes," people at the meeting said. The "no" voice was met with silence.

Write to Mike Colias at Mike.Colias@wsj.com