October 4, 2007 / 2:37 PM / 12 years ago

GM deal clears way for lower-wage hires

DETROIT (Reuters) - General Motors Corp will be able to replace roughly a quarter of its factory workers with lower cost hires under the tentative contract reached last week with the United Auto Workers union.

General Motors Canada employees assemble Chevrolet Impalas in Canada on March 2, 2005. GM will be able to replace roughly a quarter of its factory workers with lower cost hires under the tentative contract reached last week with the United Auto Workers union. REUTERS/J.P. Moczulski

The tentative contract identifies “in excess of 16,766” union-represented jobs that could be filled with new hires at roughly half the cost of current workers, according to a text of the document.

A majority of GM’s 73,500 UAW-represented workers must ratify the proposed contract in a series of local votes expected to conclude next week.

If approved, the deal would allow GM to slash the labor cost advantage enjoyed by Toyota Motor Corp and the two other Japanese automakers operating production plants in the United States.

The average UAW-represented GM assembly line worker makes just under $28 per hour now before health-care and other benefits that take total hourly labor costs to $73, the automaker has said.

By contrast, Toyota’s average hourly cost for workers at its U.S. plants was under $48 per hour including benefits.

GM and other U.S. automakers have argued that they need more flexibility to bring in lower cost temporary hires and the ability to fill janitorial and other jobs in their plants below the UAW-mandated wage scale.

UAW President Ron Gettelfinger said last week that the union and GM were negotiating a program of buyouts and early retirement offers for the automaker’s workers who are making the higher wages.

But it had not been clear until Thursday how much room GM would have under the terms of the contract to bring in replacements at lower wages and with less expensive health-care and pension plans.

Although the GM contract has been ratified by a large margin in the first votes by at least six local units, some union workers have expressed concern about the contract’s two-tier wage structure.

“Some people are happy about it because they will take the buyouts and retire, but most people are unhappy because they are on the line now and won’t get those jobs that would be converted into the lower wage,” Pat Sweeney, president of local 5960 at Lake Orion, Michigan, told Reuters.

UAW Local 5960 represents about 2,700 active members who assemble the Pontiac G6. The local has 620 temporary workers who would be made permanent under the contract, Sweeney said.

The UAW has distributed highlights of the contract to GM workers and retirees. Soldiers of Solidarity, a union dissident group that opposes many of the concessions in the proposed four-year deal, published a full copy of the tentative contract on its Web site.

In a side-letter to the contract, GM and the UAW also identified 3,126 jobs now outsourced to non-union companies that could be transferred to UAW-represented companies at the lower wage rates.

David Cole, chairman for the Center for Automotive Research in Ann Arbor, Michigan, estimated that the deal could cut GM’s labor cost disadvantage against Toyota to about $800 per vehicle from about $4,000 on the average car or truck.

The GM contract with the UAW has been expected to provide a model for Ford Motor Co. and privately held Chrysler LLC in talks that have yet to begin at a high level.

Both Ford and Chrysler have expressed some concern with aspects of the GM contract, according to people familiar with the matter, and could seek more cost cuts and fewer restrictions on their potential to shift production out of UAW-represented plants.

Additional reporting by Jui Chakravorty

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