How do strikes affect productivity?
The General Motors / United Auto Workers contract provides a dynamic window into these issues.
[Detroit] will have to deliver on their promises that they can create a New Detroit, with lower costs, leaner and more efficient factories and,most important, can build vehicles that more consumers want to buy.
With U.A.W. Accord, G.M. Looks to a New Detroit
By MICHELINE MAYNARD
The New York Times
September 27, 2007
For a generation, executives at the Detroit auto companies have complained that the huge cost of providing generous benefits for its unionized workers put them at a competitive disadvantage with surging foreign car companies like Toyota and Honda.
Now, with a new contract agreement with the United Automobile Workers reached before dawn yesterday, General Motors has taken a momentous step toward eliminating much of that burden, a step likely to be followed by Ford Motor and Chrysler.
The contract’s main feature — a health care trust called a voluntary employee benefit association, or VEBA — means that G.M. will no longer have to carry the debt it will owe for employee and retiree health care benefits on its books. Earlier this year, G.M.’s chief executive, Rick Wagoner, referred to those obligations as “very large and frankly formidable.”
That debt is estimated at $55 billion for the next 80 years. So G.M. will establish the trust with about 70 percent of that amount, making an upfront payment of cash, stock and other assets. The difference is expected to come from gains on investments by the trust.
In return, the union won guarantees that medical benefits for hourly workers and retirees and their families will remain in place for the next two years. G.M. will also invest money in its American plants, and will maintain its current union work force of 73,000, according to Ron Gettelfinger, the U.A.W. president.
“It’s a big step forward in dealing with this problem that’s been quite intractable,” said John Paul MacDuffie, a management professor at the Wharton School of the University of Pennsylvania.