GM cuts Historic Deal with UAW

General Motors and the United Auto Workers, the largest automotive worker union, reached an historic deal to manufacture a subcompact car in the United States. At a time when many US plants face closure or reduced operation, this is great news of workers, consumers, and management.

Dave Barkholz of Automotive News reported this news on Monday, October 4:

The UAW has negotiated a landmark local labor agreement with General Motors Co. that should allow the automaker for the first time to produce a subcompact car profitably in the United States.

The agreement calls for just 60 percent of all hourly workers at GM's assembly plant in Orion Township, Mich. -- where the Chevrolet Aveo will go into production next year -- to receive traditional production wages of $28 an hour with full benefits, said Mike Dunn, shop chairman for UAW Local 5960.

The other 40 percent will receive a so-called Tier 2 wage equal to roughly half that of so-called legacy workers.

Effectively, that means about 900 of the 1,200 to 1,500 workers on layoff at the plant will be able to return at full wages and benefits, Dunn said. The remaining workers on layoff will have the option of coming back with Tier 2 wages and full benefits or seeking a transfer to another GM plant, he said.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20101004/OEM01/101009947/1261#ixzz11bhIueXd

I believe this deal is good news for all involved parties. Not only will it put laid-off workers back to work, it will also cut GM's wage costs, allowing the company to competitively manufacture a small and fuel efficient car for the US market, the Chevy Aveo. Currently, the Aveo is manufactured in South Korea. It is an underwhelming vehicle at best. When it first came out, it sold pretty well because it cost just $10,000. People looking for a really cheap new car found one in the Aveo. But over the past few years Honda brought the Fit to US shores, as did Nissan its Versa and Toyota its Yaris. These three cars are leagues better than the current Aveo.

The next-generation Aveo, on the other hand, it a sporty-looking machine with a fairly nice interior (for a subcompact). This small car will allow GM to be competitive in the subcompact segment, and they should be able to turn a profit on the selling of this car. According to Mike Dunn of the UAW, "The wage agreement is expected to reduce GM's labor costs enough that the automaker can make a profit on the small car."

For the most part, subcompact cars are not made in the USA. Because of the cars' cheapness, labor costs are too high to manufacture subcompacts in America. For example, Ford's new small car, the Fiesta, will be manufactured in Mexico, where labor costs are lower.

Unionized workers would not typically be open to the lower wages imposed in this deal, but with the sharp decline of auto sales, and the subsequent lay-offs, many workers are just happy to have a job.

I find this deal encouraging, especially as GM continues to roll out highly competitive vehicles to compete with the like of Toyota and Honda. This deal between GM and the UAW is just one small step on GM's rode to redemption.