GM Backs Down On Cutting Off Healthcare For Its Striking Workers

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General Motors decides to “do what’s right” after considerable pressure and criticism, Toyota deepens its ties with Subaru, auto workers fear the labor impact of electric cars and more for this Morning Shift of Friday, Sept. 27, 2019.

1st Gear: GM Will Pay For Striking Workers’ Healthcare

GM’s union workers remain on strike for the 12th day, but they return to the picket line with their healthcare intact.


Last week GM shocked the United Auto Workers and outside observers alike by ending healthcare coverage for striking employees, shifting the costs to the union’s strike fund. That move by GM was anticipated, just not so early on, and as you might guess it looked gross for lots of reasons, including GM’s handsome profits at present and healthy executive pay.

But after criticism from the public and lawmakers, and after realizing it probably won’t be the workers who back down this time, GM has opted to reinstate healthcare for those on strike. “This is truly an attempt to do what’s right for our employees,” spokesman Dan Flores told The Detroit Free Press.

According to interviews Jalopnik had with UAW officials yesterday, GM may have also been contractually obligated to do this, at least through the end of the month.

More from the Freep:

The health care reversal comes as GM has endured withering criticism over its initial decision.

Democratic presidential candidate Bernie Sanders used the issue along with GM Chairman and CEO Mary Barra’s $21.87 million 2018 compensation to shame the company as he rallied workers Wednesday outside the Detroit-Hamtramck Assembly plant.

“They think they’re going to force you into submission. Imagine a company where the CEO gets $22 million and then they cut the health care benefits of their workers,” the senator from Vermont said.

A source with knowledge of the talks charged that GM didn’t mind using the issue as leverage but chose to reinstate health care because its image has been tarnished.

Terry Dittes, who is leading negotiations with GM for the UAW, noted in a letter Thursday to Scott Sandefur, GM’s top negotiator, that GM’s “irresponsible actions” related to health care had been “toying” with the lives of UAW families.

Labor experts had also questioned the tactic.

“They’re pouring gasoline on the fire,” Harry Katz, the Jack Sheinkman professor of collective bargaining at the School of Industrial and Labor Relations at Cornell University, told the Free Press last week. “This induces the workers to get more angry. GM thinks this will scare them or get them to rethink the cost of their benefits. I think it’s going to backfire. It’s quick, rash and insensitive.”


Either way, that has to be a huge relief for striking workers and their families (and, if I may be so bold here in the Morning Shift, it also shows what a ridiculous idea employer-paid healthcare is.) But as the Freep also notes, both GM and the UAW are still “far apart” on negotiations, and it could be a week or two more before we see a tentative agreement.

That means this is going to end up being quite costly for the automaker, which has already lost half a billion dollars to the strike.


2nd Gear: American Axle Plans Temporary Layoffs During GM’s Strike

But the auto industry is a big one that’s more than just car plants. One supplier, Detroit-based driveline manufacturer American Axle, said it’ll do temporary layoffs as GM goes on strike. GM is American Axle’s biggest client, responsible for 39 percent of its revenue. Via Bloomberg:

American Axle has started to lay off workers at a plant in Michigan due to the United Auto Workers’ strike against the supplier’s largest customer, General Motors, and Chief Executive Officer David Dauch expects some financial impact from lost revenue.

“We’re continuing to run the majority of our operations, although we do have some people that we’re putting on temporary layoffs” at a factory in Three Rivers, Michigan, Dauch said in an interview Wednesday.


3rd Gear: Toyota And Subaru Deepen Ties

More and more, consolidation is the name of the game in the car business as automakers face an expensive and uncertain future around electrification and autonomy, not to mention a possible economic downturn somewhere on the horizon. You’re seeing everything from team-ups to outright acquisitions as a result.

The next up to work together more are Toyota and Subaru. Toyota’s boosting its stake in the much smaller automaker, and the two will collaborate on even more new vehicles. Via Bloomberg:

Subaru, the maker of Forester and Outback wagons, will also take a stake in Toyota, strengthening their capital ties and collaboration, according to a statement from the companies. Toyota, which is increasing its holding to about 20% from 17% at a cost of about 75 billion yen at Friday’s closing price, plans to make Subaru an equity affiliate, bringing sales and profit from the automaker onto its income statements.

As part of their pact, Toyota and Subaru will jointly develop all-wheel drive vehicles – a traditional Subaru strength. The companies will also together work on the new Toyota 86 and Subaru BRZ sports cars.

“For Toyota, this alliance brings not just technologies such as Subaru’s i-Sight, all-wheel-drive and flat engines, but also safety and security know-how,” Yoshida said. “It brings in elements that Toyota doesn’t have.”


Hell, I’m just glad the 86 and BRZ are coming back.

4th Gear: Tesla’s Delivery Forecast Optimistic

I feel like it’s been a while since we’ve really talked about Tesla here on The Morning Shift. Besides an intriguing Nürburgring showdown, Tesla feels like it’s spent most of this year doing normal things that normal automakers do—stabilizing production and cranking out new cars as it prepares to unveil new models in the coming year and beyond.


Whether it can deliver on all of that—Model Y, Semi, Roadster and so on—remains to be seen, but CEO Elon Musk told employees the company is well-poised for a new delivery record. Shares were up as a result.

Via Bloomberg:

Tesla Inc. shares climbed the most since June after Chief Executive Elon Musk said in an email to employees that the carmaker has a chance to top the vehicle delivery record it set in the second quarter.

“We have a shot at achieving our first 100,000-vehicle delivery quarter,” Musk wrote in reference to the quarter ending this month. “Net orders are tracking to reach about 110k, so demand is strong.”

Tesla’s stock rose 6.1% to $242.56, the biggest gain in almost four months. The advance pared this year’s decline to 27%.

Musk, 48, has made a habit of sending end-of-quarter staff emails to rally the troops pursuing production and delivery goals. If Tesla were to hand over 100,000 vehicles each of the last two quarters of the year, deliveries would roughly reach the low end of the 360,000-to-400,000 range the company has forecast for 2019.


5th Gear: Auto Workers Fear Disruption

To wrap up a lot of things we talked about today, here’s one last story from Bloomberg about how auto workers—including those on the strike or watching it unfold—are quite fearful about electric vehicles. Specifically, how they have fewer parts and generally require less labor to build, threatening their jobs.

In fact, one study cited in the story said it takes 40 percent fewer hours to assemble an electric motor and battery than a traditional engine and transmission. And “engines and transmissions currently account for just under half of automaker manufacturing capacity,” which I did not know until now.


So even if EV car output is the same as ICE vehicle output—an outcome many, many years off—they should require less labor to build.

Dread over the prospect that plug-in cars — which have fewer parts and require less labor to build — will doom auto jobs helped spark the first United Auto Workers strike against General Motors Co. in over a decade. Ford Motor Co. and Fiat Chrysler Automobiles NV, which are rolling their own battery-powered models to market in the coming years, could face a similar fate if they’re unable to quell the UAW’s concerns that widespread adoption of EVs endangers the employment of 35,000 union members.

“There’s a potential for our jobs to be gone — they don’t need us anymore,” said Tim Walbolt, president of the UAW local representing workers at a Fiat Chrysler transmission components plant near Toledo, Ohio. “It scares us.”


In current negotiations, GM says the shuttered Lordstown, Ohio plant could be used to make batteries, but “the facility is unlikely to need as many staff as an engine or transmission factory would.”

Reverse: It Didn’t Work Out


Neutral: Will EVs Disrupt Labor?

Do you think this is a labor-busting move or is there truth to it? If so, how do workers get ahead of that trend?