U.S. Markets closed

GM’s Offer of a Lifeline for Lordstown Had a Catch: Lower Pay

David Welch

(Bloomberg) -- When General Motors Co. made a deadline-day offer for a new labor contract to the United Auto Workers last week, it came with a gift. The company was prepared to build batteries in an Ohio town that’s been sweating the prospect that half a century of car-making will come to an end.

But there was a catch. GM and an as-yet-unnamed battery supplier for its next-generation electric vehicles would offer wages similar to what the automaker pays non-assembly workers who top out at $17 an hour, according to people familiar with the proposal. Senior-level plant staff make roughly $30 an hour. The shortfall is one of several reasons the union rejected GM and went on strike.

For the UAW, who builds electric vehicles and how much they earn is an existential issue. Negotiators are already trying to get a better deal for temporary and less-tenured workers who don’t make the top assembly wage -- part of a tiered-pay system set up to rebuild union ranks in the wake of the recession. If it caves to GM again, the UAW fears it will be chasing wages for a generation.

Read more: In Strike at GM, Old Grievances Get Retooled for a New Era

There are also grave concerns with essentially incentivizing GM to plow money into plants making battery cells and packs -- which may require less labor and likely use more non-union sub-assembly components -- at the expense of unionized factories making engines and transmissions for gas-burning autos.

Big Stakes

The implications are much bigger than just the future of Lordstown, where GM idled a car plant in March, much to the chagrin of President Donald Trump. The project GM has planned is to make batteries for some of the 20 electric models the company has vowed to sell globally by 2023, potentially including the electric trucks that were part of its offer to the UAW. It’s a key component of GM’s transformation and will employ a lot of workers, one of the people said.

GM has reason to view its offer as a gift. Right now, GM buys batteries for its Chevrolet Bolt electric car from South Korean supplier LG Chem Ltd. The UAW doesn’t represent those workers.

The largest producer of electric vehicles is Tesla Inc., whose Chief Executive Officer Elon Musk has vehemently and publicly opposed the UAW. A Tesla employee who called for forming a union at the company’s assembly plant in 2017 claimed assembly workers there made between $17 and $21 an hour, though they also are compensated with stock options.

A union-represented battery plant in Lordstown would position the union for the electric age. But rather than see the offer as a way to add new members for decades to come, the UAW fears spend it will spend that time fighting to restore the level of pay and benefits won over the past 80 years.

The battery factory would not be located in GM’s idled Lordstown assembly plant. GM wants to go forward with a plan to sell the facility to a venture overseen by fledgling electric-vehicle maker Workhorse Group Inc.

The Union’s Worries

The UAW already has reservations about electrification. In a white paper published earlier this year, the union estimated 35,000 jobs at engine and transmission plants could be wiped out as electric vehicles become the norm. It’s worried that assembly of electric vehicles, which require fewer parts, will be a drag on jobs.

“The production of new EV components could shift business and employment to non-auto companies that lack a large U.S. manufacturing base,” UAW researchers wrote in the white paper. “This could undermine auto job quality by shifting work to employers with no history of manufacturing labor relations or to companies more likely to import components.”

There is a similar issue, though much less contentious, at GM’s so-called Poletown plant that straddles the line between the traditionally Polish town of Hamtramck and Detroit. GM also has offered to build new electric vehicles there, which would give the factory life after January, when the company ceases production of the sedans it’s been making. If the union agrees, Hamtramck would make a line of battery-powered pickups and SUVs.

Orion Precedent

While assemblers in Hamtramck would be covered by GM’s main contract, the company would likely want to include provisions to pay some workers at a lower wage, the people said. The automaker already has a subsidiary called GM Subsystems Manufacturing LLC that makes battery packs in Brownstown, Michigan, and does non-assembly work in other plants, such as handling of parts and materials. Those workers top-out at $17 an hour.

The Chevy Bolt plant in Orion, Michigan, has such a deal in place, along with GM’s plant in Lansing making Chevy Camaro muscle cars and Cadillac sedans.

For all its concerns, the UAW does see building electric vehicles as a possible lifeline for a union that’s seen membership fall precipitously from its peak in the 1970s.

Electric vehicles “could be an opportunity to re-invest in U.S. manufacturing to produce the vehicles of the future under high-road working conditions,” UAW researchers wrote in the white paper. “But this opportunity will be lost if components are imported from other economies or shifted to low-road employers that pay wages below U.S. manufacturing standards.”

--With assistance from Dana Hull.

To contact the reporter on this story: David Welch in Southfield at dwelch12@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Chester Dawson

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.