Show me the money: What the UAW got for GM workers in new contract
GM's 48,500 UAW members will get $5,000 "signing bonuses." This is money GM will pay the UAW's hourly auto workers in a lump sum instead of giving them cost of living (COLA) raises over the course of the four-year contract. That means they get a bonus that will siphoned as a one-time cost from company profits instead of a raise.
While that sounds like a lot of money, when you run the numbers you'll find out that it isn't. Not really. GM's $5,000 bonus payout comes to an average of $1,250 per year per UAW member, or about $25 a week for four years. It amounts to about a 2% increase in compensation for a veteran UAW worker who is paid about $30 an hour.
Most veteran union auto workers from GM and Ford Motor Co. make in the neighborhood of $60 per hour when taking into account their pay and benefits. Chrysler Group counterparts lag at $48 hourly, including benefits. That's a compensation gap of 20% between Chrysler and GM and Ford. Crain's Detroit Business estimates that a veteran GM auto worker earns $116,480 in annual wages and benefits.
Paying the bonus is a business decision for GM. Workers forsake hourly raises to get immediate financial gratification. The company is not being magnanimous just for fun. There is a true benefit to GM for paying up right now.
It makes sense for GM to pay one-time bonuses with no taxes being taken out instead of providing COLA raises because it gives the company tax advantages. At the same time, paying bonuses from profits instead of approving permanent wage increases depresses worker pay while not harming monthly cash flow. In the event of a layoff or dismissal, that means GM would have to pay a worker less severance pay and less in jobless benefits through the state unemployment office.
The 2011 contract is expected to give newly hired and entry-level auto workers base pay raises of up to $3 per hour. That's almost 22% higher than the current rate of $14 per hour for new auto workers.
It sounds like a lot of money on paper, but veteran UAW colleagues are still getting almost twice as much money as the new people, even with the raises.
The move lets the UAW placate new people who will complain that they work just as hard or harder than highly paid veterans. The union can say they've fought to get the new people more money. At the same time, the union has been able with this deal to protect everyone's pensions while giving veterans security for their six-figure compensation, even if won't be growing exponentially, as it did during GM's salad days.
Health-care coverage costs have had all auto workers in pins and needles in recent memory and 2011 is no exception. The good news for all of GM's UAW members is that there are not expected to be any new or higher fees for the improved health-care coverage they've been told they'll get.
The union has been expert for years in keeping these costs down. GM UAW members currently pay only 7% of their health-care costs, which is unheard of in this day and age. That saves GM-UAW workers an incredible amount of money compared with the rest of the real world when it comes to co-pays and deductibles.
Numerous variables make it hard to quantify how much money this great benefit won by the UAW saves each GM auto worker because the savings amount can vary wildly. What is known is that in 2010, GM paid out $665 million for its UAW members' health care. That came to about $13,800 that each UAW member did not have to pay to provide outstanding health-care services for each worker and his or her family.
Hawke Fracassa covers the automotive industry from Detroit for TN. You can reach him at firstname.lastname@example.org or (248) 747-1440. Or follow him on Twitter @HawkeFracassa.
Image source: Wikipedia
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