Personal Finance

CAW Reaches Deal With GM

No sooner had I labeled the head of the CAW as a dreamer for thinking that he could reach a deal with GM that didn’t involve some sort of wage and pension reductions, then lo and behold – that’s exactly what he did.


Apparently the original story was wrong and the union did give some wage concessions – I guess I should have waited a while longer before posting this. 🙂

According to this Globe article – the deal reduces the total compensation (wages and benefits) by about $7 per hour to $63/hour.  This doesn’t seem all that dramatic but it’s a good show of faith by the CAW.  I suspect they will have to give up more in the future but the real cost savings will be in head count – as in a lot less of them.

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My first thought was why the heck did GM agree to this deal?  It seems quite obvious to me that significant salary cuts are needed – both in hourly wages and a reduced work force.  It could be just one more example of how GM (and the other car companies) are incapable of negotiating properly with the unions but I think maybe some of these factors might also have been at play:

  • This deal was made just to get the bailout money.  The companies and unions have to show some serious money savings in order to qualify for the bailout so they put together a deal which they feel is the “minimum” necessary.  If I was in charge of the bailout money – this deal wouldn’t get a dime.
  • Given the worsening financial situation at GM, this deal might not mean much if they file for bankruptcy in a few months which I think is going to happen sooner or later.  Even if they don’t file – financial conditions in a few months might mean this deal becomes irrelevant anyway.

8 replies on “CAW Reaches Deal With GM”

Sadly, I suspect the answer is Option B. GM could agree to almost anything at this point but if it is too obvious, Option A might not work. Sales number are not good (read awful) , consumer confidence is… well isn’t anymore and restructuration under the CCAA in Canada (not bankruptcy yet) can be quite a deal. Just remember Air Canada.

The next few weeks will tell. My heart still goes to the workers.

Nicolas, it will be interesting to see what the government does – do they accept this type of deal and hand over the bailout money? or do they make them do more cuts and restructuring? That would be interesting if the government has to be the bad guy because GM won’t.

Thanks for the link Mike.

I still see the government at some point supporting them through Chapter 11….I just can’t see how any concessions in this economic environment will dramatically change the economics of their business model. Even if they get costs under control the demand/sales for their product is still far under profitable market conditions.

Let the government take over the company for a 40% premium and I bet that’s still 1/3 of what the overall cost would be in continued bailout money. This sucker has to get “lean and mean”, not just lean and current management needs to be shown the door. Set an example: “You want help?……bye bye!” 🙂

Nurse – you’re right about management. I think GM last made a profit in 2004? So it’s not just the latest downturn that has caused their problems.

I think Option B is what’s going to happen.

the unions probably gave up the concessions so they don’t look like the bad guys that forced the bankruptcy.

It’s all optics and positioning. Reality is money is not GM’s issue and hasn’t been for some time. It’s a symptom and more capital delays what is looking more inevitable.

I know it sounds a bit drastic, read somewhat foolish, but if I was the one doing the “giving” in regards to the bailout money needed, this is what I would do:
1) Change the executives and CEO – they’ve shown they know how to make bad investment decisions and how to spend recklessly…
2) CAW needs to drop another 10$/hour. Average employee makes 70K; you want to keep your job, well times are rough & you need to show how much you want to keep it. You don’t want to, out the door you go. (remember Reagan & aircraft controllers??)
3) I would want to have at least 50% of the loan guaranteed (now I know I’m dreaming, the US has it all but what the heck..)
4) Lastly, and this is the big one, give them 1 year to turn the company around, i.e: get new cars ready, whether they be electrical, small, big, I don’t care, make cars people will want to buy!!!

Nobleea – I think you’re right – the union doesn’t want to be the bad guys.

Mark – I think the loans are “guaranteed” – but the guarantee is only as good as the company that backs it.

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