Detroit Free Press: Marick Masters on repercussions of GM, UAW standoff

General Motors stopped paying for health care coverage for striking workers Tuesday, the company confirmed. That means striking GM union workers are eligible for union-paid COBRA to continue their health care benefits. The latest development added to tension as GM and the UAW returned to the bargaining table Tuesday morning. The two sides negotiated until about 9 p.m. Monday, sources said. Meanwhile, more details emerged about GM's offer to the UAW. Two sources familiar with GM's offer said it called for a 2% wage increase for the first and third year of the four-year contract and 2% lump sum payments the second and fourth years. UAW members are emotional after GM moved to shutter U.S. plants, so the fear that the automaker wants to break the union is understandable to Marick Masters, business professor at Wayne State University who specializes in labor. But he said, it's not realistic. “If that were the case, they could take more draconian measures, such as hiring other workers, encouraging people to break the line and go back to work or GM could have had a workforce ready to hire before this even started,” said Masters. GM likely knows it will have a union for the foreseeable future, which is why it is structuring a contract that allows it to be more cost competitive against nonunion automakers, he said. That means having the ability to have a larger temporary workforce and multiple wage tiers is crucial to the carmaker. But the two sides must reach an agreement in short order for several reasons, he said.

“The auto industry is not a particularly attractive industry to invest in to begin with, so Wall Street will lose patience with GM quickly if there is still no agreement in a few days,” said Masters. If the strike is prolonged to say 54 days, he said that would amount to GM losing $2.7 billion, about 25% of GM’s free cash. “That a good chunk of money to lose,” said Masters. “They have huge investment needs and very little to spare.” Finally, a long strike increasingly sours relationships with workers. “GM is in the business of trying to recruit and hire the best talent they can get,” said Masters. “People see the strike and they ask, ‘Is that a company I want to work for?’ GM has likely the worst reputation among the automakers due to the legal problems it’s had, and it’s known as ‘Government Motors.’ It has a reputation as a huge bureaucracy. Strikes are pretty rare today and so for the average person who looks at this, they think this is everything that is wrong with the industry.”

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