GM dumped health care for striking workers. That poured gas on fire, expert says

September 2019

Phoebe Wall Howard, Detroit Free Press


DETROIT – Within 36 hours of the United Automobile Workers strike against General Motors, the Detroit automaker announced a decision to shift worker health care payments to the union immediately – a strategy that risks dragging out the strike, labor negotiators say.

“They’re pouring gasoline on the fire,” said Harry Katz, the Jack Sheinkman Professor of Collective Bargaining at the School of Industrial & Labor Relations at Cornell University. “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.”

In response to criticism, GM spokesman Pat Morrissey referred to the company’s statement released Tuesday: “We understand strikes are difficult and disruptive to families. While on strike, some benefits shift to being funded by the union’s strike fund, and in this case hourly employees are eligible for union-paid COBRA so their health care benefits can continue.”

Katz, though, compared the tone of the move to how GM abruptly announced planned factory shutdowns in November prior to contract negotiations, alienating workers in a way that made global news.

“It just doesn’t suggest a wellthought strategy,” Katz said. “It’s an unfortunate move by General Motors. They’re providing very good healthcare benefits. They should’ve just sucked it up.”

Hardball
The UAWsaid its lawyers are reviewing the move, which forces the union to more quickly tap its strike fund, which exceeds $750 million. Worker coverage would be picked up by COBRA, but the logistics are frightening to families of the 46,000 hourly workers during this time of uncertainty.

“This was done as a scare tactic,”
said a UAWsource close to the negotiations. “It was unnecessary.” Legal experts nationally question the wisdom of the decision. “This would really lay down the gauntlet,” said William B. Gould IV, emeritus professor of law at Stanford University and former chairman of the National Labor Relations Board. “It certainly shows GM is playing hardball in a big way. I think it’s a calculated decision to pressure the union. But it’s like throwing a red flag before the bull.”

It’s possible GM doesn’t believe that a prompt resolution can be realized unless the union can be squeezed, Gould observed.

In fact, a person familiar with negotiations told the Free Press that union negotiators have been distracted by legal activity involving the federal corruption investigation of the union.

Union has cash to fight Sources close to the negotiations said if the conflict “was likely to end in two or three days,” GM “may have gone a different route” and “just continued paying their health care.” But the situation felt “stagnant.” And GM reacted.

This illustrates missed opportunity, said Harley Shaiken, a labor expert based at the University of California, Berkeley whose grandfather worked at Ford Motor Co.

“This might have been a moment for a gesture by GM meant to show workers their value,” he said. “This was a
moment to rise above. And they didn’t. This was an ill-considered move that will anger ordinary UAW members without any corresponding gain for the corporation.”

The cost of lost production alone has been estimated at $50 million a day, analyst Dan Levy Credit Suisse wrote in a client note. Other analysts have estimated total costs to be twice that, depending on how calculations are done.

The cost of lost production alone has been estimated at $50 million a day, analyst Dan Levy Credit Suisse wrote in a client note. Other analysts have estimated total costs to be twice that, depending on how calculations are done.

Sources close to the negotiations say union officials have no problem absorbing the cost of health benefit payments in addition to paying $250 a week in strike pay, but making the payments retroactive to Sunday’s strike start came across as intentionally jarring – in a manner designed to startle GM workers.

“How is GM not worried about how workers would feel about this? They helped save this company when it was
going bankrupt and here they’re on strike for a day or two and the company does this. It doesn’t build goodwill,” said a source close to the UAW negotiations, noting that the union has a large strike fund. “Many
unions couldn’t weather this situation.”