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UAW Corruption Probe May Complicate Labor Deal With GM

UAW Corruption Probe May Complicate Labor Deal With GM
A UAW worker takes her time crossing the street, as nonstriking salaried workers wait to gain access to GM's plant in Flint, Mich. (Jeff Kowalsky/AFP/Getty Images)

By    |   Thursday, 26 September 2019 06:14 PM

Wall Street analysts say the United Auto Workers strike against General Motors is costing America's No. 1 auto maker up to $100 million a day -- and that’s about to go way up.

The reason: GM has announced it will continue to cover the health-insurance costs of employees walking the picket lines. About 50,000 workers are on strike.

GM Vice President of Labor Relations for North America Scott Sandefur wrote a letter Wednesday to UAW Vice President Terry Dittes, stating: “GM has chosen to work with our providers to keep all benefits fully in place for striking hourly employees so they have no disruption to their medical care, including vision, prescription, and dental coverage.”

In what many observers saw as an important good-will gesture, GM said Wednesday it would keep paying for health benefits out of concern for workers’ welfare.

“Throughout this negotiation,” Sandefur wrote, “GM has said that our No. 1 focus was on the well-being for our employees. That remains the case today.”

Some UAW communiques to workers had suggested they had no insurance coverage. In fact, the workers continued to be eligible for coverage through COBRA.

GM officials, however, stepped in to restore workers’ company-based healthcare coverage to stem any confusion.

That won’t be cheap: GM defrays 97 percent of its workers’ healthcare costs; workers pay the remaining 3 percent. According to the Society for Human Resource Management, large U.S. employers typically pay about 70 percent of their employees’ healthcare costs on average .

Some 33 GM manufacturing plants scattered across nine states have been affected by the walkout. The Wall Street Journal reported the strike could cost GM between $50 and $100 million per day, based on a Citigroup analysis.

Although GM’s losses continue to mount, the general fallout to the U.S. economy has been limited. Most dealers say they have about a two-week supply of vehicles to sell.

GM-certified replacement parts are said to be increasingly hard to come by, however -- auto shops tend to order them on an as-needed basis. Operations at 22 GM parts-distribution warehouses have also been affected.

In what industry insiders viewed as a sign of progress, UAW Vice President Dittes announced Wednesday: “All unsettled proposals are now at the main table and have been presented to General Motors, and we are awaiting their response.”

Pushing the negotiations out of the subcommittees and on to the negotiating table, where they can be addressed systematically, is seen as a positive sign in a labor action that has dragged on longer than most expected.

The walkout caught some observers by surprise considering the favorable terms in GM’s initial proposal, including a 4 percent pay hike, a $8,000 bonus for ratifying the deal, and $7 billion investment investment in 10 facilities that would create some 5,500 new jobs.

Kovacs remarks: “That’s 5,500 new members and new dues payments as well. It is shocking that the UAW was concerned with the loss of members due to automation, that they wouldn’t agree to a deal that would invest so much in the United States and create new members for them.”  

The major sticking points are now said to over wages, profit-sharing, and a faster-route to full-time status for temporary workers who comprise about 7 to 10 percent of GM’s workforce in any given year.

Also looming over the UAW workforce, although largely absent from this negotiation: The anticipated introduction of less expensive hybrids and fully electric automobiles and trucks, which have about 80 percent fewer parts than internal-combustion vehicles, and are expected to require fewer workers to produce.   

Trey Kovacs, policy analyst at the Competitive Enterprise Institute (CEI), tells Newsmax the UAW strike is remarkable in several respects.

“I certainly haven’t seen anything like this,” he says.

It is the UAW’s longest strike against GM since 1970. Also, negotiations have been complicated by an expanding federal probe involving the IRS, the FBI, and the Labor Department into alleged corruption and kickbacks by UAW officials.

CNBC reported earlier this month that federal prosecutors have charged Jeffery Pietrzyk, a retired former top aide of United Auto Workers Vice President Joe Ashton, with conspiracy to commit wire fraud and money laundering. He became the 11th person to be charged in the ongoing UAW corruption probe.

The Pietrzyk charge comes just two weeks after one of his alleged co-conspirators, Michael Grimes, pleaded guilty to charges of taking kickbacks from union vendors.

The Detroit Free Press reported on Aug. 28 that the FBI and other federal agents had raided the homes of current United Auto Workers President Gary Jones, and Jones’ UAW predecessor, Dennis Williams, who lives in California. Neither has been charged with wrongdoing, nor has Ashton.

Also raided last month: The Wisconsin home of a former Williams aide, a regional UAW office in Missouri, and the UAW’s conference center in northern Michigan.

A federal complaint details lavish spending by some union officials, including a dinner at a restaurant that cost $6,600, including four bottles of Cristal champagne that cost over $1,700.

One Labor Department court filing stated the investigation had uncovered “a multi-year conspiracy involving senior UAW officials embezzling, stealing, and unlawfully and willfully abstracting and converting UAW funds to purchase luxury items and accommodations for their own personal benefit.”

Mark Fields, the former CEO of Ford Motor Co., recently said the corruption probe could make it harder to get a labor pact ratified.

“When you reach a tentative deal, the [companies] are relying on the union leadership to sell that to their rank and field,” Fields told CNBC. “So it doesn’t weaken the UAW’s negotiating power, but what it does do is weaken the loyalty and the trust that the rank and file have in the leadership.”

Indeed, Kovacs suspects UAW leaders called for the strike despite “a pretty good” offer from GM because union leaders feared they lacked enough member support to win a ratification vote.

“UAW officials could have agreed to a contract with GM, but they feared that they couldn’t sell it to membership,” he tells Newsmax.

“The rank and file still would have had to sign onto the contract,” Kovacs says, “and when a bunch of union officials are being indicted or convicted of bribery and kickbacks, embezzling members’ dues, and stealing money out of worker-training funds meant for UAW members, you can see why they might not believe that whatever the UAW is bringing to them is in their best interest.”

The UAW’s messaging in response to the corruption probe has been mixed. At times the union has condemned the conduct of former officials, but on another occasion said the government had “misconstrued any number of facts.”

The labor impasse also has political overtones during a presidential election cycle. Michigan is a key battleground state that could swing the election, and the UAW is viewed as closely allied with the Democratic Party.  2020 Democratic presidential candidates have joined UAW workers on the picket lines to show their alliance with organized labor.

“Auto workers deserve good wages, comprehensive benefits, and economic security,” progressive Sen. Elizabeth Warren tweeted out earlier this month. “I stand with @UAW as they strike to get what they deserve, and urge GM to come to the table and negotiate in good faith.”

In a recent statement to Fox Business, the UAW stated: “The UAW is focused on standing with our members from General Motors who are on strike. Our members are our focus and they stood up for GM in their darkest days. Now we need GM to stand up for us.”

The auto industry’s labor strife may not end once the GM-UAW deal is consummated. UAW workers have indefinitely extended their contracts with Ford and Fiat Chrysler, and will likely revisit them.

Further complicating the negotiations: New vehicle sales are trending down, after being flat for several years.

Edmunds has projected new U.S. vehicle sales will drop from 17.3 million last year to about 16.9 million in 2019.

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Wall Street analysts say the United Auto Workers strike against General Motors is costing America's No. 1 auto maker up to $100 million a day -- and that's about to go way up.The reason: GM has announced it will continue to cover the health-insurance costs of employees...
uaw labor, corruption probe, general motors, health insurance, labor negotiation, GM union
Thursday, 26 September 2019 06:14 PM
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