GM Will Raise Entry-Level Wage by $2 to $3 Per Hour

By David Welch - Sep 18, 2011 2:14 AM GMT+0700
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A worker puts a tire on a General Motors Co. 2012 Opel Ampera GM's European version of the Volt, at Detroit-Hamtramck Assembly Plant in Detroit, Michigan. Photographer: Jeff Kowalsky/Bloomberg

General Motors Co. (GM) will increase entry-level pay by $2 to $3 an hour as part of a tentative agreement on a new four-year contract with the United Auto Workers, said two people familiar with the accord.

Starting pay will increase to about $16 an hour from $14 and rise to about $19 an hour from a previous maximum of $16, said the people who asked not to be identified disclosing details before they have been presented to union members for ratification. UAW President Bob King had said getting those workers a middle-class lifestyle was his highest priority.

“This is a wage gain in an economy that is cratering in some places,” Harley Shaiken, a labor professor at the University of California at Berkeley, said in a telephone interview today. “It’s an important symbol.”

GM will also pay a record $5,000 signing bonus if a majority of the 48,500 hourly workers vote to ratify the accord, the people said. That would cost the Detroit-based automaker $242.5 million. The accord also includes new jobs and better profit-sharing, the union said. Ratification votes will probably be held within 10 days, GM said.

The new entry-level wage will get workers close to the average manufacturing wage in the U.S., Shaiken said. In August, it was $18.90 an hour, according to the Commerce Department.

Tennessee Plant

Chief Executive Officer Dan Akerson also agreed reopen a former Saturn assembly plant in Spring Hill, Tennessee, the people said.

GM made its last Chevrolet Traverse sport-utility vehicle at the Spring Hill, Tennessee, factory in November 2009, according to its website. The assembly plant has been on standby since then. GM continued to produce 4-cylinder engines at the site, about 40 miles south of Nashville, and kept running a stamping plant and paint operation.

“It’s an impressive agreement in a very tough economy,” said Shaiken, the Berkeley professor. “This agreement amounts to a stimulus package because it generates jobs and puts purchasing power into the economy.”

The profit-sharing plan becomes more generous and transparent, the union said last night. The company will give workers a schedule that bases bonuses on GM’s profit in North America, the people said. The plan requires a minimum profit to produce a payout and includes caps on such distributions, they said.

GM must make at least $1 billion in North America to pay a UAW bonus, one of the people said. Last year, members would have received about $5,000 on average instead of $4,300, the person said. The profit-sharing checks would roughly equal $1,000 per $1 billion in North American profit, one of the people said.

Shared Sacrifice

“When GM was struggling, our members shared in the sacrifice,” UAW Vice President Joe Ashton, who directs the union’s General Motors Department, said in a statement released last night. “Now that the company is posting profits again, our members want to share in the success.”

The union typically uses the first accord to set a pattern for pay and benefits for the other two U.S. automakers. UAW negotiators will seek a deal with Chrysler Group LLC next and then go to Ford Motor Co. (F), three people familiar with the talks have said.

King and Ashton plan to present the agreement to the president and chairman of each UAW local on Sept. 20 in Detroit, said four people familiar with the schedule.

The union said it rebuffed efforts to weaken health-care coverage and won “significant improvements.”

‘New Strategies’

“The UAW approached these negotiations with new strategies and fought for and achieved some of our major goals for our members, including significant investments and products for our plants,” King said. “This contract will get our members who have been laid off back to work and will create new jobs in our communities.”

The agreement positions GM for long-term success, Cathy Clegg, GM vice president for labor relations, said in a statement.

“We worked hard for a contract that recognizes the realities of today’s marketplace, enabling GM to continue to invest in U.S. manufacturing and provide good jobs to thousands of Americans,” she said.

The UAW will probably turn its attention next to Chrysler, majority-owned by Fiat SpA (F), said Shaiken. The GM accord, he said “defines competitiveness for Detroit going forward.”

“The details will be critical because the union’s goals of job security and sharing in the success of the company can be in conflict,” he said in a telephone interview last night, noting that he hasn’t been briefed on those details. “The results will not make everyone happy.”

Non-Union Competition

King, 65, has pledged to organize a foreign automaker this year to expand the UAW’s bargaining power beyond GM, Ford and Chrysler. He said the union has “recommitted to that goal.”

“As long as unionized workers are being forced to compete with nonunion workers who in most cases receive lower pay and benefits -- many in temporary jobs -- there will continue to be a downward pressure on the wages and benefits of all autoworkers,” he said in the statement.

Contracts covering 113,000 workers at GM, Ford and Fiat SpA-controlled Chrysler were set to expire Sept. 14 and have been extended while negotiations continued.

The UAW proposed a signing bonus of $8,000 to $10,000 for each member, four people familiar with discussions said last week. A large bonus may help sell the deal to union members looking to be repaid for what King has estimated as $7,000 to $30,000 in concessions they each gave since 2005.

Workers at GM, Ford and Chrysler received signing bonuses of $3,000 after they ratified the current contract in 2007. Prior to that, signing bonuses had been around $1,000, Shaiken said last week.

Past Concessions

Previous concessions included surrendering raises, bonuses and cost-of-living adjustments as well as agreeing to a two-tier wage system, where new hires are paid about half as much as senior employees. With GM and Dearborn, Michigan-based Ford profitable, workers have said they want to recover what they gave up.

Workers at Ford have filed an “equality of sacrifice” grievance against the automaker for restoring raises and bonuses to salaried workers last year. An arbitration hearing on that dispute started Sept. 15.

UAW members agreed to a no-strike pledge at GM and Auburn Hills, Michigan-based Chrysler as part of their U.S.-backed bankruptcies in 2009. Unsettled disputes at the automakers are to be decided through binding arbitration. Ford didn’t receive a U.S. bailout and UAW members there went against the wishes of union leaders and rejected a strike ban and arbitration.

To contact the reporter on this story: David Welch in Southfield, Michigan, at dwelch12@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net