Trump Pours Gas on GM's Already Smoldering Relations With UAW

David Welch
Trump Pours Gas on GM's Already Smoldering Relations With UAW

(Bloomberg) -- President Donald Trump’s Twitter barrage is unlikely to re-open an idled Ohio car plant. But his intervention in the matter will intensify what are already shaping up to be hard-fought negotiations between General Motors Co. and the United Auto Workers union.

In a series of tweets starting Saturday, Trump attacked both General Motors Co. and the UAW over the closing of a Chevrolet Cruze factory in Lordstown, Ohio. GM and the UAW each pushed back, but the two have otherwise been very much at odds entering bargaining over a new four-year labor contract. The president is making no bones about inserting himself in crucial talks that will determine the wages, health care and job security of thousands of Americans in states pivotal to his re-election bid.

“Trump’s tweets definitely amped it up,” said Jeff Schuster, senior vice president of researcher LMC Automotive. “It adds layers of pressure on GM.”

GM and the UAW’s negotiations will decide the fate of the Lordstown factory and three other U.S. plants that are ceasing production and lacking any future product. The union is under pressure from its members to bargain hard for the plants to be saved. But GM management is unlikely to buckle easily, since the four endangered facilities aren’t the only ones the company hasn’t been fully utilizing.

Strike Odds

The negotiations already were set to be tenser than in past years before Trump waded into the debate, said Kristin Dziczek, vice president of the labor and industry economics group at the Center for Automotive Research.

“It’s going to be a fight,” she said. “The possibility of a strike is higher this year than in any of the past few negotiations.”

In the days since Trump’s tweets began, candidates to challenge him for the presidency have piled on. Beto O’Rourke, the former Texas congressman, showed up at UAW Local 1112, which represents the Lordstown plant, to defend its president, who Trump criticized Sunday. Senator Kirsten Gillibrand of New York seized on a question about the GM factories posed in an MSNBC town hall into a chance to pitch Democrats’ Green New Deal.

UAW’s Fight

At the union’s bargaining conference this month, UAW President Gary Jones announced he was raising strike pay to $250 a week through the end of this year, from $200. Workers will get another bump to $275 from January. Jones also said he doesn’t fear a walkout.

GM’s announcement that it’s idling what it calls “unallocated” factories in November preceded the company reporting near-record profit for 2018. The union has sued the automaker, alleging the company is breaching its last contract by ending production at three plants in Maryland, Michigan and Ohio.

At a minimum, analysts say the union will want job security guarantees for the remaining plants. That will be tougher for GM to extend with economic growth slowing and auto sales weakening early this year. Chief Executive Officer Mary Barra has put sustainable profit ahead of market share, and that change in priorities has contributed to lower sales of some models.

Capacity Concerns

The Lordstown and Detroit-Hamtramck plants that were part of GM’s November announcement both have been making slow-selling sedans. LMC Automotive estimates capacity utilization rates for each plant of less than 30 percent.

That’s well below the 80 percent rate automakers set as a rough target to keep plants profitable, Schuster said. “Even if all of the unallocated plants are closed, you could argue that they should close two more,” he said.

For GM’s management, shrinking production capacity so that it’s more in line with sales volume may be an unenviable but unavoidable task. “GM has to do what’s best for the company, regardless of who’s tweeting,” Schuster said.

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