You Manage It! 4: Ethics/Social Responsibility Union Members Protest a 50 Percent Wage Cut at a General Motors Plant
In October 2010, two hundred auto workers picketed outside the locked gates of their union headquarters in Detroit, Michigan, to protest an agreement that let General Motors (GM) pay half the wage rate of current employees to newly hired workers or those called back from layoff at GM’s assembly plant in Orion Township, Michigan. The wage cut for the newly hired and returning workers was part of an agreement between the United Auto Workers (UAW) and General Motors that was designed to help GM make money on building the Chevrolet Sonic, a low-price subcompact car, with unionized labor in the United States. In the past, General Motors and other U.S. automakers needed to assemble small cars in Mexico or Korea, where labor costs were lower, which took jobs away from unionized U.S. workers.
The agreement between the company and the union was the first time the union has agreed to a pay cut for workers returning from layoff. The Michigan auto plant builds the Chevrolet Sonic and had previously been closed. U.S. automakers have struggled for years to make money on small cars. Mark Reuss, GM’s president for North America, said that the company expected to make money on the Sonic. The UAW deal, he said, was one of the reasons why the small car will be profitable. Others included a highly efficient factory with new equipment and help from state and local governments.
Meanwhile, the auto workers who have been laid off and who were recalled to work in the Orion Township auto plant felt betrayed by their union. Prior to being laid off, the workers earned $28 per hour, and after being recalled were asked to do the same work for $14 per hour. That is why two hundred of these auto workers protested the deal made between the UAW and GM to lower auto worker wages. Gary Bernath, an assistant director of the UAW, said the bankruptcies of GM and Chrysler in 2009 forced the union to make very difficult decisions to safeguard union jobs. In GM’s latest contract with the UAW that was settled in 2011, the recalled employees at the Orion Township plant had their wages increased to $16 to $19 an hour, which was still substantially below the $32 per hour wage received by experienced UAW employees who work at other GM assembly plants.
Critical Thinking Questions
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15-23. Why did the UAW agree to a 50-percent pay cut for its unionized workers who were being recalled to work in the Orion Township assembly plant? Do you think the local workers who will have their pay reduced by half are justified in protesting the deal made by their union, which is supposed to be representing their interests? Explain the reasons for your position.
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15-24. When employees are dissatisfied with the way they are being represented by a union, what are some tactics that employees can use to influence the union leaders to make changes in the union’s goals?
Team Exercise
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15-25. A big challenge for the GM managers at the auto plant making the Chevrolet Sonic will be maintaining positive employee morale. They will be managing a workforce of 1,550 employees that is composed of 60 percent workers transferred from other GM facilities who will be earning $28 per hour, and 40 percent GM workers recalled from layoffs and new employees doing similar jobs and earning only $14 per hour. With a group of four or five fellow classmates and using your knowledge of HR practice, develop a list of suggestions that managers can use to keep the plant operating efficiently despite the large differences in pay between the two sectors of unionized employees. Be prepared to share your findings with the class when called on by your instructor.
Experiential Exercise: Individual
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15-26. Assume you are an employee in a situation similar to the one described in this case, a situation in which you believe your union has not represented your interests fairly and made a deal with management that reduces your pay substantially. You are not free to quit your job because the unemployment rate is high in your community and replacement jobs are scarce. What can you do to cope with being paid a lot less for doing the same job? Will you communicate your dissatisfaction to the union, and if so, how will you do it? Will you communicate your dissatisfaction to management, and if so, how? What do you hope to gain by communicating your feelings to the union and/or management? What are the risks of communicating dissatisfaction to the union and/or management? Is it better to keep quiet and do your job without rocking the boat? What personal values enter into your decision to either be proactive and communicate your dissatisfaction or be silent and avoid controversy?