Monday, January 12, 2009

Federal Government and Automakers Make No-Strike Agreement

Uaw It sounds odd that the government and an employer entered into an agreement that said that a union can't go strike, but that's exactly what happened recently. According to a recent SEC filing by GM, the loan agreement between the automaker and the Treasury Dept. has a provision stating that a strike by the UAW would invalidate the terms of the agreement.  Chrysler apparently has a similar provision.  According to the Wall Street Journal:

The terms are part of the agreement GM and the U.S. Treasury Department hammered out in December. They surfaced late Wednesday in a regulatory filing by GM and surprised union leaders, including President Ron Gettelfinger, people familiar with the matter said. Treasury spokeswoman Brookly McLaughlin said that the no-strike provision was "included as a taxpayer protection" and that it could be waived if the government determines that was appropriate.

The chances of a UAW strike are small because both sides are under orders from the government to work quickly to cut costs to help GM get on the path to recovery. Any delay could push the auto maker to the brink of bankruptcy again, a fate that was put off for now after the government provided the first $4 billion portion of a $13.4 billion emergency loan. The company and the union have until Feb. 17 to negotiate cuts. If they do, GM could be in line for additional loans. Still, the strike ban is likely to give GM some additional leverage as it negotiates with its largest U.S. union. In the loan agreement, the Treasury stipulated that there can be no labor strikes against GM pending or threatened between the period from Dec. 31 to Feb. 17. . . .

GM and the UAW are set to start negotiating Monday on issues ranging from job security to compensation. When the White House gave GM and Chrysler a $17.4 billion bailout last month, it insisted that the UAW make concessions that would allow the auto makers to become more competitive with foreign rivals like Toyota Motor Corp. During a joint interview on NBC Thursday morning, GM Chief Executive Rick Wagoner and the UAW's Mr. Gettelfinger expressed optimism about their ability to come to an agreement that puts the auto maker on a stronger footing and meets the government's demands. . . . "

Barring the UAW from a strike has taken a critical bargaining chip away from the union. In years past, when negotiating with the Big Three and key automotive suppliers, the UAW has often encouraged workers to walk off the job, leading to major cost penalties and a lack of vehicle supply for the auto makers. On Monday, as bargainers from GM and the UAW begin hashing out concessions, some UAW members -- under the banner of a group called -- are planning to protest the proposed cuts by rallying at the Detroit auto show. . . . At this point, however, with U.S. light-vehicle demand tracking at its lowest point in decades and GM perilously close to collapse, the UAW might well have been reluctant to strike in any case.

I'm not surprised that the automakers and the government would want this provision, but I'm perplexed at how it was done.  As the article notes, there's little chance that it would have any impact; the UAW is very unlikely to strike and if it did, the automakers would probably be toast no matter whether or not they had a federal loan.  Given that and the fact that the UAW was never informed, much less consulted, about this, it just seems like a stick in the union's eye, and I wonder whether this was an idea from the Bush Treasury Dept. that the automakers were only too happy to go along with.  Whether it ends up ticking off the UAW enough to affect negotiations remains to be seen.  I doubt it--there's too much at stake--but it certainly doesn't help.


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» Auto Bailout Includes A No-Strike Provision from Adjunct Law Prof Blog
Via Workplace Prof Blog reporting on a Jan. 8, 2009 Wall Street Journal article, the Bailout includes a provision that the UAW may not strike. The amazing thing about this provision is that the union is NOT a party to [Read More]

Tracked on Jan 12, 2009 9:59:33 PM


The newspapers seem to be misinterpreting the agreement. As far as I can tell, the agreement between GM and the government does not and could not "bar" the UAW from striking. All that it does is raise the stakes: if the UAW strikes, GM doesn't get more money, which would bankrupt it and eliminate the UAW jobs. So the UAW is still legally free to strike, even though doing so would be to commit economic harakiri. As you point out, that was effectively true even before the GM agreement, so the clause seems symbolic rather than practical.

The more interesting question is whether GM will be viable even with union concessions (and those of the creditors, who are being shorn even more closely than the UAW). Recent articles about its prospects strongly suggest not, and today's paper says that it already has its nose in the government trough looking for more.

Posted by: Dennis Nolan | Jan 12, 2009 10:37:05 AM

I agree Dennis. I had to read the WSJ story a couple of times before what the agreement said really sank in. I kept thinking "they can't do that" until I realized that it was simply a loan-contingency provision.

Posted by: Jeff Hirsch | Jan 12, 2009 10:40:20 AM

Isn't this a Machinist Preemption problem?

Posted by: Liz | Jan 13, 2009 7:48:42 PM

I don't think there's a preemption problem here because, despite some news articles to the contrary, there is not actual ban on a strike. Rather, it's a contract between the employers and the government saying that if a strike occurs, the bailout funds will cease.

Posted by: Workplace Prof | Jan 13, 2009 11:28:35 PM

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