Not News: UAW Considering Plan to Milk the Unemployment System If It Calls a GM Strike

October 24th, 2015 10:30 PM

The news coming out of Detroit about near-deadline negotiations between the United Auto Workers union and General Motors has been pretty quiet. As the Sunday 11:59 p.m. deadline approaches, the Associated Press only has a four-paragraph blurb indicating that the union wants to get a richer package than it just garnered in negotiations with Fiat Chrysler. A Reuters report goes into detail about GM's cost structure still being higher than that seen at Toyota's and Nissan's U.S. plants by about 15 percent and 31 percent, respectively. The New York Times is only carrying reports from the wires.

One note of substance about the UAW's strategy covered at Bloomberg News — surely known to others following the industry who are filing bland reports — is that it plans to milk the unemployment insurance system in the event of a protracted strike.

To be clear, such a strike would appear to be very unlikely, if for no other reason than the fact that Americans remember that the Obama administration bailed out GM at a considerable cost several years ago. The final fully-loaded cost involved was $26.5 billion — not the $11.2 billion touted by the press last year. It's safe to say that quite a few people would not take kindly to the idea of the primary beneficiaries of that unprecedented largesse walking out on their jobs when so many others are still unemployed and under-employed over six years after the most recent recession's official end.

(Additionally, the linked $26.5 billion analysis appears not to have picked up the effect of the government permitting GM to carry forward $16 billion in tax losses incurred by the "old GM" into the "new GM" — even though "a business that undergoes a change in ownership usually has to forfeit the old company’s net operating losses," which certainly happened during the bailout. At the statutory federal income tax rate of 35 percent, that decision alone cost the U.S. treasury $5.6 billion.)

That said, if a strike does occur, Bloomberg's David Welch and Bob Van Voris appear to be unique in reporting (though quite late in their writeup) the UAW's cynical strategy. It's all pegged to the fact that striking workers are generally not eligible for unemployment benefits, but laid-off workers are (bolds are mine throughout this post):

Auto Workers Set Sunday Strike Deadline in GM Contract Talks

The United Auto Workers said it informed General Motors Co. that it will terminate its contract with the automaker at 11:59 p.m. on Sunday, effectively setting a strike deadline for talks to reach a four-year agreement.

... The UAW is reaching agreements that add substantially to the automakers’ costs for the first time in a decade. After settling with Fiat Chrysler, which has smaller earnings than GM and Ford, the union is aiming for more lucrative contracts with those larger companies.

GM goes into the talks after posting its most profitable quarter ever. The UAW may win greater profit-sharing and bonuses and more jobs.

... Should GM and the union fail to reach an agreement, the UAW could call a strike targeting a plant that makes key parts, such as engine or transmission components, to choke off production companywide, said Bloomberg Intelligence automotive analyst Kevin Tynan. The union’s strategy would be to minimize the number of workers it has to pay from its strike fund, he said.

GM would have to shutter at plants impacted by a strike at "key parts" plants, because they would have no work. Affected workers would then file for and collect unemployment benefits, putting the unemployment insurance system on the hook for untold millions of dollars per week, instead of having to rely on the UAW's strike fund.

Based on how many states' unemployment insurance systems work, such a move during a protracted strike would cause future unemployment insurance premiums paid by GM to increase substantially. That unfair enough, but the move would also affect other companies in the same industry in the same states, because part of an individual company's premium is usually based on industrywide claims experience.

The assessment of the situation by Bloomberg Intelligence's Tynan of a possible "targeted strike" did not come out of nowhere. According to an Ocotber 7 item at the Detroit Free Press, the UAW apparently had such a move on the drawing board if a Fiat Chrysler strike had occurred:

A national walkout or strike would threaten to quickly destabilize Fiat Chrysler, which has been profitable in recent years, but is the weakest company of the Detroit Three. It also could do tremendous damage to the relationship between the union and the company that has markedly improved in recent years compared with prior decades.

... A targeted strike at pinch points like the Kokomo transmission plant would mean a few thousand workers would have to rely on $200 in weekly strike pay while workers at other plants that go down because they can’t build vehicles without transmissions would receive unemployment benefits and not be hurt as much financially by a walkout.

Targeted strikes don’t put as big a dent in the UAW’s strike fund ...

... Fiat Chrysler will be most hurt by the idling of the Kokomo transmission plant and the vehicle assembly plants in Toledo and Jefferson North that make popular Jeeps and the Warren Truck plant that makes the Ram full-size pickup.

“That would hit Fiat Chrysler where it hurts," (the Center for Automotive Research's Kristin) Dziczek said.

I would think that companies affected by publicly proclaimed "targeted strikes" would have a case to argue against workers at other plants receiving unemployment benefits. But the pressure to shut up and accept it, especially at companies just bailed out, would appear to be overwhelming.

Regardless of whether the UAW calls a strike at GM, the American people should know about its plans to milk the unemployment system and have "somebody else" pick up most of the tab for their actions.

Cross-posted at