Fate of Janesville GM plant hangs in balance of autoworkers union, manufacturers labor talks
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DETROIT--The United Auto Workers union has chosen Fiat Chrysler as Detroit automakers General Motors, Ford and Fiat Chrysler and the union continue to negotiate a new, four-year labor agreement.
As negotiations move forward, the major question in Janesville remains as unanswered as it did in 2009, when General Motors idled the Janesville Assembly plant, locked its doors, and placed the 4-million-square-foot manufacturing complex on “standby” status, pending future market conditions.
Will the plant, now idled more than six years, close permanently, remain on standby or could it someday reopen? Its standby status is an element of the national contract between GM and the UAW.
The UAW's choice of Fiat Chrysler, announced Sunday from Detroit, signals it would likely be the first company to reach an agreement with the union in a sprawling set of talks that cover 140,000 workers.
Historically, the first labor pact the union reaches with one of the three automakers becomes a template for union agreements with the other two manufacturers, although in the past all three automakers have announced union contracts agreements nearly simultaneously.
Fiat Chrysler—the smallest of the three companies—now becomes the focus of bargaining and could be hit with a strike if negotiations stall.
In a statement, UAW President Dennis Williams said all three automakers are "working hard" to reach an agreement and will continue negotiating even as the UAW turns its focus to Fiat Chrysler. The company confirmed its selection but had no further comment.
The union and the three automakers have a deadline of Sept. 14 to reach labor agreements. The union's current four-year contract is set to expire Sept. 15, although some analysts have said the current contract will likely be extended, and new contract agreements could roll out sometime over the next week to 10 days.
All three companies officially kicked off bargaining for new four-year contracts in July.
UPDATE: Fiat Chrysler cancelled plans to attend the Frankfurt International Motor Show Monday, which industry analysts say is a sign that the company may be getting close to reaching a tentative contract with the UAW.
Meanwhile, Ford on Monday morning filed for an extension for its own contract talks, according to a joint release by Ford and the UAW.
Jimmy Settles, vice president of the UAW-Ford, said in a statement Monday that he "has full faith that UAW President Dennis Williams and Fiat Chrysler Automobiles Vice President Norwood Jewell will set the tone and negotiate an agreement that meets the needs and demands of the UAW-FCA membership."
There's been no word whether GM has filed an extension in its own talks with the union.
GM BELOW CAPACITY
Some analysts were optimistic the former SUV assembly plant in Janesville could be reopened someday, but local government officials have begun to prepare for the potential that the plant could be closed and sold, possibly to a third party.
Auto industry analysts in the last two years have highlighted both options and had indicated that the 2015 labor talks could be critical for a final decision on the plant's future.
It's not clear how the UAW's choice to target Fiat Chrysler in negotiations could affect a potential decision on the GM plant, the largest and oldest of GM's plants.
But analysts and insiders in recent days said they believe it's unlikely GM is in a position to reopen the aging Janesville plant.
That's mainly because the company has more plants operating at lower capacity than either Ford or Fiat Chrysler, and all three companies are trying to run as lean as they can despite record sales of SUVs and projections that automakers could produce 17 million new vehicles this year—the most in any year since before the Great Recession,.
Ron Harbour, a partner at auto consulting firm Oliver Wyman in Detroit, said that although consumer demand for new vehicles this year is as strong as analysts had predicted, GM is still running most of its U.S. plants 35 to 40 percent below capacity compared to Fiat Chrysler and Ford.
Fiat Chrysler and Ford have fewer U.S. plants active than GM, and they're running the plants harder, Harbour said.
“That's back-of-the-envelope analysis on the production side, but one would say, wow, I don't think GM is finding the capacity it has yet,” Harbour said. “That is not good news for Janesville. In layman's terms, the reality is it's probably not likely that GM is going to need another plant online to add capacity right now.”
PLANT OPTIONS
The prospect that GM and the union could essentially make no decision on the plant and leave it on standby is something that would not please local government and economic development officials.
The future of the Janesville plant is important to local stakeholders who are in the midst of carving a new economic path that doesn't hinge on the sometimes volatile swings of the American auto industry
Forward Janesville President John Beckord has expressed frustration about the plant being in limbo, telling The Gazette in multiple interviews that it's not so much that he wants to see the GM plant close. He wants to see a decision made on it and for something there to move forward.
He said it has been frustrating to hear firsthand of developers—both local and out-of-state—who have interest in potential re-use of the site.
Some worry about the liability that it could get handed to a third party and set up for a complicated, arduous process of cleanup, sale and redevelopment.
GM, in its Great Recession-era, post-federal bailout reorganization, continues to list the Janesville plant as an asset on its balance sheets.
If GM does have a potential use or a prospect to deal the Janesville plant, there's no consensus whether it could be easily retrofitted for other uses or whether it's on a slow slide to the scrap heap. The company declined a request by City Manager Mark Freitag earlier this year for a local roundtable about the plant's future.
UAW ATTITUDE
Kristin Dziczek, director of the industry and labor group at the Michigan-based Center for Automotive Research, says the choice of Fiat Chrysler–the smallest and least profitable of the Detroit Three–signals a different attitude at the UAW, which used to go after the most profitable automaker during negotiations.
“This is the recognition that the union has had for a while, that you can't destroy the companies and still have jobs,” she said.
The UAW also wants to close the wage gap for entry-level workers, who make about half the $29 hourly wage of veteran employees. The wage gap benefits Fiat Chrysler, the most, since 45 percent of its hourly workers make entry-level wages. Only about 20 percent of workers at GM and ford Ford and make the lower wage.
Dziczek said the UAW might have chosen Fiat Chrylser because its CEO, Sergio Marchionne, has said he wants to eliminate the wage gap.
All three companies also want to stick with profit-sharing instead of increasing hourly labor costs. During the past four years, workers have gotten annual profit-sharing checks; at FCA, those bonuses totaled $9,000 per worker.
Williams and Marchionne, who greeted each other with a hug as the negotiations began in July, both say they would consider it a failure if they can't reach an agreement and workers strike.
Workers at Fiat Chrysler—known as Chrysler before its 2009 merger with Fiat—went on a seven-hour strike during contract negotiations in 2007, but were prohibited from striking in 2011 under terms of a government-funded bankruptcy.