Significant Benefit Increases Expected from Tentative UAW Deals

As of Monday morning, the United Auto Workers union has agreed to tentative deals with all three Detroit automakers—General Motors, Ford Motor and Stellantis—putting an end to collective bargaining talks after more than six weeks of targeted strikes.

Ford was the first to reach a tentative agreement with the union on Wednesday, followed by a deal with Stellantis on Saturday and GM on Monday.

While the automakers did not agree to restore the workers’ defined benefit pension plan, which shut down in 2007, they conceded to significant increases in benefits for workers with pensions and 401(k) plans; 25% wage increases; the reinstatement of cost-of-living adjustments; the reduction to three years of an eight-year path to top wages; and many other enhanced benefits.

The raises and benefits cumulatively boost the top wage to more than $40 per hour, including an increase of 68% for starting wages to more than $28 an hour, the UAW announced of the Ford and Stellantis deals.

Improvements to Retirement Security

For current employees in the defined contribution plan, Ford and Stellantis offered to increase 401(k) contributions to 9.5% of pay from 6.4%. For retirees on the defined benefit plan, the automakers agreed to a $5 credit per month for each year of service.

Marick Masters, a professor of management at Wayne State University’s school of business in Detroit, says the $5 increase means that if a worker has been in service for 25 years, they would receive $125 more per month.

“I think what the company did is move the needle substantially … in the general area of retirement security,” Masters says. “Also, it’s important to realize that when they pay a certain percentage of the wage into the defined contribution plan, that [contribution] goes up as their wage goes up.”

Masters explains that over the life of the contract, temporary workers—the lowest-paid workers—at Stellantis will get a 168% raise, and starting wages under the agreement will increase 67%, with the top wage increasing about 33%. Ford came to a similar agreement.

“This, in many ways, is a very lucrative contract for the members, and it does address their concerns about retirement security,” Masters says. “It’s true that they didn’t get the defined benefit [plan] back, and they didn’t get the retiree health care as it existed before, but those things were very much stretch goals. I just don’t think in today’s era, with the demographics of the workforce, that they’re in the realm of possibility.”

Ford is also offering a special retirement incentive package for workers looking to retire in 2024. , retirees and surviving spouses will also receive yearly payments of $500, with the first payment coming no later than the first quarter of 2024 and subsequent payments being made in December from 2024 through 2027.

In addition, Ford will get the opportunity to offer an unlimited number of $50,000 buyouts to older workers earning the top rate. This would allow Ford to replace these workers with younger hires who will earn less than the top wage for three years. Earlier, it took eight years for new workers to reach the top wage.

Masters says he views this strategy as a “prudent cost-saving measure” for Ford, which also allows people who are on the cusp of retirement an opportunity to get an early start.

“Anything [the automakers] can do to bring new people in that would reduce their overall cost, they are in favor of doing,” Masters says. “It may be an opportunity for them to do some downsizing, as well.”

A ‘Record’ Contract

Overall, Masters argues that the automakers were generous in their concessions and characterized the agreement as a “record contract.”

“I think it reflected the fact that the union strategy of selected strikes on rolling deadlines was effective and pushed the companies to make more concessions than they might have otherwise,” he says. “I would also say that the economics of the overall situation favored the union in this case, and they exploited that to the maximum effect.”

In terms of the UAW’s original demands, Masters notes that the workers convinced the automakers to agree on many, including more paid time off, wage increases, the elimination of tiers and enhancement in profit-sharing.

As a result, Masters predicts that, moving forward, unions with expiring contracts are going to continue to make bolder demands. However, he notes that only 6% of the private sector workforce is unionized, which limits their impact.

Because companies like Stellantis, GM and Ford went into the strike and negotiations coming off years of high profits, it gave them the latitude to make generous concessions, Masters says. It would be a different story if the companies had incurred negative earnings over the last few years and were in a weaker financial situation.

Although the automakers did not agree to the union’s demand for a 32-hour work week, Masters predicts that employers will start to move toward a reduced work week and find that it will be a “very attractive means of recruitment.” He says this would potentially allow employers to pay workers a little less, but allow workers to get more satisfaction out of their jobs as a result.

Striking workers at all three companies will return to their jobs while the union organizes ratification votes, a process that could take a week or more. If the workers reject the deals, they would likely return to the picket lines.