General Motors' announcement to idle and possibly close five plants next year comes around the same time that the company begins their negotiations with the United Auto Workers (UAW). Already, the UAW has said they would go "through every legal, contractual and collective bargaining avenue open to our membership," to try and keep the plants.
GM's rationale for the move is to improve profitability and help reduce the underutilization of its plants. As we reported last week, GM represents 1 million of the 3.2 million units of underutilized capacity in the U.S. through October.
We should note that GM did not say they were going to close down the plants. They used the word "unallocated". We'll let The Detroit News explain why.
But GM was careful last week in its restructuring announcement when it addressed the affected plants, coining a new term: "unallocated."
The reason: to avoid the words "idle" or "close," which are explicitly addressed in the 2015 agreement between GM and the UAW. The "Plant Closing and Sale Moratorium," outlined on page 356 of the agreement, states that GM will not will not close or idle "in any form, any plant, asset, or business unit of any type" outside of collective bargaining, with a caveat for extreme market conditions or an "act of God."
Emphasis mine. Under the current contract, GM cannot close or idle any plant unless it is done through the collective bargaining process. By not providing any future products, GM may have found a loophole they can use in the negotiations. But it may have opened up a Pandora's box.
"This was long planned through intentional strategic investment decisions and product movement over our objections. They may have kept the news about it quiet, but this was planned and had to be gradually executed long before sales numbers were known,” the UAW said in a statement to the News.
"GM and the UAW will talk about numerous topics that affect our employees and our business during 2019 negotiations. As always, our intent is to work with the UAW constructively to address our business challenges in a way that keeps the company competitive in these changing market conditions," GM said in a statement.
Source: The Detroit News