Recent UAW Contracts with Ford, GM, and Stellantis

The U.S. auto industry is highly cyclical and even when the overall industry is up or down, the fortunes of individual UAW-represented automakers have waxed and waned. What follows is a summary of previous rounds of bargaining between 2003 and 2019. Contracts during this period were for four years, though the parties could—and can in the future—agree to any term. This blog post first discusses recent trends in U.S. wages and market share for the UAW-represented firms to provide the long-term wage context of bargaining and then provides high-level summaries of recent bargaining rounds.

The combined market share of Ford, GM, and Stellantis¹ has fallen steadily since 1976. As the companies’ market share declined, so, too, did the UAW’s share of U.S. motor vehicle and parts employment and their bargaining strength. The three automakers’ U.S. market share fell from roughly two-thirds to two-fifths between 2000 and 2009 and has been hovering in the mid 40% range since the Great Financial Crisis and GM’s and Chrysler’s (now Stellantis) bankruptcies.² Thus far in 2023, the combined market share of the three companies is 39%.

As auto companies have adjusted to falling market share, they have also seen rising nominal labor costs. It is important to note that labor costs do not represent the dollar value of wages and benefits to each individual worker nor are they indicative of UAW members’ take-home pay. Instead, labor costs represent all the costs of employing workers—their wages, benefits, bonuses, lump sums, statutory costs (taxes, workers compensation insurance, and unemployment insurance), and post-employment benefits divided by the number of hours worked. A company with high legacy cost burdens (more retirees than active workers) or a larger share of workers on layoff or sick leave would see higher costs per hour worked. Labor costs are also higher when output is lower—such as the recent supply-constrained period due to fewer hours worked overall and thus a smaller denominator. Labor costs are also a blend of costs of employing different categories of workers, so a company with a larger share of higher-paid skilled trades workers might see higher average hourly labor costs, and a company that chooses to use more temporary workers might have lower costs. The composition of the workforce matters, too. A company that has a younger workforce compared to their competitors might see lower costs for health care because their workers may be healthier or have fewer dependents.

Wages are defined as the base rate paid to workers and are the key component of UAW members’ take-home pay. Individual workers’ pay determines the rate at which they earn overtime or shift premiums, vacation or holiday pay, and the like. These payments—plus lump sums, bonuses, and profit-sharing checks—are what workers earn.

The table below shows the combined market share of Ford, GM, and Stellantis, an estimate of the blended average of the companies’ labor costs, and the top production (hourly) wage in UAW contracts. Note that the top hourly wage for production workers did not increase between 2006 and 2015, while wages for temporary workers and new hires (not shown in table) did see gains in this period.

The companies’ estimated hourly labor costs and top production hourly wages are influenced by their UAW contracts. The next section reviews the base wage increases and other major changes in each of the last seven rounds of bargaining between the UAW and Ford, GM, and Chrysler/DaimlerChrysler/Stellantis between 2003 and 2019.³

2003: Cuts, cuts, cuts

In the 1980s and 1990s, UAW contracts generally contained wage and benefit gains. Wage increases ranged from 2.25% to 3%, and the contracts included similarly sized lump sum payments in the years in which there was not a base wage increase. The 2003 contract differed in that it contained a two-year base wage freeze, followed by a 2% pay raise in year three and a 3% raise in year four. Aside from smaller gains, the 2003 agreement also diverted some money that had been intended to pay cost-of-living adjustments (COLA) to instead pay for rising health care costs. As a result of the 2003 agreements, the companies closed 11 plants and indicated they would sell seven more.

2005: Concessions, revisited

2005 was not an on-cycle bargaining year. However, the UAW agreed to reopen talks with Ford and GM to negotiate a company-run Voluntary Employee Benefit Association (VEBA) agreement to fund rising retiree health care costs. Under the VEBA, the company’s obligations to pay for future retiree health costs would be capped, and the post-employment health benefits package could be adjusted based on the balance in the VEBA retiree medical benefit trust funds. The UAW and Chrysler (now Stellantis) did not make a similar deal in 2005.

2007: Enter the second tier

2007 bargaining brought about monumental changes to the UAW agreements with Ford, GM, and Stellantis. Notably, the parties agreed to a four-year base wage freeze with 3% lump sums in the last three years of the contract. The UAW won a pension increase and product commitments that signaled job security for their members, but they also made some major concessions. Concessions included a new wage and benefit scale for workers hired after the 2007 contracts were ratified—which was called the “second tier.” These workers’ starting pay was roughly half that of the incumbent workers and they would not be eligible for the same active health care benefits, pensions, or retiree health care coverage (though they did have a smaller package of both active and post-employment benefits). Another major change was offloading the entire retiree health care cost burden to a new independent UAW Retirees Medical Benefits Trust (VEBA) that would be funded by the companies and transfer to independent management on January 1, 2010. The current UAW leadership team (president and three vice presidents) holds four of the eleven seats on the VEBA trust board of directors, with a fifth seat currently filled by a retired UAW vice president. The companies also closed eight plants as part of the 2007 deal.

2009: The bankruptcy rounds

Just two years after signing the major concessions in 2007, the Financial Crisis of 2008–09 happened, and the automakers were facing very challenging financial conditions. With the U.S. government involved in the Chrysler and GM rescue plans, the UAW and all three companies agreed to additional concessions in a contract addendum. A condition of the government assistance to Chrysler and GM was that they become “cost-competitive” with the international automakers that also produced light vehicles in the United States; this required closing a roughly $10 per hour labor cost gap with their international competitors. To do that, the UAW agreed to suspend the 2007 lump sums, COLA, and job security programs. Workers lost a holiday and their legal aid benefits, and older workers were offered buyouts and early retirement packages to make room for younger (and less costly) workers to be hired. The companies restructured their VEBA obligations by replacing cash commitments with equity. An additional provision mandated by the government was that the UAW could not strike until 2015.

2011: Bargaining within government constraints

One of the few ways a union can apply pressure on employers to reach a deal is the threat of withholding labor through a strike, and in 2011, the UAW could not strike at Ford, GM, or Chrysler under the provisions of the 2009 agreements. As a result, the contract gains were muted. The 2011 agreement contained wage increases for workers hired since 2007, but no raises for legacy workers. Some of the provisions of previous contracts that were suspended (such as the job security programs) were eliminated, while COLA remained suspended. There were more buyouts for workers hired before 2007 and no pension increases. The contract was not all concessions, however. Notably, health care coverage was improved, and the UAW won a revamped profit-sharing formula and significant product commitments that contributed to job security.

2015: Status quo

The 2015 UAW contracts with Ford, GM, and Chrysler brought the first wage increases for legacy workers since 2006. These top-tier workers received 3% wage increases in the first and third year of the agreement and 4% lump sums in the second and fourth years. Workers hired since 2007 also received wage gains and active health care benefit equity with the legacy workers at Ford and GM. The UAW won back the holiday and legal aid benefits that had been eliminated in 2009, but COLA language was completely stricken from the Ford and Chrysler agreements (it remained suspended in the GM contract). The 2015 agreement also contained significant investments in products and plants in place of a formal job security program.

2019: 40-day strike at GM

In 2019, the UAW chose GM as the lead company in the negotiations, and when they could not reach a tentative agreement by the contract expiration, the union launched a strike against the company that lasted 40 days. The resulting contract gave legacy workers the same 3% wage increases in the second and fourth years of the contract and 4% lump sums in the first and third years. Workers hired after 2007 had a defined wage progression to reach parity with legacy worker wages ($32 per hour) in four years for workers who were on the rolls at the time the contract was signed and eight years for those hired after the effective date.⁴ The post-2007 workers at Stellantis also received active health care benefit parity in this agreement. The UAW negotiated language that gave temporary workers a path to become permanent workers at Ford and GM and preferential hiring status at Stellantis. The contract also included more buyout opportunities for workers hired before 2007 and large investments in products and plants.

My next post will explore the negotiating process for UAW and the automakers.

Notes

¹ Stellantis is the current name (since 2021) of the automaker that was known as Chrysler (pre-1998), Chrysler LLC (2007–09), Chrysler Group LLC (2009–14), DaimlerChrysler (1998–2007), and Fiat Chrysler Automobiles (FCA) (2014–21).

² According to Wards Informa.

³ The sources for this section include the UAW-Ford, UAW-GM, and UAW-Chrysler/UAW-DaimlerChrysler/UAW-Stellantis agreements and contract highlights documents produced in each round of bargaining. Links to examples of the current (2019) and past (2015) contracts and highlighters can be found on these websites: Ford | UAW, GM | UAW, and Stellantis | UAW.

⁴ The workers who were hired after 2007 but could now reach top pay and active benefits parity were called “in-progression” workers.

The views expressed in this post are our own and do not reflect those of the Federal Reserve Bank of Chicago or the Federal Reserve System.