As General Motors Co. prepares for its electric vehicle future with multibillion-dollar investments in Lansing, Orion Township and elsewhere, autoworkers worry about the growing number of employees making less than traditional union-represented employees at the Detroit automaker.
They see the push to add more jobs at subsidiary GM Subsystems Manufacturing LLC and GM's joint venture battery cell manufacturer Ultium Cells LLC as unmistakable moves to retain a tiered wage system the United Auto Workers fought hard to eliminate.
"When they say they got rid of the tiers, anybody outside of GM would assume everybody's on the exact same pay level in the plant — (that) we're all getting the exact same benefits in the plant," said Ken Larew, a GM worker in Spring Hill, Tennessee. "And that couldn't be farther from the truth."
Subsystems employees work at multiple GM plants performing a variety of tasks that involve warehousing work including material handling with top wages hitting in the $17 per hour range — compared to just over $31 per hour in a traditional union-represented plant. And they could be employed in new operations expected to be announced Tuesday by GM CEO Mary Barra and Gov. Gretchen Whitmer.
That could become a growing problem as automakers like GM transition their auto-making investments to electric vehicles powered by batteries made by workers who could be paid considerably less than what their legacy UAW brethren get. The trend of using subsidiaries, still in its early phases pending talks with the union at sites in Ohio, Tennessee, and, soon Michigan, risks becoming a flashpoint with a union that abhors pay tiers within its ranks.
A new Subsystems agreement is currently being negotiated between the company and the UAW as legacy GM hourly employees grow concerned that jobs once coveted by members for their high pay and enviable benefits will be transferred to the lower-wage Subsystems group.
"It just seems like it's another step in the big plan," Larew said. "With having seniority members not being able to get out to these better jobs, it seems like a way for them to get rid of seniority members or have seniority members not willing to stick around as much, which opens the door for again, more inexpensive labor."
Larew, a GM employee since 1997, watched jobs get outsourced throughout his career. He started at the now-shuttered GM Lordstown Assembly plant in northeast Ohio before going to Spring Hill in 2018 where he works as a trainer. And then he found out that UAW Local 1853 representing Spring Hill workers, joined by UAW regional leaders, signed a memorandum of understanding with GM allowing several hundred jobs to be done by Subsystems employees as the plant transitions to building electric vehicles.
GM is investing $2 billion at its Spring Hill plant to build gas-powered Cadillacs and future electric vehicles, including the Cadillac Lyriq electric crossover arriving this spring. The Spring Hill memorandum of understanding signed in June 2020 says battery assembly operations work, body shop sub-assembly production for battery electric vehicles and battery electric vehicle general assembly sub-assembly production content will be done by Subsystems employees with employment levels near 400.
In a statement to The Detroit News, UAW spokesman Brian Rothenberg said: "Through the additional product commitment at Spring Hill, UAW members received General Motors commitment to invest $2 billion in Tennessee, increasing UAW represented jobs and building products here in the United States."
GM's multibillion- investment in the plant — including a new body shop, paint shop and battery assembly area — "is only made possible by executing an innovative and competitive labor and staffing agreement," the memorandum states. "The parties have discussed the competitiveness of performing certain work activities that can be a benefit to the overall profitability of the company, but only when the work is performed at a competitive wage, consistently over time."
The document was signed the same month GM cut a shift at the Spring Hill plant. GM defends the deal, according to spokeswoman Kim Carpenter, saying the "agreement allows us to grow new UAW jobs by bringing work into the plant that could have potentially been done by outside suppliers, and it positions GM to successfully compete against other automakers and EV start-ups. Importantly, it also helps bring our workforce along on our journey to lead the industry in electrification."
The automaker would not "speculate" if battery assembly jobs at other EV plants will also be performed by GM Subsystems employees. The automaker is spending billions to transition multiple plants for EVs and build battery cell manufacturing facilities to support its zero-emissions goals.
On Tuesday, GM plans to detail its latest investments for the EV future: $4 billion at Orion Assembly in Lake Orion, which already utilizes the GM Subsystems workforce, to build electric trucks, and $2.5 billion for a battery cell manufacturing plant it will build with partner LG Energy Solution through a joint venture called Ultium Cells LLC.
Ultium Cells employees are not covered by the national GM/UAW national contract, and it will be up to the workers to decide if they'd like union representation. GM in the past has said it will support union organization in the plants. UAW Vice President Terry Dittes told The News in November: "We do not anticipate pushback from Ultium ... and there's no doubt in our mind that we are going to represent those workers."
A production associate job listing for Ultium Cells says the company offers "market-competitive compensation including base pay and incentive compensation opportunities based on the achievement of company goals." Ultium Cells wage rates for production employees range from $15 to $22 per hour, the company said.
The 'situation sucks'
Subsystems was formed in March 2009, according to state registration documents. The subsidiary's employees work at multiple GM facilities, including the Lake Orion plant, Factory Zero at Detroit Hamtramck Assembly Center, Flint Assembly, Lansing Grand River and the Brownstown battery plant.
In 2018, UAW Vice President Cindy Estrada wrote a letter to members explaining the outsourcing taking place at the Lake Orion plant and the defunct Lordstown facility to make GM's small car plants more competitive. The letter doesn't name Subsystems as the outsourcing company, but those jobs went to Subsystems employees, which Automotive News reported in 2018.
"This was a decision agreed to by the involved local, regional, and national leadership. Everyone agrees that this situation sucks," Estrada wrote. "But what would suck even more would be to have GM shut down any of our plants and devastate hundreds of our members' lives and the communities where those plants exist."
For decades, "the UAW has been negotiating from a point of weakness," said Marick Masters, a professor at Wayne State University's Mike Ilitch School of Business.
The Detroit Three have been competing heavily with non-union auto companies in the United States since the 1970s, forcing the UAW had to make concessions for the automakers to stay competitive — including creating a tiered wage system and outsourcing jobs.
Now, there's even more pressure being exerted by the pivot to electrification as GM and its crosstown rivals Ford Motor Co. and Stellantis NV compete with such foreign automakers as Volkswagen AG, Toyota Motor Corp., EV heavyweight Tesla Inc. and new EV startups.
"The two-tier wage system was meant to make the company more competitive and using the subsidiary to hire workers is intended to make the company more competitive," Masters said. "And what they have in common is that they're both doing so by paying lower wages."
The UAW's Rothenberg declined to comment on current Subsystems negotiations and what the union is looking to achieve for those employees. The contract is being negotiated at the local, regional and international levels.
Mike Carter II, chairman of the Subsystems workforce at the Detroit-Hamtramck plant, said the membership is looking for better health insurance and a wage boost, among other requests. Subsystems employees max at $17 per hour, he said. By comparison, a GM employee in vehicle assembly can make up to $32.32 per hour by the end of the four-year 2019 contract.
"Pay raises, that's a must," Carter said. "Amazon is giving out $1,000 bonuses, starting off at $18 an hour. They know they have to be competitive. But will they?"
GM invested $2.2 billion at the Detroit-Hamtramck to build EVs there, including the recently released GMC Hummer EV pickup. When the plant previously built the Chevrolet Impala and Cadillac CT6, a little more than 100 GM Subsystems employees worked there, but the subsidiary has "inherited" the jobs to deliver materials to the line and hundreds more will be hired as the plant gets built up.
"How is (it) that I have to make half and I'm here every day and I do my due diligence," Carter said. "You just got through paying high-paid people $30-some an hour."
'Destroys solidarity'
In 2014 Detroit-Hamtramck GM employee Chris Viola worked a material handling sequencing job he liked, but it got eliminated as a traditional GM job. Subsystems got that work, he said.
Having two sets of employees "destroys solidarity," said Viola, who now works in repair. "Nobody's happy about working with other people that make way more than they will."
Viola doesn't know how many Subsystems employees are in the plant now, but employment at the subsidiary has noticeably expanded.
"We'd like to hear union leadership speak out against the constant expansion," he said. "And if they actually are accepting these, lay out the arguments, like give us the hard numbers, tell us why we have to accept this when companies have still been never more profitable."
At the Flint heavy-duty truck assembly plant, Subsystems workers handle some of the flow of parts and sequencing before they hit the line, said Eric Welter, shop chairman of Local 598 representing GM workers there. The work was previously done by a different company and was then brought inside Flint Assembly, which actually increased the number of GM employees needed to help do the material handling in-house.
"I'd rather do all of the work myself," Welter said. "It's part of the business that you may not like, but it's still part of the business."
