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GM’s Mexican factories – Why ending the UAW strike will be so hard

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The talks to resolve the longest auto industry strike in decades have taken place in downtown Detroit for 24 straight days. But the biggest issue on the table now revolves around what happens in Mexico.

The United Auto Workers union, whose nearly 50,000 members have been on strike against General Motors since Sept. 16, has previously made shifting work back from plants in Mexico to plants in the United States a major issue in the talks. But it is a bigger factor this year, after GM announced plans to close four US plants. While many other matters have been resolved, there remains a huge chasm between the two on that point.

Three plants — an assembly line in Lordstown, Ohio, and transmission plants in Warren, Michigan ,and Baltimore — have already halted production, while the Hamtramck assembly line in Detroit is slated to close early next year. The union wants to keep these plants alive by shifting production from Mexico.

Terry Dittes, the UAW’s chief negotiator, sent an email to union members Tuesday saying GM’s refusal to make such a shift is the biggest problem in the talks.

“We have made it clear that there is no job security for us when GM products are made in other countries for the purpose of selling them here in the USA,” he wrote. “We believe that the vehicles GM sells here should be built here. We don’t understand GM’s opposition to this proposition. Building more world-class vehicles at our UAW-GM locations is the best solution for our members, our families, our communities and GM.”

The union is still negotiating over other issues, including wages, profit sharing and GM’s use of temporary workers. But Dittes said “economic gains in this agreement will mean nothing without job security.”

In recent contracts, automakers have offered job security to the union with promises to invest in plants, as well as plans to build specific vehicles in specific plants. GM said its current offer includes plans to invest more than $7 billion in US plants, which would create or protect about 5,400 jobs.

GM said the overwhelming majority of the cars it sells in the US are built in the US. While it doesn’t provide the number of cars built in Mexico, the company points out that it has four factories in Mexico, compared to 29 in the United States — not counting the four it is planning to close. It also said it has proposed “solutions” for the Hamtramck and Lordstown plants.

Data released by the UAW from Ward’s Automotive Reports shows GM produced 834,000 cars and trucks in Mexico last year, about 30% more than Fiat Chrysler and roughly triple the number of cars built there by Ford. Overall it sold about 3 million vehicles in the United States last year.

Beyond those four plants, the union is worried that other GM plants could be at risk of closure without shifting production back to United States from Mexico. With Lordstown and Hamtramck still in the equation, GM’s US plants were operating at about 68% of capacity, said Kristin Dziczek, vice president of industry, labor & economics at the Center for Automotive Research, a Michigan think tank. Without them it’ll be above 80% of US capacity, she said.

“You want to be in the 85% to 90% range,” she said.

The vehicles GM is building in Mexico are among its best selling – the Silverado and Sierra pickups, the Blazer, Equinox, Terrain and Trax SUVs. Of those vehicles, only the Silverado and Sierra are also made at US plants. Those are already working around the clock on three shifts turning out pickups. The Terrain and Blazer are built only in Mexico. The Trax is built in Mexico and South Korea, and the Equinox is built in Mexico and Canada.

Most of those vehicles are early in their product life cycle, such as the Blazer, which is in its first year of production. Typically if a vehicle is going to be shifted from one plant to another, it’s when there is a major design change after at least five or more years.

“It cost billions of dollars to put them [in Mexico], and it’d cost billions of dollar to bring them back,” said Dziczek. “GM will be loath to move anything back that they just spent money to put there.”

In addition, GM is paying workers in Mexico a fraction of the more than $30 an hour that veteran UAW members make at US plants.

But not bringing product back from Mexico creates its own problems for GM. Any labor deal needs to be ratified by UAW membership before it can take effect. And with the plant closing plans, membership is focused on job security as a top issue.

“What GM needs is they need it to be able to be ratified,” said Dziczek. “Plants that get investment are plants that workers can feel will be around for a while.”

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