Is the UAW’s Demand for Return of Pensions a Realistic Ask?

As the United Auto Workers continue to strike at key auto plants, putting pressure on Detroit’s Big Three automakers—Ford, General Motors and Stellantis—some of their demands may be more difficult to gain than others, especially a call for the restoration of a defined benefit pension plan that ended in 2007, according to retirement plan industry watchers. 

Given the backdrop of the Teamsters Union trying to help trucking company Yellow Corp. open by negotiating an extension for the company to make $50 million in benefit payments, as well as the ongoing Writers Guild of America strike, workplace benefits and concerns about financial security in retirement are clearly at the forefront of workers’ minds.  

“For UAW in particular, but other union jobs as well, a worker typically reaches the top end of their pay scale early in their career,” said John Lowell, a partner in October Three Consulting, via email. “What they have to look forward to for longer tenure are those benefits that will sustain them in retirement. To them, that is their pension and retiree medical.” 

Lowell added that “other employers, both in manufacturing and in other industries, should note some of what the union is saying: They want guaranteed lifetime income. They want rewards for their longevity.” 

Currently, UAW workers who were hired after 2007 do not receive defined benefit pensions, but instead have access to 401(k) profit-sharing plans, which are employer-funded and allow the option for employees to make pre-tax contributions. During the 2008 global financial crisis, when GM and Chrysler went bankrupt, the union agreed to massive concessions in benefits, which included their pensions.

The workers attempted to get their pensions back during the 2019 movement “Unite All Workers for Democracy,” but the negotiations failed after a 40-day strike. 

Existing workers hired before 2007, many of whom are now retired, were able to keep their pensions and now receive, on average, about $18,000 per year, according to Marick Masters, a professor of management at Wayne State University’s School of Business. 

In addition to demanding full restoration of the DB pension plan for workers hired post-2007, the union is asking for a significant increase to current retiree pensions, as well as retiree health care coverage, which Masters says would come at a huge cost for the automakers to fund and maintain. 

“I think that’s a real sticking point … the restoration of the defined benefit plan and the restoration of retiree health care,” Masters says. “These are non-starters from the company’s standpoint. I think if the union insists on getting those things, they’re going to be in for a long strike.”  

The automakers have released statements that agreeing to the pension restoration would likely bankrupt the companies, and Masters agrees that their investors would likely bail out, hurting the companies’ stock prices and making it very difficult for them to survive. 

The Union’s Demands 

Wednesday was Day 6 of the UAW’s strike against the Detroit Three, and UAW President Shawn Fain announced that the new deadline for the automakers to reach a deal is Friday, September 22, at noon. If Ford, GM or Stellantis have not made substantial progress toward a fair agreement, the UAW will call on more members to join the “Stand Up Strike.” 

As of September 14, GM has proposed a 20% wage increase over the life of the contract, with a 10% boost in the first year, as well as contributions of $500 to retirees’ and $1,000 to active employees’ defined benefit pension plans. Ford is also offering a 20% raise over four and a half years, and Stellantis offered a 17.5% increase.  

“Beyond just making some cash infusions, the [automakers] are not going to do anything with regard to restoring these former [pension] programs,” Masters says. “They’re not going to balloon their balance sheets.” 

The UAW is, however, pushing for a roughly 40% wage increase for its members over the length of a four-year contract, and Masters says he would be surprised if they accept anything less than 30%. This push is being driven, in part, by the success of other unions, such as those at UPS and American Airlines, that have received similar increases this year. UPS workers were able to secure a $2.75 raise per hour, and American Airlines pilots successfully negotiated a 46% pay raise, which included an increase to their 401(k) contributions.

Autoworkers also gave up cost-of-living-adjustments in their negotiations during the 2008 financial crisis and are now pushing for a reinstatement of COLA protections to ensure wages keep up with inflation over the course of the next contract. 

The automakers have put some COLA proposals on the table, but Fain has rejected them, saying they do not meaningfully protect against inflation.  

Masters says it seems likely that the strike could lead to the end of the two-tier system that is currently in place for wages, health care and retiree benefits.

In 2019, the companies agreed to an eight-year progression scheme, allowing a new hire to eventually work their way up to the same pay as longer-tenured colleagues. The UAW is now pushing for a 90-day progression to the top rate. So far, the companies have countered with an offer for a four-year progression.

The Strike Continues 

Ford reached a tentative labor deal late Tuesday with Canadian labor union Unifor; contract talks have been running concurrently with the UAW’s. Details of Unifor’s agreement have not been disclosed, and it remains unclear whether this agreement will influence union talks in the U.S. 

The Stand Up Strike is a unique approach to striking in that instead of striking at all the plants at once, select union locals are being called upon to walk out of targeted plants throughout the Midwest. Masters says this form of striking limits the pain to the company and to the union but still imposes a cost on both that will hopefully be an inducement to the companies to come to the table with a better offer. 

On Wednesday, 2,000 GM employees were laid off due to the strike forcing the company to halt production at an assembly plant in Fairfax, Kansas, and Stellantis said it is laying off about 370 employees at three parts factories in Ohio and Indiana due to storage constraints related to the strike. 

Masters predicts the automakers will not allow the strike to go on for too long in order to avoid a company-wide strike, but he says if workers insist on retiree health care and the return of defined benefit plans, it will likely prolong the strike.