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GM plants ready for an eventful year

General Motors workers received a shot of good news this month: eligible hourly employees will get profit-sharing checks of up to $9,000, a record high for GM.

It was another sign

of how far GM has come since the dismal days of the recession, when the automaker slid into bankruptcy and its future was gloomy.

The outlook is different now. Both of GM’s local plants, in the Town of Tonawanda and Lockport, are determined to build on recent investments by the automaker, with an eye toward attracting even more work.

Meanwhile, larger issues loom. GM’s labor contract with the United Auto Workers will expire in September, and the landscape is much different from when their current deal was ratified four years ago.

The economy is stronger, and U.S. vehicle sales are rising, with some experts predicting sales might reach levels unseen since the early 2000s. GM reported robust profits in 2014, despite the negative publicity, recalls and high costs stemming from faulty ignition switches on some of the automaker’s small cars.

GM’s two area plants have more than 3,300 employees between them, so the automaker’s performance affects the Buffalo Niagara region. The Tonawanda complex has managed to keep refreshing its product lineup to stay viable within GM. Likewise the GM Lockport plant, which survived a rocky period as a Delphi manufacturing operation before returning to the GM fold more than six years ago.

GM’s Tonawanda engine complex spent 2012 and 2013 drawing upon $825 million in new investments by the automaker, installing new technology and equipment for new engine lines. Last year, the plant was focused on taking advantage of the upgrades, said Steve Finch, the plant manager.

“I would have thought we were so intense during the production launch phase of the business that things were (in 2014) going to kind of relax and we’d be able to take it easy, but actually it’s been as intensive, if not maybe more intensive, with just the level of activities to get us to be more productive,” he said.

The complex makes Ecotec engines for vehicles including the Chevrolet Malibu, Buick Regal, the Chevy Silverado and GMC Sierra pickup trucks. It also produces V8 engines for the Chevy Corvette Stingray and Cadillac CTS-V.

The production numbers for the V8 were “very, very good,” Finch said. “We would have liked a little bit stronger sales on our (Ecotec) side. But in general, we’ve had pretty steady production lines.”

GM Tonawanda has 1,774 hourly and salaried employees, along with 15 on layoff. The plant in 2014 generated wages of $157 million, and payroll taxes of $31.5 million.

Arthur Wheaton, an automotive industry expert at the Cornell University School of Industrial and Labor Relations in Buffalo, said he believes the Tonawanda plant’s future is bright, although it could use a few more breakout hits among cars it supplies engines to.

“I think they’ve had good sales, but I don’t think they’ve had spectacular sales,” Wheaton said. “They don’t have that red-hot vehicle coming off the line like the Ford F-150 so they’re not in a position to start adding a great deal” of workers.

However, the plant is the exclusive supplier of the standard engine for the Corvette Stingray, which made the “Ward’s 10 Best Engines” list and was featured in a Science Channel program. “They’ve got very big prized assets, which means [GM has] a lot of faith in their ability,” he said. “They have great labor relations.”

Last year, GM Tonawanda produced nearly 611,000 engines, up 67 percent from 365,000 in 2013, which was an unusually low total because the plant was still ramping up its new engine lines.

“Our [production] volumes are pretty consistent in terms of our outlook for the near-term future, so our employment numbers are fairly stable,” said Finch, a Buffalo native who has led the plant for about eight years.

The complex’s output is rising, but has a long way to go to match the 1.92 million engines it produced in 1995. Since 1938, GM Tonawanda has produced about 72 million engines.

Finch said plant management continues to have a good ties with UAW 774, a relationship credited with helping the plant secure new work over the years. Along with adding new engine lines, the Tonawanda complex has had to complete another task: bringing aboard new employees, including some who transferred from other GM plants, and others who were brand new to the industry. The result is a workforce that blends longtime Tonawanda complex workers with newcomers and workers from other GM sites.

“If you go out there and talk and interact with people, you can hardly tell one from the other,” Finch said. “Everybody’s just kind of working together as a team and I think that part’s gone very well.”

A piece of the team approach, he said, is encouraging workers to help identify and solve problems. Gone are the days when manufacturing workers were expected to simply show up, do their jobs and go home, Finch said. “I think that has gone to make the work environment better. It engages them and gets them involved.”

To hear Finch describe it, the Tonawanda plant can reap more benefits from its new investments, and he is looking forward to accomplishing that.

“I think anytime you do a major transformation of a manufacturing facility like this – we basically gutted the operation and brought in all new equipment – and in many cases new technology – it takes a while to adjust,” Finch said. “I think the equipment is performing better, but certainly we’ve got more improvement opportunities to go.”

Finch said he was not aware of any new engine line opportunities within GM at the moment, but his message is to not let up.

“What I’m telling employees right now is our mission to become a world-class efficient operation,” he said. “That’s what we’re trying to do. I think that is the best thing we can do to put ourselves into position for new work.”

In Niagara County, GM’s Components Holdings plant in Lockport has also capitalized on new investment: a total of about $40 million in 2012 and 2013 to support product launches.

The plant last year produced nearly 11.5 million parts, up 9.2 percent from 2013. It makes products like radiators (1.6 million of them in 2014), condensors, heater cores, evaporators and HVAC modules, for a wide range of GM vehicles.

“It was a pretty strong, steady year from a volume perspective,” said Pat Curtis, the plant manager.

The Lockport plant has 1,560 employees, including 137 temporary workers who were converted to full-time status. The plant has also revived its apprenticeship program, with plans to select four apprentices this year.

As the Lockport complex has added employees, it has not lacked for good candidates, said Susan Gouthro, the personnel director. Individuals from both inside and outside of GM have applied for positions. “Definitely people want to work here, people want to stay working here.”

Curtis has some of the same goals for the Lockport site that year that Finch describes for the Tonawanda plant: reining in costs, encouraging employee engagement in their work, and, ideally, securing new work when GM decides where to assign it.

“We’ve got to be the best quality, low-cost option,” Curtis said. “As an organization, we’re focused and engaged to make that happen.”

Michael Branch, shop chairman for UAW Local 686, said last year “went according to plan. I think we met our goals from a UAW perspective. I think we’ve situated ourselves with the union leadership and GM leadership to put ourselves in a good position for the upcoming programs we’re going to be bidding on.”

Branch said the leadership of the plant and UAW 686 make decisions jointly. “We’re all on the same page for what we need to do here to make Lockport as successful as we know it can be,” he said.

Gordie Fletcher, UAW 686’s president, said the plant’s impact last year went beyond production, with fundraising efforts benefiting local charities and events like a “Buy American Day” the UAW held in conjunction with GM at the union hall.

As GM and the UAW prepare to negotiate in Detroit this year, the outcome will affect workers across GM’s operations. (UAW contracts with Ford and Chrysler are set to expire at the same time as GM’s. Ford has a manufacturing plant in Hamburg.)

Consider how different things are for GM from the last time the automaker struck a deal with the UAW. In 2011, GM was only a couple of years removed from its bankruptcy filing. The 2011 contract kept intact a two-tier wage system established four years earlier, allowing GM to pay newly hired hourly workers at a lower wage rate.

The leadership of GM and the union has also changed. Mary Barra was named GM’s CEO just over a year ago. When Dennis Williams was elected UAW president last June, and he said he was committed to ending the automaker’s two-tier wage system. That could provide a difficult fight, since GM has used the system to keep labor costs in check.

GM’s economic fortunes have also brightened. The automaker reported net income of $2.8 billion in 2014, down 26 percent from the year before amid high recall costs. It earned $1.1 billion in the fourth quarter alone.

“A lot of people think ‘Gee, they’re doing well and they’re making money, so the negotiations will be easier,’” said Wheaton, the automotive industry expert. “And it’s actually not the case. Sometimes when they’re making money, it makes the negotiations even more difficult.”

Union members will understandably want their share of the prosperity, “but you’re trying to negotiate a contract in good times and you don’t know what will happen in the lean times,” he said.

One way GM has dealt with that unpredictability, Wheaton said, is through profit-sharing checks that leave employees’ base wages unchanged. But Wheaton said there comes a point where employees want a raise. “It becomes a mental aspect of, ‘Why am I still getting paid the same as 10 years ago’?” he said.

And profit-sharing checks have their limits as a source of income, since they fluctuate, Wheaton said.

“The banks won’t approve your mortgage or give you loans based on what your profit-sharing checks are,” he said. “They only want to know what’s in your base wage you can guarantee.”

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