UAW President Gary Jones and GM CEO and Chairman Mary Barra shaking hands at the event.

Source: General Motors

DETROIT – Amid growing concerns about an economic recession and volatile trade deals, General Motors will lead what are expected to be contentious contract negotiations this year with the United Auto Workers union.

What company leads the negotiations is important because the UAW traditionally uses “patterned bargaining,” which means the union negotiates a deal with the first company and then uses that contract framework to negotiate with the other two car makers.

The contracts between the UAW and Detroit Big Three are tailored to each automaker, however going first is viewed as a positive that better allows a company to set their own terms.

GM, in a statement, said it looks “forward to having constructive discussions with the UAW on reaching an agreement that builds a strong future for our employees and our business.”

The talks are expected to be the most contentious in at least a decade amid “America first” policies and trade threats from the Trump administration; a tight labor market; and thousands of job cuts and cost reductions as the industry prepares for an expected economic downturn.

“(GM CEO and Chairman) Mary Barra said from the outset of these talks that we will stand up as we tackle a changing industry. We are ready to stand strong for our future,” UAW President Gary Jones said Tuesday in a release announcing GM as the target. “We are focused. We are prepared and we are all ready to stand up for our members, our communities and our manufacturing future.”

This year’s negotiations will set the wages and benefits for about 158,000 members. The outcome will also help steer investment plans for GM, Ford and Fiat Chrysler in the U.S. for the next several years.

FBI agents finish loading materials into a truck out of the home of United Auto Workers President Gary Jones on Wednesday, Aug. 28, 2019.

Michael Wayland / CNBC

An ongoing federal probe into corruption at the highest levels of the UAW also is expected to add to the tension. Federal officials raided Jones’ Michigan home last week as part of a multistate sweep of six properties owned by the union or former and current union officials.

The possibility of the UAW striking at one or more of the automakers that could significantly impact production and profits is high. The union announced additional funding for its “strike fund” earlier this year. As of last year, the fund totaled more than $721 million.

Shares of GM were relatively unchanged in trading Tuesday as the union announced the company would be the first to negotiate.

GM is expected to have the toughest negotiations with the union amid the automaker’s plan to potentially close four U.S. facilities, including large assembly plants in Michigan and Ohio, as part of a corporate restructuring aimed at cutting $6 billion in costs a year by 2020.

GM’s plans, which impacted roughly 14,000 U.S. salaried and hourly workers, were hailed by investors as a way for the automaker to address production overcapacity in the U.S. but heavily criticized by union leaders and President Donald Trump, who demanded the company sell or reopen Lordstown.

The contracts between the union and automakers all expire on Sept. 14, however, it’s common for that deadline to be pushed back weeks, if not months.



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