Workers at General Motors' Indianapolis metal-stamping plant are finally casting ballots this week on a contract proposal from JD Norman Industries—and possibly paving the way to a change of ownership.
Persuading union labor to accept a pay cut would be a feat, but it won't be the last challenge that Norman Industries would face, said Jay Baron, director of the Center for Automotive Research in Michigan.
“Even [paying workers] $15 an hour, it’s not obvious to me somebody’s going to get rich" in the metal-stamping business, Baron said. “There's almost nobody in the world today making a lot of money in stamping.”
For three years, General Motors has planned to close or sell the 2-million-square-foot plant west of downtown by September 2011. The deal with Addison, Ill.-based Norman Industries looks like an ideal way to save hundreds of local jobs. UAW officials are even hoping to see their membership grow under Norman's ownership.
“What we’re hoping and we believe will be successful, [is that] Norman Industries takes this plant over and becomes profitable,” said Maurice “Mo” Davison, director of UAW's Region 3 office. At the end of the five-year contract, he said, “we can sit down and share in that.”
Norman Industries owner Justin Norman did not respond to a request for comment. He's said in the past that in additon to becoming a GM supplier, he hopes to win contracts from other manufacturers in the region.
Davison believes that under Norman's ownership, the plant could go from about 640 hourly workers to more than 2,000. Norman has also said he would look to keep the plant's engineers and other salaried employees.
Baron, who wasn't familiar with Norman Industries in particular, said that even after negotiating a lower pay structure, the company would have to overcome a “glut” of U.S. metal-stamping capacity. What's more, the Indianapolis plant was built under the auto industry's old model of forming sheet metal for multiple assembly lines from a central location. “There's just all kinds of inefficiencies,” he said.
The deal is fueled as much by GM's needs as by Norman's business plans. One retired GM executive in Indianapolis said closing the plant could cost GM at least $50 million, a figure that Baron said is plausible.
The whopping closure cost stems from the expense tied to removing and possibly relocating GM's massive presses and cutting dies, according to the retiree, who asked not to be identified. The presses are as much as three stories tall, and dies can be as large as 10 feet by 15 feet, depending on the size of the vehicle part they are used to make.
And GM, which has emerged from bankruptcy and is preparing for a public stock offering, might need the production capacity from the Indianapolis plant.
“They didn't lose as much market share as they thought they would in bankruptcy,” said Tracy Handler, a market analyst at IHS Global Insight in Detroit.
Metal stamping in particular has a long lead time. “It would be really hard to change suppliers mid-stream,” Handler said.
With the Indianapolis facility open but under new ownership, GM would get what it needs without the cost of long-term employees, Handler said. One other benefit is in public relations. If demand dries up in the future, GM wouldn't be the one to finally close the historic plant, Handler said. “It gets the negative publicity off GM.”
UAW Local 23 resisted negotiating with Norman Industries. The proposed base wage of $15.50 an hour for unskilled labor represents nearly a 50-percent cut. Norman's offer includes a host of incentives, including cash bonuses of up to $35,000 and preserving worker's right to transfer to other GM-owned plants, but local union leaders worry that the pay cut would ripple throughout GM.
Davison, who endorses Norman's offer, said that fear is unfounded. He said UAW negotiated the wage so it would be on par with second-tier wages already in place at GM plants. The regional office arranged for the vote to be held by mail-in ballot. The American Arbitration Association is overseeing the process. The deadline for receipt of ballots is Sept. 27.
While labor costs are an issue throughout the auto industry, Baron said it may be tougher for Local 23 to accept Norman's wage cut because of the nature of metal stamping. “They are amongst the toughest places in the auto industry to work,” he said. “Loud, dirty … the fumes. The whole building's shaking. There's a lot of pressure to keep the machines running all the time. Those workers earn their pay.”