Treaty of Detroit - GM-UAW Contract Establishes Labor Containment Model

General Motors and the United Auto Workers sign a landmark five-year contract on May 23, 1950, that Fortune magazine christens the “Treaty of Detroit.” The agreement provides unprecedented wage increases and benefits but requires the UAW to abandon demands for a voice in corporate decision-making, establishing a model of labor containment that trades economic gains for management prerogatives.

The contract includes an automatic cost-of-living adjustment (COLA) tied to the Consumer Price Index and an “annual improvement factor” providing regular wage increases linked to productivity gains. It also includes pensions, health insurance, and other benefits that become hallmarks of postwar labor contracts. GM President Charles Wilson describes it as a “living agreement” that provides stability and predictability.

However, the contract’s significance lies equally in what the UAW surrenders. Walter Reuther abandons demands for open pricing policies, access to corporate financial data, and union participation in production decisions. The agreement explicitly preserves “management prerogatives” over investment, technology, plant location, and corporate strategy. GM gains five years of guaranteed labor peace and full control over strategic decisions.

Fortune magazine hails the contract as “industrial statesmanship” and a model for American labor relations. Business analysts praise the containment of union demands within purely economic terms, preventing the broader challenges to corporate power that characterized the militant 1930s labor movement.

The Treaty of Detroit becomes a template for postwar labor relations: generous wages and benefits in exchange for labor peace and management control. This model provides prosperity for organized workers during the postwar boom but leaves unions vulnerable when corporations later relocate production, automate jobs, and eventually break the contract framework entirely. By accepting management prerogatives over strategic decisions, unions sacrifice leverage over the very choices that would later devastate the industries they organized.