2007 September 24 Monday
UAW Strike Against GM

The United Auto Workers are like the dog that bites the hand that feeds it.

Workers left their jobs at 11 a.m. Eastern time, after a strike deadline set by the union late Sunday passed without a deal. Negotiators from the two sides were back at the bargaining table by early this afternoon. But industry analysts said that given how far apart the two sides appear to be, the strike could last for weeks.

The stalemate apparently arose over the union’s demand for job protection for its work force at G.M., which is one-fifth its size in 1990. G.M., in return, had pushed for the creation of a trust that would assume responsibility for its $55 billion liability for health care benefits for workers, retirees and their families.

Although the two sides agreed last week on the framework of the trust, they could not reach an agreement without addressing other contract issues, which in turn would determine how much money G.M. could invest in the trust.

This monopoly labor supplier for the US auto industry wants job security. Well, yes, and so do most people. But the US auto makers have long ago ceased to be the oligopoly suppliers of cars to the American people. Most people realize that in today's economy with global competition there's no job security. But the UAW want an unachievable goal that private sector workers can't have. The UAW is an anachronism.

Every time the UAW strikes against a US maker that maker loses marketshare that it does not gain back. Seems to me the UAW was way too fast to go out on strike. They are further weakening the wounded behemoth that they they count on being able to feed on.

The UAW sort of understands that the Moderately-Big-But-Shrinking Three are, well, shrinking under an onslaught from competitors that have cheaper labor costs. But the UAW isn't willing to give up much to save GM, Ford, and Chrysler from bankruptcy.

For his part, Mr. Gettelfinger said the union was “very concerned” about the long-term outlook for G.M., which was passed this year by Toyota as the world’s biggest auto company.

“We’ve done a lot of things to help that company,” he said. “But look, there comes a point in time where you have to draw a line in the sand.”

How long can General Motors survive a strike before they hit a liquidity crunch? At the moment I doubt that GM can borrow any more money. How fast can GM shift all their production abroad?

Share |      By Randall Parker at 2007 September 24 05:51 PM  Economics Labor


Comments
Kenelm Digby said at September 25, 2007 3:51 AM:

Whenever I see footage filmed inside an American auto factory, I am always struck that how old the workforce is, truly there seems to be no one under the age of 50 on the shop floor!
Of course this is due to the fact that the big auto-makers haven't recruited in years and that the workers lucky enough to have such jobs hold on to them for dear life.
By contrast I am always struck by the fact that in Chinese auto-plants the workers are so young - no one appears to be older than 30 - perhaps their industry hasn't existed long enough for 'long-service men' to have arisen.

tvoh said at September 25, 2007 6:37 AM:

Randall,

I'm neither an economist or financial analyst and I've not been researching GM's fainancial situation. Still, the strike may be not too much a burden to the company. If they have unsold inventory they can work off and not make cars in unionized plants while importing from overseas facilities (if they have them in place to do so), then not paying wages and benefits to the overpaid can't be all that bad.

From KD's comment above, those plants with greying workers are probably to be phased out anyway. A ten year strike until those guys are too old to come back would not be horrible under the right conditions.

Ned said at September 25, 2007 7:57 AM:

GM won't mind a short strike - it has almost 1,000,000 vehicles in inventory, and demand has been slowing lately. A short strike may actually be beneficial. The company has about $32 billion in cash reserves, enough to keep the wolf from the door for a while. A longer strike would be disastrous for both the company and the UAW. It could push the company into bankruptcy, and then all those juicy retirement packages that have been negotiated over many years would go poof! GM, Ford and Chrysler have about a $1,000 cost disadvantage per vehicle against the Asian car makers, a difference that is not sustainable in the long term, especially given the perception that Asian cars are superior in quality and are worth a premium price. So expect this one to be settled quickly. GM has improved the quality of its vehicles substantially in recent years, and getting its labor costs under control may be the last major step toward long term profitability. Whether Ford and Chrysler can pull it off is another question entirely. I wish them well, although their problems are entirely of their own making. For years, the "Big Three" behaved like oligopolists, selling poorly made vehicles at inflated prices to American consumers. But that never was much of a bargain, and the surge of high quality Asian vehicles plus the excessive costs have finally caused a breakdown. Who knows how many of the "Big Three" will still be around in a decade?


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