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This GM strike is different
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June 12, 1998: 7:06 p.m. ET
Fiercer rhetoric and firmer resolve mark GM's eighth strike since 1996
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NEW YORK (CNNfn) - As talks resumed Friday at two General Motors Corp. plants where strikes by union members have idled nearly 51,000 blue-collar workers, the prospects for a quick fix to the labor strife seemed murky at best.
"The rhetoric is much different this time - this time they're really out to get each other," said Harley Shaiken, a professor who specializes in labor issue at the University of California at Berkeley.
Shaiken was referring to a 17-day strike at two GM brake plants in Ohio in 1996 that cost the company $900 million in pre-tax profits and virtually paralyzed GM's North American operations. Since then, the nation's largest automaker has been afforded little respite from labor walk-outs: in 1997, the company was hit by six strikes.
The latest showdown erupted on June 5 when 3,500 members of United Auto Workers Local 659 struck a GM metal-stamping plant in Flint, Mich. over staffing, health and safety issues and a perceived failure by management to fulfill a pledge to invest $300 million in a plant upgrade. The walkout forced GM to idle more than 18,000 workers at seven plants in North America.
The ripple effect gathered force Thursday evening with a walk-out by 5,800 workers at another Flint facility, the Delphi East plant. That factory makes spark plugs, speedometers, instrument panels and other parts crucial to the assembly of GM cars and trucks in North America.
The GM strike has forced the automaker to stop building high-profit vehicles like the Chevy Suburban.
A protracted strike at Delphi, analysts say, could force a total shutdown of GM's 31 plants in the United States, Canada and Mexico.
A gaping chasm separates sides
The picket line dividing the two sides in the current strike is a familiar one to many veteran industry observers. But it is a gaping chasm to striking workers who view GM's efforts to cut or transfer jobs out of the country as the epitome of corporate callousness. GM, for its part, argues that unless it streamlines operations, it will continue to lose market share to rivals Ford Motor Co. (F) and Chrysler Corp. (C) in the hyper-competitive auto market.
For that reason and others, GM may be more willing than ever to sacrifice short-term profits in the name of efficiency down the line.
"What they're really looking at is the long-term implications of this," said David Cole, the Director of the Office for the Study of Automotive Transportation at the University of Michigan at Ann Arbor. "In the past, there was a decidedly short-term mentality, and basically what (GM) would say is we'll settle so we can meet our quarterly profit projections. That's different today. The financial community is concerned about the short-term return…but what they're focused on is the long-term profitability."
Cole added that the $900 million hit GM took in the 1996 strike is not as devastating as the numbers may appear when viewed in a larger context. GM's current three-year contract with the UAW, Cole points out, has allowed the company to reduce the workforce by 10,000 workers a year, saving GM $2 billion annually.
Given this, he says, it becomes costlier for the company in the long term not to make the cuts, even at the short-term risk of drawing the wrath of union members.
For GM, however, job issues "are just one part of a complex picture," according to John Casesa, an auto analyst with Schroder & Co.
"GM's competitiveness is not only dependent upon labor costs, but also on the speed of its decision-making, its success in responding to the market appropriately and its ability to identify the growth segments in the market," Casesa said.
A hemorrhaging of market share
Shaiken, the Berkeley professor, puts it another way: "What's going to happen to GM's markets and the decline in its market share is not due to the fact that the company's overstaffed but rather that in the 70s they missed the small-car surge and in the 80s they missed the large-car boom," Shaiken said. "I think GM has made some rather impressive strides in the past few years, but its core problem has been a hemorrhaging of market share because it has not responded well in the marketplace."
Today, GM owns about 31 percent of the U.S. auto market, down from roughly 50 percent in past decades. Ford, meanwhile, has 24 percent of the market.
Heightening the pressure, others point out, is the fact that GM's industry peers, Ford and Chrysler, have attacked their own labor and balance-sheet problems so effectively through successful streamlining campaigns.
"There is enormous peer pressure because Ford faced essentially the same conditions as GM does now back in the '80s," Casesa noted. If the company hopes to overcome its reputation as a lumbering giant that achieved its number-one ranking thanks to sheer volume, Casesa adds, it has to "pick up the pace."
"GM is going in the right direction, but it is not getting better as fast as the competition is getting better," Casesa said.
Since the 1970s, GM has pared its hourly workforce almost in half to 218,000 employees. But analysts say the company must eliminate 30,000 more blue-collar jobs if it hopes to transform itself into a lean corporate player fit for 21st century competition.
Despite the seeming intractability of this week's standoff at GM, Cole says the two sides are likely to find common ground once the union members have had an opportunity to vent their pent-up feelings of fear and anger. "Until you diffuse the anger, it's hard to be rational," he said.
Nonetheless, Cole did not play down the significance of this week's action. It's "one of the end battles of the old industry as it pretty much gets ready to make the transition across the board to what it needs to be."
But Shaiken said GM's troubles will not fade away after the striking workers return to the assembly lines.
"These are issues that are ultimately going to have to be resolved in national negotiations where GM is not making the union its adversary, but is actually figuring out a basis where it can work with the union," he said.
GM shares closed Friday at 69-7/8, down 3/8.
-- by staff writer Douglas Herbert
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