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GM tactic a red herring?
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July 6, 1998: 6:10 p.m. ET
Bringing in outside suppliers to ease production woes may not be feasible
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NEW YORK (CNNfn) - As General Motors mulls the feasibility of using outside suppliers as lifelines for its strike-addled assembly plants across North America, GM managers may intend the move more as a negotiating ploy to wrest concessions from the picket line, than as a viable business plan, analysts say.
With the work stoppages at the nation's largest automaker heading into their second month, GM has reportedly begun to explore other channels for obtaining the hoods, fenders, spark plugs, speedometers, instrument panels and a host of other parts supplied by the two striking plants.
Finding outside suppliers could allow the reopening of as many as 10 of the 26 assembly plants forced by the strikes to cease operations before GM went on its annual two-week summer shutdown June 27.
GM operates 29 such assembly plants across North America, each supplied by a small constellation of parts plants outfitted to the specifications of their hub factory. The closures, to date, have idled 163,000 non-striking hourly workers, and cost the company an estimated $1.2 billion in the second quarter alone.
The strike has also depleted dealers' inventories, raising the specter of near-empty lots as the strike eats into the traditionally brisk summer season for car and truck sales.
Yet even if a willing supplier were found, experts argue, GM would face the daunting task of successfully integrating it into an assembly operation staffed overwhelmingly by hostile union workers. The often long lead times required to get production up and running could also short circuit the strategy.
Unlikely to make good on the threat
Not every supplier, of course, is comprised of non-union workers. And all of the top three automakers - GM, Ford Motor Co. and Chrysler Corp. - already incorporate outside suppliers, to varying degrees, in their production networks.
Nonetheless, any move by GM to allay its production woes by going out-of-house is bound, analysts say, to rattle union members already resentful of what their leaders have dubbed GM's "America Last" strategy. And that is precisely why GM management is unlikely to make good on its rumored threat.
"If GM actually did pursue this route…there would be a really poisoned atmosphere in the United Auto Workers plants where the parts are shipped," said Harley Shaiken, a professor at the University of California at Berkeley who specializes in labor issues.
Shaiken suggested that bringing parts in from outside would put union workers at the recipient plants in an awkward position.
"The workers would likely perceive this as 'scab' parts and would handle the parts with reluctance," he said.
Complicating matters for GM executives is the intensely ideological nature of the current work stoppage, which has mushroomed from a local strike action to a national battle over clashing visions of the industrial future.
About 3,400 workers represented by UAW Local 659 walked off their jobs at GM's metal-stamping plant in Flint, Michigan June 5 in a dispute over work rules and productivity. They were joined six days later by 5,800 peers from UAW Local 651 at the nearby Delphi East diversified parts plant.
Union workers at the metal-stamping facility, the Flint Metal Center, accuse GM of reneging on pledges to invest $300 million in plant upgrades and of attempting to slash jobs or move them out of the country.
A failure to adapt to new workplace
GM retorts that it cannot realistically afford to invest more than $120 million in the facility. The automaker argues the workers' current plight is a result of their failure to adapt to a changing global work environment.
GM has pointedly complained that workers are often paid for 8 hours for 4 or 4.5 hours worth of labor; as a result, the management says, the Flint facility bleeds money, losing an estimated $50 million annually.
Unless the plants are more competitive, GM fears, they will not survive in the automotive fast-lane of the 21st century. Compounding matters, GM's market share has plunged from nearly half the U.S. market two decades ago, to about 31 percent, leaving a glut of production capacity that has left the behemoth feeling flabby compared with rivals Ford and Chrysler.
Today, Chrysler accounts for 16 percent of total market share, compared with about 25 percent for Ford.
In the view of many industry observers, GM's real dilemma in the current strike is that it has been fighting on two fronts: one, the grass-roots battle to wring specific concessions from workers at the two Flint plants. But the other, broader, skirmish is the one being waged on a national stage, replete with all the rhetoric of a fight to the finish.
For GM, the problem at times has seemed to be the difficulty of linking the local battle to the larger one in articulating a grand strategy.
Possible boost in "incremental" sales
Meanwhile, competitors have watched with mixed feelings of optimism laced with unease. At rival Ford, an official said the boost to his company thus far from the GM strike has been negligible, though that equation may change if the strike endures beyond a short-term phenomenon. Then, he said, Ford could see some "incremental" sales, depending on how the strike goes.
Mel Stephens, Ford's director of business news, said that for the month of July the strike has had "hardly any impact on our sales." On Monday, Ford posted an 11.4 percent increase in its June vehicle sales, as truck sales surged 18.1 percent, a new one-month record.
GM had earlier reported a 24 percent increase in June sales, but warned of a 30 to 40 percent drop in July due to the strike. Chrysler sales rose 10 percent for the month. Heavy incentives propelled sales at all three automakers.
After steady negotiations over the weekend, GM resumed talks Monday with the striking UAW workers amid signs that both sides saw a renewed urgency in ending the strikes.
There has been speculation GM and the union may agree to settle the strikes before July 13, when the automaker's two-week model changeover ends.
However, union officials said that may be wishful thinking.
"That's the rumour everybody's put out," Brown said. "Youcan't predict anything like this. If GM wants to settle, they can turn around and have an agreement in two hours."
GM, according to a published report, could see its remaining 850,000 vehicles disappear by August if sales continue at their current brisk pace. Further strikes, meanwhile, have been threatened at two plants in Dayton, Ohio that last struck for 17 days in 1996, costing the company $900 million. A strike-authorizing vote is scheduled at a stamping plant in Indianapolis on July 12.
As talks continue, GM now finds itself wondering what it could win through negotiations that would be worth the $1.2 billion it has lost in the 32 days since the strike began. That is more than 20 times the $50 million GM loses annually from the Flint plant.
--By staff writer Douglas Herbert
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