UAW Strikes GM Nationwide for First Time in 30 Years

Special Report

2007 UAW
Labor Talks

United Auto Workers union members employed by General Motors Corp. staged their first nationwide strike in more than 30 years today.

The walkout comes after the two sides fail to negotiate a tentative contract before an 11 a.m. deadline imposed by the union. Job security is the primary issue standing between GM and a settlement, the union says.

The impasse occurs despite protracted talks, which went nine days beyond the previous contract’s expiration date.

“(GM) made it clear as we moved closer to that (11 a.m.) deadline that they had no intention of sitting down and working out something that is equitable for our membership,” UAW President Ron Gettelfinger says during a press conference at the union’s Detroit headquarters.

“We feel like we’ve been pushed off a cliff,” Gettelfinger says, adding he hopes to return to the bargaining table later today.

The strike could cost GM thousands of units of production, including a waft of critically important ’08 vehicles now in launch phase, such as the Chevrolet Malibu and Cadillac CTS sedans and Saturn Vue cross/utility vehicle.

“We are disappointed in the UAW’s decision to call a national strike,” the auto maker says in a statement. “The bargaining involves complex, difficult issues that affect the job security of our U.S. work force and the long-term viability of the company. We are fully committed to working with the UAW to develop solutions together to address the competitive challenges facing General Motors.

“We will continue focusing our efforts on reaching an agreement as soon as possible.”

The auto maker has scheduled third-quarter production of 1.05 million vehicles. It expected to build 1 million vehicles in the fourth quarter.

The strike could also halt the sales momentum GM has gained in recent weeks. GM’s August sales soared 6%, as strong performances by its fullsize pickups and CUVs helped mitigate the headwinds from a housing downturn and rising fuel prices that sent sales in the previous two months down sharply.

GM was the only auto maker to show a gain in the month and it helped nudge market share to a seasonally adjusted best 26%, or roughly two percentage points better than year-ago.

Ward’s forecasts an equally brisk September for GM sales, with sales rising 6.8% above year-ago levels and moving 11.1% ahead on prior year’s DSR. As was the case in August, GM should benefit in September by an aggressive incentive program.

But the lost production surely will affect inventories and start to pinch vehicle availability if the strike lasts for any duration. GM’s inventories at the end of August already stood at a relatively tight 65 days, compared with 71 days in like-2006, according to Ward’s data.

Related document: U.S. Light Vehicle Inventory - August 2007

Some inventories are particularly tight. The Malibu, for instance, stood at 21 days in August. Dealer orders for the ’08 Buick Enclave, which has been bringing new buyers to the brand at an unprecedented rate and evolved into a pillar of GM’s cross/utility vehicle portfolio, number 1,900 units. Before GM added a shift to its CUV plant in Delta Township, MI, to meet demand that number was 3,000.

But a strike will not just hurt GM, warns JP Morgan analyst Himanshu Patel.

“A protracted strike at GM would only deplete the potential funds available to the UAW for an eventual VEBA trust,” Patel says in a research note, referring to the Voluntary Employee Beneficiary Assn. the two sides were reportedly establishing.

The trust would finance the health-care needs of retirees, releasing GM from obligations estimated at $3 billion annually. Legacy costs were expected to be a major stumbling block of these talks.

The protracted negotiations had been seen as an encouraging sign.

“It suggests GM is fighting hard, but it may also signal that the UAW may not have many other viable options on its hands,” Patel says. “The primary motivation of the strike announcement, coming nine days after contract expiration, may be to pressure GM to finalize lingering issues in the contract.”

Gettelfinger also accused the auto maker of taking UAW members for granted. While much attention has been focused on the labor cost disparity between Detroit auto makers and competitors such as Toyota Motor Corp., the UAW has been eager to point out productivity differences that favor unionized plants.

Citing research by Harbour Consulting Inc., the UAW says unionized workers assemble vehicles more efficiently than their non-unionized counterparts in 11 of 12 product categories.

Meanwhile, GM effectively matched Toyota in this year’s Harbour plant rankings, while Ford had two of its sites ranked among the top 10 in North America.

However, industry data shared by auto makers and obtained by Ward’s suggests Detroit OEMs and the Japanese transplants are still separated by a per-vehicle labor cost gap of $1,002.

The UAW last called a national walkout in 1976, with Ford Motor Co. the target. This nationwide strike is the first for GM since 1970. In both 1999 and 2003, the union reached agreements without a work stoppage. However, workers at GM-parts plants in Dayton, OH, walked off the job in 1996, forcing the auto maker to lay off others and slow vehicle production due to a shortage of brakes.

The local union returned to work 17 days later claiming a victory for job security. In 1999, workers at GM’s stamping plants in Flint, MI, struck for nearly two months and cost the auto maker more than $2 billion in lost production. The union gained pay concessions and new investment.

GM and the UAW have been negotiating all summer on a new contract. Their current pact expired Sept. 14 and the union was extending it by the hour with the hopes of reaching a deal.

The two sides hit a logjam over job guarantees, Gettelfinger says.

Against the walkout, GM’s greatest bargaining chip is a threat to move jobs overseas, a decision it would consider necessary to remain competitive should the union not make certain concessions related to health care.

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