GM, UAW Talks Hold Risks for the Softening Economy
The United Auto Workers union has an array of options open to it as national contract talks with General Motors Corp. enter their final hours.
Some of the strategies, if carried out, carry potentially serious consequences for the U.S. economy.
In a nutshell, the union has three choices: Reach agreement before the current contract expires at midnight Friday, extend the current agreement beyond then or stage some kind of strike.
It was difficult on Wednesday to assess the chances of an agreement before the deadline. The tone of negotiations since they began in mid-July has been mostly cordial, but some auto analysts have said for months that a strike against GM is likely.
The UAW also is bargaining with Ford Motor Co. and Chrysler Corp., but the union has put talks with those two companies on hold pending the outcome of the GM negotiations. In all, more than 450,000 active auto workers are covered by UAW contracts with the Big Three, each of which expires at the same time.
With a strike fund of about $770 million, the union has the fiscal flexibility to take a large number of the 300,000 GM workers out of the company’s plants for a long time.
But the union may feel that such a labor bomb is unnecessary to demonstrate its discontent with GM.
The company, like other auto makers, brings parts to its assembly plants within hours of the parts’ being installed in vehicles. That means even a small strike can take on huge proportions as it dries up the parts pipeline.
The UAW demonstrated that last month, when it staged a walkout involving about 2,800 workers at GM’s AC Rochester West plant in Flint, Mich., where fuel tanks and other parts of GM cars and trucks are made.
When the supply of fuel tanks stopped, so did assembly plants.
The strike was seen as a signal of what the union could do to the auto maker if national talks broke down.
By the time the six-day strike was over, seven assembly plants and portions of more than a dozen component factories had been shut down, temporarily idling more than 20,000 workers.
Whenever an assembly plant shuts down, layoffs ripple out. Depending on how long production at an assembly plant is interrupted, effects can be felt throughout the auto supplier industry, including plastic, glass, rubber and steel makers.
Labor negotiations in the auto industry come as the economy is slowing down and predictions of a recession are growing.
In 1970, an already weak economy slipped into recession when the UAW struck GM for 69 days, said Donald Ratajczak of the Economic Forecasting Center at Georgia State University in Atlanta. At that time, he said, GM played a much larger part in the U.S. economy than it does now.
“Therefore, it (GM) by itself isn’t going to take down the economy,” Ratajczak said Wednesday of this year’s negotiations. “Although it’s a negative. We’re being hit by negatives all over the place.”
He said auto negotiations this year come “at a bad time when consumer psychology is hurting anyway. You start to run up the unemployment rate (from a strike) and you’ll kill Christmas.”
A strike that slows production conceivably could help clear out dealers’ lots of unsold cars, but inventories are already at optimum levels for this time of year, the dealers say.
Auto dealers, struggling with slumping sales for nearly a year, have been decreasing their orders to increase their profits.
