Brake Plants’ Strike Puts GM on Brink of Shutdown

General Motors Corp., the nation’s largest company, neared a total shutdown of its car and truck production Tuesday as seven more assembly plants were closed because of a strike at two factories that make brakes for most of its vehicles.

Twenty-one of GM’s 29 North American assembly plants have now halted production, and work has been partly curtailed at 30 parts facilities. More than 80,000 workers have been affected, and company officials said that all vehicle production could be halted nationwide within a day or two.

The eight-day strike has already become the most crippling labor action at GM since 1970, when a historic nationwide UAW walkout shut down the company’s U.S. operations for 67 days and helped drive the nation into recession.

No formal negotiations have been held since Thursday, but a GM spokesman said that bargainers from its two Delphi Chassis Systems brake plants in Dayton, Ohio, and United Auto Workers union Local 696 agreed to resume talks Tuesday night.

The fast-spreading work stoppage comes as the nation’s economy appears to be growing only grudgingly and auto sales are lackluster. The walkout already has had a slight adverse impact on the nation’s economy.

Economists predicted the lost auto production to date would knock off about one-tenth of a percentage point from the gross domestic product in the first quarter.

“It will have a slight dampening effect on the already sluggish economy,” said David Littman, senior economist for Comerica Bank in Detroit. The strike, however, would have to last a month or more to have a lasting impact, analysts said.

In an era when unions have generally lost clout, the UAW’s strategic strike stands out because of the speed with which it has managed to cripple the industrial giant.

The dispute also brings into focus the growing national debate about corporate downsizing, job insecurity and falling living standards for many middle-class Americans.

The Dayton strike revolves around GM’s attempts to send more component work to outside suppliers, a practice known as “outsourcing.” The company argues that its unionized work force cannot make certain parts as cheaply or efficiently as some independent contractors. But many workers, who have sought to cooperate with GM’s cost-cutting efforts, say enough is enough.

“I think that because of all the outsourcing that they’ve done it’s about time that we stand up and say it’s enough,” said Dee Byers, a production line worker at a GM assembly plant in Kansas City. “We need to fight for our jobs.”

GM has given in on several similar local strikes in the past three years rather than lose production. But the company is stronger financially today, and some observers said the No. 1 auto maker may be taking a stand.

“This is the most important issue facing the industry,” said David Cole, executive director of the University of Michigan’s Office for the Study of Automotive Transportation. “This could be a watershed strike.

“GM wants to settle this issue and put it behind them. I wouldn’t be surprised it this goes on for several weeks.”

Despite its downsizing over the past 15 years, the auto industry remains one of the nation’s most important, accounting for 4.5% of GDP, the total value of a nation’s output and services. It is estimated that each assembly job creates three or four others in supply and ancillary businesses.

GM remains the world’s largest auto maker and accounts for about one-third of all the cars and trucks sold annually in the United States. GM alone sold 4.8 million vehicles here last year.

The widening strike is creating financial hardship for workers, the company and its suppliers. GM deals with more than 1,600 supply companies, and many have been forced to furlough workers or switch them to other work. No figures were available on how many supplier layoffs have already been ordered.

The 3,000 striking workers are eligible for $150-a-week strike pay. Other union workers laid off because of the parts shortages must rely on state unemployment benefits, which normally take a week or two to kick in.

For GM, the strike comes just as it is beginning to reap the fruits of a painful restructuring. GM earned $6.9 billion last year. The company has earned money on its U.S. car operations for the past two years, after four years of devastating losses.

David Healy, an analyst for Burnham Investment Research, estimated that GM could lose as much as $35 million a day if all its vehicle plants are shuttered. If the strike is short-lived, most of the lost production and profits can be made up, he said. But if it lasts several weeks, the company’s net earnings could be hit hard.

Standard & Poor’s Corp., the credit rating agency, reaffirmed the company’s debt ratings Tuesday but said it might review them for a downgrade if the strike was prolonged. S&P; said it was concerned that the dispute would hurt profits and GM’s efforts to renew a labor contract with the UAW in the fall.

The adverse financial effects on GM are muted at this point because the company’s dealers generally have more trucks and cars on their lots than they can sell.

As of Feb. 29, GM had an 82-day supply of cars and 79-day supply of trucks, according to Ward’s Auto Reports, a trade newsletter. A level of 60-70 days is considered healthy going into the spring selling season. But some popular models are in short supply: Saturn subcompact, 49 days; Tahoe sport utility vehicle, 30 days, and Chevrolet Suburban, 33 days.

Some analysts suggested that GM may be using the strike to reduce dealer stocks. “But that’s a sledgehammer approach, since it affects both the popular as well as not so popular products,” said Healy.

The industry is split on whether this strike will last long. One train of thought is that GM has no choice but to settle quickly or risk losing sales and market share to competitors.

But others believe that GM is in for the long haul because it is intent on settling the outsourcing issue before negotiations with the UAW on a three-year national labor agreement start in September.

The seeds of the current strike were planted in the settlement of a labor dispute in 1994. GM wanted to award a contract for antilock brakes to Robert Bosch AG, a German supplier. The UAW agreed in exchange for a promise that GM would bring additional work into the Dayton plants that would lead to hundreds of new jobs.

The UAW now says that GM reneged on its pledge of new work. The company replies that it could not attract new business because the union did not live up to promises to improve productivity.

When the union struck on March 4, the impact quickly rippled through GM’s operations. Because the company relies almost solely on Dayton for its brake systems and components, it had no other source of brakes. And because modern manufacturing techniques do not allow inventory buildup, it had no backlog of parts to use.

On Tuesday, the company was forced to shut down truck plants in Linden, N.J.; Oshawa, Ontario; Flint, Mich., and Baltimore; and car plants in Kansas City, Kan., Oklahoma City and Arlington, Texas.

GM no longer builds vehicles in California.

“By the end of the week, we could be out of the business of making cars and trucks,” said GM spokesman Gerry Holmes.

GM has about 200 North American parts plants, many of which make components for other auto companies.