More Is at Stake Than Lost Car Sales

Daniel J.B. Mitchell, a professor in the Anderson Graduate School of Management and the School of Public Policy and Social Research at UCLA, teaches labor relations

Much of the media attention on the General Motors strike has centered on its economic impact: lost paychecks, lost profits, car dealers running low on inventory. But there is more at stake in the GM dispute. Unions (not just the United Auto Workers) and unionized employers (not just GM) must be concerned about a fundamental breakdown in the normal operating procedure of American labor relations. The stakes are particularly high for unions, which have seen their share of the private work force dwindle to about one-tenth.

Unlike many countries, the U.S. has evolved a legalistic form of labor relations with enforceable multiyear union-management agreements. Although examples of written union contracts could be found early in this century, the current system developed out of the Great Depression of the 1930s. Surging unionization in that period led to a wave of strikes and government regulation of the collective bargaining process.

Two concepts developed to characterize union-management disputes. “Interest disputes” were those arising from the negotiation of a new agreement. Once the agreement was reached, it was codified in a written contract of specified duration. Disputes over the interpretation of that agreement were labeled as “rights disputes” and were typically settled peacefully through a system of contractual grievance handling. Any unsettled grievances were referred to a neutral arbitrator under procedures set forth in the contract for a binding decision. During the life of the agreement, strikes and lockouts were either proscribed or allowed only in limited circumstances.

At various points in history, the interest in maintaining this system has shifted between unions and employers. A wave of strikes after World War II led to an outcry from the business community, which demanded that contracts be made legally enforceable. Employers wanted to settle any outstanding conflict at contract negotiation time and then be free to run their enterprises without strike interruptions until the agreement expired. A Republican Congress granted their wish in the form of the Taft-Hartley Act of 1947, which also contains language endorsing arbitration of rights disputes.


In the early 1980s, the situation reversed. Employers called for union concessions on wages and benefits. Some employers, most notably Continental Airlines, used bankruptcy proceedings to void their union contracts. This time, unions went to a Democratic Congress and won modification of bankruptcy laws to limit the use of such tactics. Now in the 1990s, we see GM going to court claiming that the UAW has violated its existing agreement by striking before that contract expired. The court has referred the matter to an arbitrator.

What is clear from the GM-UAW dispute is that the parties did not really settle all their outstanding differences when they last negotiated in 1996. That by itself is not unusual in labor relations. Unfortunately, GM and the UAW also did not settle on a peaceful mechanism for resolving those differences. The result is the current midcontract strike.

Unions and unionized employers should be asking themselves whether they want the system of contractual labor relations that has evolved since the 1930s to continue. The unions’ stake is clear: Unionized firms will have an increased incentive to go nonunion if they cannot be guaranteed labor peace having once negotiated a contract.

Employers also have a stake, the same one they had in the 1940s. Without a guaranteed period of labor peace, corporate planning, inventory control and the ability to meet customer needs are compromised. Organized labor and organized management need to come together and discuss these larger issues.


E-mail: daniel.j.b.mitchell@