GM, Union Settle on Terms to End Strike
General Motors Corp. and the United Auto Workers union reached a tentative agreement Tuesday to settle a 54-day strike that cost the giant auto maker as much as $2.8 billion and nipped U.S. economic growth this summer.
The walkout--GM’s most costly in 28 years--was a concerted effort by the world’s largest industrial corporation to halt a damaging slide in its competitive position, but a number of experts said GM failed to win a clear-cut victory.
A number of key details of the agreement were withheld by both parties, though GM did extract contract settlements at several parts plants that were vulnerable to strikes and the union rebuffed at least some of the corporation’s initiatives to improve efficiency.
Striking UAW locals in Flint, Mich., are scheduled to vote on the pact this morning and some workers could be back on the job by late this afternoon if the agreement is ratified.
It could take three or four weeks, however, for GM to ramp up to full production and to fill its withered inventory pipeline. In the interim, supplies will continue to shrink and sales volumes fall, a situation that will keep pressure on retail prices in areas like Southern California.
Acknowledging the damaging cost to even his own members and communities across the country, UAW President Stephen Yokich said, “I hope that in the near future that GM and the UAW can find a different way of doing things.” It was a sentiment echoed in the White House, where President Clinton praised the agreement as “a victory for all Americans.”
Because the auto makers and their unions are unusually close-mouthed about terms of their agreements, it may take months before any clear indication of the winners and losers emerges in this fight.
GM probably didn’t lose much in the way of customer or dealer loyalty “because this wasn’t like the UPS strike, where consumers were hurt immediately,” said labor specialist David Weil of Boston University’s School of Management. “There were enormous inventories” and most reports say dealers have just now started to feel the effect.
Still, some observers already are saying that GM achieved little of lasting importance in the strike that involved only 9,200 workers at two key parts plants but which idled 188,900 workers as the domino effect of parts shortages rippled through the auto company’s North American production system.
“We have a long and costly strike, and economic blood in the streets. Hundreds of millions in production and profit have been lost and I don’t see anything different from June 5" when the strike began, said Dale Brickner, a retired Michigan State University labor professor and longtime auto industry watcher.
In a news conference called to announce the agreement, Yokich said the agreement was one “we can take back to our membership and our membership will ratify.”
Gerald Knechtel, GM’s lead negotiator and vice president for personnel, said the settlement agreement provides “a foundation for progress.”
The UAW received assurances that GM will not sell or close its Delphi parts plant in Flint for at least 18 months more, persuaded GM to drop its claim that the strikes at the Delphi plant and an aging metal fabrication plant in Flint were illegal and won a promise from GM to honor its commitment to invest an additional $180 million in capital improvements at its aging metal fabrication plant in Flint.
One victory for GM was that, in addition to resolving issues with the two striking locals in Flint, the proposed settlement would end the growing threat of walkouts at three other plants in Indianapolis and Dayton, Ohio. But the settlement does not cover GM’s Saturn facility in Spring Hill, Tenn., where workers recently authorized a strike.
GM also won agreement from the union to let it install unspecified “production efficiencies” at the metal stamping plant in Flint to increase production by 15%.
But the car maker lost its bid to end the practice of “pegged rates” at the plant and let the union keep the same production quotas. The pegging policy allows workers to quit early or earn overtime after they reach their quotas.
GM and the union also agreed to establish a system of “frequent discussions at high levels,” said UAW Vice President Richard Shoemaker.
Other details were not disclosed, but some insiders have said that the union agreed to give GM a four-year national contract instead of a three-year pact when that agreement is renewed next year. UAW negotiators also agreed that the union would not call a strike at the Delphi plant in Flint while the no-sale agreement was in effect.
But there were apparently no concessions by the union that would enable GM to slash its payroll and its reliance on costly, captive parts suppliers--as competitors Ford and Chrysler have done. And such concessions are critical to GM, which has the highest production costs and lowest profit margins of the domestic Big Three auto companies.
Brickner said the strike appeared to be “a situation where the relationship between GM and the UAW is inherently unstable. There is an incredibly bad relationship between the union and the company. You wouldn’t have this situation with Ford and Chrysler.”
The animosity between GM and the UAW is part of the reason the strike lasted longer than either side expected, said labor professor Weil.
The tensions have deep historical roots, he said, but most recently have been exacerbated because “GM has the toughest catch-up game to play. It still relies more on its own internal suppliers, its costs are higher and it still has a lot of older plants, so competitive pressures are tremendous.”
William Wilson, an auto industry economist with Detroit-based Comerica Inc., said “GM still stands in place in terms of closing the profit gap [with other car makers] and it has no assurances, except at one plant for one year, that the union won’t strike again. GM got some concessions, but not enough.”
The settlement was announced after the stock market closed, but GM shares rose $1.13 to close Tuesday at $74.25 on the New York Stock Exchange, as news spread that an agreement appeared near. Wall Street has supported GM management in the strike--seeing it as a struggle to cut costs and improve profits.
GM has said that the strike slashed production by 21,000 cars and trucks a day. But it still was running ads nationally with the slogan “Lots of Cars. Lots of Trucks. Lots of deals,” to assure buyers there are still GM vehicles to be had.
Many GM dealers in Southern California, however, say they were just starting to see their supplies depleted and sales shrink. At Yorba Linda Chevrolet, owner Milt Barnes said he breathed a deep sigh of relief when he heard about the settlement.
Barnes’ stock of Chevrolets had dwindled to 70, compared to the 300 he usually keeps in stock.
“The sales staff was getting nervous,” Barnes said. “Because they work on commission, some of them were wondering how they were going to feed their families.”
One salesman, worried that he would not have enough cars to sell, recently defected to a nearby Ford dealership, Barnes said.
Customers were also starting to shy away from his and other GM dealerships, Barnes said, because they suspected--wrongly--that they had small inventories and higher prices.
The strike also had an impact on prices of used cars. Dealers who feared that the strike would dry up their supply of new vehicles tried to outbid each other at used-car auctions, driving up prices, Barnes said.
“We’re happy to see this behind us,” Barnes said. “Now we can get back in the business of selling cars.”
Ted Jenkins, sales manager at Renick Cadillac in Fullerton, said the dealership sold only 15 cars this month, down from 66 in June--its best month in eight years. He blamed the slump on “a false perception among buyers” that many GM dealers had few cars in stock and were hiking their prices.
The end of the strike was accelerated by a pending ruling from independent arbitrator Thomas Roberts on GM’s allegations that the Flint strikes were illegal. Some insiders say GM had built a good case and that the union--which has been controlling the strike until now--wanted to settle to avoid an adverse finding.
Had Roberts ruled against the UAW, the union would have faced a forced end to the walkout and a stiff claim for damages from GM.
The strikes had virtually halted North American production of the world’s biggest auto maker as 27 of GM’s 29 major assembly plants on the continent were idled. More than 100 GM parts plants also were affected, in addition to dozens of suppliers.
GM claimed it lost an estimated $2.2 billion in profits from vehicles that didn’t get made during the strike, and some analysts have said the total will hit $2.8 billion by the time all the damages are tallied.
But economist Wilson says those figures are “accounting numbers” and not real losses. He estimates that GM will report an after-tax hit of about $1 billion because of the strike. Offset by market gains GM’s competitors have made, the impact of the strike would be enough, Wilson estimates, to cut the nation’s gross domestic product by about 0.3% this year.
A NECESSARY COST: GM paid dearly to endure the strikes, but it did so in the name of greater efficiency. D1