Showdown In Detroit
For General Motors, it was like the throb of a migraine headache building to a sickening crescendo. First, angered by the company's aggressive farming out of work, 3,000 workers struck two brake-parts plants in Dayton, Ohio. Then, as brake inventories ran out, GM had to shut down its car and truck plants, one by one: Pontiac, Mich.; Lorain, Ohio; Flint, Mich.; Ste. Therese, Quebec; Linden, N.J. Twenty-two of GM's 29 North American assembly plants had gone idle by Mar. 13. Management and the United Auto Workers grudgingly agreed to resume bargaining and seemed likely to settle their differences. But the painful toll remained: $50 million a day in forgone pretax earnings, analysts figure.
Welcome to one tough labor bargaining season. For GM--and probably for crosstown rivals Ford Motor and Chrysler--this is a pounding headache that's likely to last all year. The Dayton strike is the latest in an escalating series of local walkouts against General Motors Corp. and Chrysler Corp. that foreshadow talks to start this summer over new three-year contracts with the Big Three. And when union leaders convene on Apr. 1 in Detroit to plan their bargaining strategy, the flashpoint issue will be the same as it is in Dayton: shipping out parts-making work to outside suppliers.
The wrangling over outsourcing will only get fiercer as the union grapples with which of the Big Three to target for a potential strike and how to protect its pension rights and $45-per-hour pay and benefits package. And despite its recent humbling defeat in the 18-month-long strike against Caterpillar Inc., the UAW still considers a walkout its ultimate weapon in a war of nerves with the auto makers. "We're not strike-happy, but that's the only way to get the attention of top management," says UAW President Stephen K. Yokich, who took over the union's top post last June.
The larger issue raised in Dayton is whether Yokich is shifting the union's emphasis from wage hikes to job security. Historically, the UAW has accepted weaker layoff guarantees than it wanted in exchange for income protection for laid-off workers and above-inflation pay gains. Union members still want healthy raises when their labor contracts expire on Sept. 14. But Yokich also seems more determined to slow job loss from outsourcing. The issue may even spark Detroit's first national strike since 1985, says Harley Shaiken, a labor studies professor at the University of California at Berkeley. "We're fighting for our future," says Phil Day, a worker who struck GM's Ohio brake plants. "Above all, we need to protect our jobs."
Indeed, Yokich put job retention "on the front burner" even before the Dayton walkout. Last year, for instance, Chrysler wanted to sell off its antiquated glass plant in Detroit, only to be met with a potentially crippling three-day strike. To achieve peace, Chrysler had to relent on its sale plans and agree to invest $70 million in new equipment at the factory. "Clearly, the UAW will be very vigorous in trying to save jobs," says one Big Three executive. "We expect to get beat up on outsourcing."
"TO THE BARRICADES." GM is by far the most vulnerable. While Chrysler produces only 30% of its own parts and Ford Motor Co. about 50%, GM makes close to 70% of its components at a sprawling network of 194 plants. Workers in GM's Delphi brake-parts unit earn the same pay as assembly workers, while most outside suppliers pay much less. Big investors have relentlessly pressured GM to hand off more business to outside suppliers. "The competitive situation does not permit GM to have unproductive parts plants," says John Casesa, auto analyst at Schroder Wertheim & Co. in New York.
That's why GM put its foot down in Dayton. The strike was triggered in part by the GM's decision to subcontract out some parts work and to buy antilock brake systems for two 1998 models from Germany's Robert Bosch. The union claims that would cost 125 future jobs--and renege on a deal GM made two years ago after a similar strike. "They agreed to bring work in, and they broke their promises," says Joe Buckley, an official of UAW Local 696 in Dayton.
But GM argues the Dayton workers failed to meet productivity goals needed to win brake work on new models. To get the point across, the company broke off talks three days into the strike. With an oversupply of cars on dealer lots, idling plants wouldn't hurt much. So GM made no move to return to the table until plants building high-profit trucks were hurt. Says a GM spokesman: "The union believes that competition does not matter and they have a right to the business."
The Dayton strike demonstrates that a strategic walkout at a parts plant can quickly shut the giant down. One reason: GM, like other manufacturers, has increased its use of just-in-time inventory methods, which require plants to keep only a small stock of parts on hand. Says a source close to the UAW: "The union has more power today than ever because the companies are more vulnerable to a strategic strike than they've ever been."
The head-butting won't stop anytime soon. Parts chief J.T. Battenberg III claims that 14 of GM's 194 components plants lose money. "We're working with the unions to make fixing our troubled operations a high priority," he says. But that does not wash with the UAW. "The company made $6.9 billion last year, and here they're talking about hundreds of jobs they don't need at these little plants," says Sean McAlinden, a University of Michigan labor expert. "The union will go to the barricades on that." And in this election year, job preservation is an especially potent issue.
The big question in Detroit: Which company will the UAW pick as the strike target? In pattern bargaining, the UAW usually chooses one company to negotiate with first, and then tries to impose that deal on the other two. In 1993, for example, it picked Ford, then the industry's healthiest player, and followed with Chrysler. That left GM for last, in tense talks that went right down to the wire.
CASH HOARD. This year may be Chrysler's turn to go first, say union officials. The No.3 auto maker hasn't been chosen as the union's target since 1973, and its $7.5 billion cash hoard is as enticing to union members as it was to investor Kirk Kerkorian. With the lowest level of outsourcing among the Big Three, Chrysler's parts operations also represent an inviting opportunity for the union to try to gain jobs. "We won't be looking to freeze outsourcing at Chrysler," says one UAW official. "We want them to bring more work back in."
Trouble is, a contract with outsourcing limits that Chrysler can live with might be tough for GM to swallow. In that case, GM might resist--and face a strike that would be costly for company and union alike. If Yokich wins an early victory with the strike that began in Dayton on Mar. 5, he may enter the April bargaining convention on a wave of rank-and-file support. And each round of applause will worsen the sick pounding GM already feels in its temples.