Can Harry Pearce Stare Down The Uaw?

General Motors Vice-Chairman Harry J. Pearce doesn't flinch in a tight situation. He showed that last summer when an angry black bear threatened to maul him and his buddies on their annual fishing trip in the deep woods of Canada. While the others froze in fear, Pearce coolly picked up a gun and killed the beast. "It was so typical of Harry," recalls his brother Bill, "one shot and that bear was dead."

One tough guy to face down in a fight. The United Auto Workers are learning that lesson right now. Pearce is leading General Motors Corp. in the largest labor dispute to hit the No.1 auto maker in 26 years. What began as a strike at two GM brake plants in Dayton, Ohio, on Mar. 5, effectively shut down the auto maker's North American car business. But Pearce is adamant that GM won't back down precipitously just to shorten a costly strike, as it sometimes has in the past.

The tough tactics are characteristic of Pearce's style, notes Morgan Stanley & Co. analyst Stephen J. Girsky. "GM is accelerating the big issue that was going to come up this fall." Indeed, rather than wait for Detroit's traditional fall labor negotiations, when the UAW typically targets one company for a potential strike, Pearce is forcing the union to deal with GM on the issue he regards as key: outsourcing. Pearce believes that to survive, GM must have the power to buy parts at the best prices, either from its own plants or by outsourcing the work to suppliers. "It is critical to any company's long-term viability," he says.

GM's big problem: Its own parts workers pull down up to $45 in hourly wages and benefits, far more than employees at many outside suppliers. Plus, the outsourcing the company wants to do at Dayton involves a key new technology: antilock brakes, the unit price of which, industry sources say, has dropped to about $200, from $700, since 1991. So, with the Dayton strike looming, Pearce paid a visit to Richard Shoemaker, the UAW's top GM negotiator, at the union's Detroit headquarters. His message, says another top GM executive: The company would not capitulate on the outsourcing issue. The union won't comment.

BROAD POWERS. Pearce was given the job of taking on labor by GM Chairman John F. Smith Jr. and the company's board. A source close to the board says outside directors were upset that the UAW wouldn't agree to lower wages in parts plants in the 1993 contract, and still wants management to institute such cuts. Pearce, 53, became GM's No.2 executive on Jan. 1, and has broad powers to involve himself in important strategic issues. If he prevails now, insiders think he has a good chance of succeeding Smith, 57, as chairman and CEO.

But Pearce is playing a high-stakes game of chicken with the UAW. By March 20, the strike had already cost GM more than $500 million in lost profits, analysts estimate. And Steve Yokich, who won the UAW's top job in part on his reputation as a street fighter, could take vengeance by hitting GM with more crippling strikes if the union doesn't get its way in Dayton. Pearce also may endanger the cooperation with the union which the company needs in order to continue reducing its costs.

Pearce, a former North Dakota trial lawyer who joined GM in 1985, has bested formidable foes before. In a highly publicized 1993 press conference, for instance, he methodically dismantled a trumped-up Dateline: NBC expose on the safety of GM's pickup trucks. His powerful performance--and GM's whopping defamation suit--forced Dateline: NBC host Jane Pauley to apologize to GM on air. "Harry can look you straight in the eye and convince you that you should do exactly what he says," says Elmer Johnson, the former GM general counsel who originally hired Pearce. All of which means GM's get-tough-with-labor stance may not end any time soon.

Before it's here, it's on the Bloomberg Terminal.