Gm And Labor: So Much For Hardball

After GM's Canadian pact, war with the UAW isn't likely

Ever since General Motors Corp. held fast during a 17-day strike in Ohio last spring, the company has been determined to show a tough new face to its labor unions. The No.1 auto maker adopted a similar hard stance after the Canadian Auto Workers won stringent outsourcing protections from Chrysler and demanded the same from GM. The result was a 21-day strike in Canada that ended on Oct. 23.

So has GM finally drawn a line in the sand after years of backing down to labor? Not hardly. In fact, the company has swallowed exactly the same limits on future outsourcing as its rival. Dean Munger, GM's top Canadian negotiator, argues that in its deal with the CAW, the company has won the "flexibility to address [its] unique competitiveness needs," since it remains free to sell two parts plants and cut jobs for reasons other than outsourcing. As a result, GM now can slash up to a fifth of its 26,000 Canadian jobs. However, the CAW already had agreed to all this before the strike. GM also gave ground by promising not to outsource 774 jobs it had planned to dump (table). GM officials say what's important is that both sides are happy. "We don't view it as a win-lose situation," says a spokesman.

GM's pragmatism bodes well for a settlement with the United Auto Workers in the U.S. It came to terms in Canada just as the walkout was beginning to shut down U.S. production and cost big bucks, suggesting it won't want to pick a protracted battle with the much larger UAW. There, the two sides already have agreed on everything except whether GM will accept the outsourcing limits the UAW won from Ford and Chrysler, which aim to preserve 95% of current employment. The two sides are likely to settle quickly on a deal that still would allow GM plenty of room to downsize. But it still could face walkouts by militant union locals, notably in Doraville, Ga., where GM is launching its new minivans.

In Canada, GM did win much of the flexibility it wanted. The pact allows it to outsource or eliminate nearly 5,000 jobs. Most are in its high-cost components plants, the crux of its competitiveness disadvantage with Ford, Chrysler, and the Japanese transplants. By 1999, the CAW estimates, GM Canada will have cut 40% of these parts-plants jobs.

But the new pact will limit its maneuvering room in Canada. It spells out what CAW President Basil "Buzz" Hargrove calls "the principle of work ownership," which prohibits "selling jobs just because [someone else] can do them cheaper." This precludes any new plant sales during the three-year contract and requires GM to replace all jobs outsourced to cheaper vendors.

What makes the strike so puzzling is that Hargrove had agreed to all of the key concessions before it began. He had said he would let GM proceed with nearly completed plans to sell two Ontario parts plants employing 3,500. He also told Munger he would accept job losses caused by changes in the market and technology, allowing GM to slice more than 1,000 jobs as it phases out old engine models.

ON THE PAYROLL. But GM balked. CEO John F. Smith Jr. even argued that the CAW's proposals would "cripple" his company. Just two weeks into the battle, though, with the CAW about to impose a dues increase on its members to double its smallish strike fund, Smith flew to Toronto to cut a deal.

In the end, GM agreed to virtually everything Munger and Hargrove had laid out on Oct. 1. It accepted the same limits on future outsourcing as Chrysler Canada Ltd. And GM will ensure that the 3,500 workers at the two plants up for sale get generous transition benefits, even ensuring that their pensions will equal those at the company for the next nine years. Plus the company reversed previously announced decisions to outsource the 774 Canadian assembly jobs. "GM didn't need to take this strike to get what it got," says Nicholas Lobaccaro of Bear Stearns & Co.

So why did GM allow the walkout to happen? Most likely, officials felt that they had to stand up to labor to placate Wall Street hawks. Then when huge losses loomed, pragmatism prevailed. It likely will prevail again with the UAW.

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