Trench Warfare In Detroit

The UAW is using sudden local strikes to battle job cuts

Remember last fall, when Detroit auto makers insisted that the contracts they signed with the United Auto Workers would leave them plenty of room to make much-needed efficiency gains? Today those claims ring increasingly hollow. After two local strikes at General Motors Corp. and another at Chrysler Corp. in the past month, UAW leaders have made it clear that there will be precious little labor peace in Detroit. Sure, the contracts signed in September allow carmakers to trim at least 5% of their blue-collar jobs. But the UAW has served notice that it won't give up those jobs without a fight. "The strike caught us a bit off-guard," concedes one Chrysler official, referring to the walkout of 1,800 workers at a Detroit engine plant.

The spate of walkouts illustrates just how much power the UAW still holds over the Big Three. The industry avoided a national walkout in the fall by agreeing to guarantee 95% of all current jobs for three years. But UAW President Stephen P. Yokich can still hit the companies hard by authorizing local strikes, as he did several times at GM during the last three-year contract.

LOST PROFITS. With this strategy, Yokich has avoided a costly drain on the UAW's strike fund that a national walkout would have caused. Yet he can still inflict punishing blows on the auto makers as he tries to hold on to every possible job. The Chrysler strike, for example, had idled 22,000 workers as of Apr. 22, costing the company an estimated $20 million a day in lost profits. The result: Detroit will have to fight every step of the way to achieve the job cuts it needs. GM, which must cut the most, faces the largest problem. "These strikes are the price GM has to pay to downsize," says Sean McAlinden, a University of Michigan labor economist.

The flashpoint issues dividing the UAW and Detroit seem tiresomely familiar: farming out parts work to nonunion suppliers, cutting union jobs, and ratcheting up overtime levels. In March, GM suffered a 13-day walkout at its Fort Wayne (Ind.) truck plant. An Apr. 4 walkout at an Oklahoma City assembly plant has cut supplies of the new Chevrolet Malibu and Oldsmobile Cutless models. And another strike loomed on Apr. 23 at a pickup truck plant in Pontiac, Mich.

Still, GM feels it has little choice but to fight. "It is of critical importance that we improve our efficiency," says Chief Financial Officer J. Michael Losh. "We certainly want a favorable labor relations climate as part of that, but we need to get the results. And sometimes these things are in conflict." GM has trimmed about 3% of U.S. hourly workers since November, mostly through retirements and two plant sales. But, says Losh, "we're not by any means done."

The UAW isn't about to let GM finish without a fight. Workers in Oklahoma City, for example, complain that GM's elimination of 900 jobs has forced them to work at a back-breaking pace. In a rare public diatribe on Apr. 17, UAW Vice-President Richard Shoemaker said in a prepared statement that GM is provoking local strikes by speeding up assembly lines and demanding onerous levels of overtime. He also fumed at reported comments by Chairman John F. Smith Jr. suggesting that local strikes are isolated skirmishes. "Make no mistake," says Shoemaker. "These local unions have the full support of the international union."

GOODWILL. Outsourcing issues plague Chrysler, too. At the crux of the engine-plant strike is the transfer of driveshaft production to an outside supplier, Dana Corp. The union claims the move will cost it more than 200 jobs, which Chrysler denies. Even if Chrysler is right, the company may be losing more by closing six factories that make its fat-margin pickups and sport-utility vehicles than it would gain from the outsourcing. Even Chrysler insiders wonder about the move. "Rational minds aren't in control on either side right now," says one.

Ford, for its part, has not had a local strike in a decade. But its good relations with the union have cost the company goodwill with suppliers; Ford's backing of the UAW in its recent strike against seatmaker Johnson Controls Inc. enraged its nonunion suppliers.

The current strikes at GM and Chrysler are likely to be settled fairly quickly. But Yokich is said to be weighing several more requests by GM locals for strike authorizations (table). And the Chrysler strike is already chipping away at second-quarter earnings estimates. With each new picket line, Detroit's labor negotiations of last fall look less and less successful.

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