Gm Can't Afford To Budge

To compete on productivity, it risks strikes

A crippling 17-day strike cost General Motors Corp. $900 million in aftertax profits last year. But the nation's largest carmaker is prepared to hang tough against the United Auto Workers again in 1997.

Why? Because GM has the lowest productivity of any auto company, according to a study released on June 11. The data, assembled by industry researchers Harbour & Associates Inc. in Troy, Mich., show that GM spends $700 per vehicle more than the industry's most efficient producer, Nissan Motor Manufacturing Corp. GM uses 47 worker-hours to produce a car, compared with Nissan's 28. The other U.S. giants, Chrysler Corp. and Ford Motor Co., come in at 38 and 41 hours.

WALL STREET BACKING. To get its numbers in line, GM is determined to cut 50,000 plant jobs in the next few years--even if that leads to more strikes. As of June 11, GM was facing walkouts at three parts plants, including a catalytic converter plant near Milwaukee. A strike there could idle assembly plants within days. But GM is not budging, and it has support from Wall Street, where winning the productivity battle is seen as the key to future profits. "This is GM's opportunity to downsize through attrition, and it has to take advantage of that," says Nicholas Lobaccarro, an analyst with Merrill Lynch & Co.

Needless to say, the UAW, facing the loss of thousands of jobs, is not giving GM management many concessions on staffing levels. "The union locals have got their teeth into this issue," says one UAW source. That means more strikes, more strife, and for GM, a longer wait for the productivity improvements it needs.