In G.M. Strike, Both Sides See a Crossroads
The United Automobile Workers union wielded its most potent weapon
against General Motors yesterday, sending 73,000 workers to picket lines
in its first national strike at G.M. since 1970.
Union officials said they were left no choice but to strike because
General Motors was unwilling to accept the union’s demand that it
protect workers’ jobs and benefits.
“We’ve done a lot of things to help that company,” said Ron
Gettelfinger, the union’s president, in a news conference shortly after
the 11 a.m. strike deadline passed. “But look, there comes a point in
time where you have to draw a line in the sand.”
For General Motors, its unyielding stance reflects its decision to
accept the short-term pain of a strike at 80 facilities in 30 states to
achieve its goals: a lower cost structure and more flexible work force
to better compete against surging Japanese automakers like Toyota and Honda.
“This really is a defining moment,” said James P. Womack, an expert on
manufacturing and co-author of “The Machine That Changed the World,”
which studied the plants of Japanese automakers in the United States.
“G.M. has backed away from defining moments for generations. And now
somebody there has finally said, ‘We have to do this because it’s a new
The length of the walkout may hinge on the answers to two crucial
questions: How long can the U.A.W. afford to stay out? And how long can
G.M. endure a strike? While an indefinite strike would pose risk to both
sides, each has made a calculated decision that it has more to gain by
G.M. is better positioned to handle a strike now than in earlier
contract talks, though not for reasons that have to do with strength.
With its operations shrinking in the United States, the majority of its
sales and profits are now coming from abroad.
It is selling more vehicles built in Canada, Mexico, and Europe, the
source of new models for its Saturn division. And it is rapidly
expanding production overseas, especially in China, which is fast
becoming one of the world’s major car markets.
The company’s problems at home, which resulted in losses of more than
$12 billion in the last two years, have forced it to close all or parts
of a dozen factories, cut tens of thousands of jobs and offer deals to
workers to quit or retire. A smaller G.M. means there are far fewer
workers involved in this strike, so a halt in production inflicts less
pain on the company.
The U.A.W. membership at G.M. has shrunk by more than 80 percent since
the 1970 strike, when 400,000 workers were off the job for 67 days.
In recent years, the U.A.W. has been more cooperative with Detroit
automakers, working side by side with auto executives to fashion early
retirement incentives to shrink the work force and better match
Detroit’s diminished stature within the industry. It also agreed to
concessions on health care at G.M. and Ford Motor.
But yesterday, U.A.W. officials sought to dispel any doubts among the
membership that they could still stand up to management.
“A strike gives the union an opportunity to say we’re not completely
acquiescent,” said David L. Gregory, a professor of labor law at St.
John’s University in Queens.
Eldon Renaud, president of U.A.W. Local 2164 in Bowling Green, Ky.,
where workers make the Chevrolet Corvette and Cadillac XLR sports cars,
said, “I think a lot of people are happy the strike happened, because
they believe the company is walking over them.”
The strike occurred even though G.M. and the U.A.W. agreed to discuss a
health care trust — called a voluntary employee benefit association, or
VEBA — that would have assumed G.M.’s $55 billion liability for medical
benefits. G.M. considered the formation of a VEBA its major demand.
Investors and G.M. managers have pushed for a VEBA as a way to move the
liability of generous health care benefits for current and retired G.M.
workers, as well as their families, off the books of the automaker once
and for all, even if that required a huge upfront payment.
G.M. has long said that such costs, representing hundreds of dollars for
every car it builds, put it at a disadvantage with foreign competitors.
Mr. Gettelfinger, in fact, stressed that the strike was over other
issues besides the VEBA, with job security topping the list.
Tom Wickham, a G.M. spokesman, said, “The bargaining involves complex,
difficult issues that affect the job security of our U.S. work force and
the long-term viability of the company.” He added that company officials
would “continue focusing our efforts on reaching an agreement as soon as
Negotiators from each side were back at the bargaining table by early
afternoon yesterday. But industry analysts said that given how far apart
the two sides appear to be, the strike could last for weeks.
Jonathan Steinmetz, an analyst with Morgan Stanley, said the company
could endure a strike lasting several weeks, but not more. After that,
G.M. would begin to burn cash, and investors, who have encouraged G.M.
to take a firm stand with the U.A.W., might eventually grow impatient in
the face of a months-long strike.
Another analyst, Mark Oline of Fitch Ratings, cautioned that the damage
caused by the walkout would have a ripple effect on suppliers that sell
parts to G.M.
“The U.A.W. strike has the potential for far-reaching, crippling
repercussions throughout the industry,” Mr. Oline said in a research
The union, which pays workers $200 a week in strike pay if they take
shifts on the picket line, has nearly $900 million in its strike fund,
enough to cover a two-month walkout.
G.M., meanwhile, had a 65-day supply of vehicles at the end of August,
about normal for summer, and it had already announced plans to reduce
production in the final three months of the year because of slowing sales.
Beyond that, however, each side risks damage to its image. In recent
years, the U.A.W. had fostered an image of being more of a partner than
a foe in Detroit’s efforts to restructure.
Even last week, Mr. Gettelfinger said in an e-mail message to union
members that the U.A.W. was committed to avoiding a walkout, although he
acknowledged yesterday that he suspected last week that a strike was likely.
Likewise, G.M. has spent years trying to convince consumers that its
vehicles are the equivalent of high-quality Japanese models, and that
its brands are every bit as appealing as Toyotas, Hondas and Nissans. An
angry work force, or one worried about its future, may scare off some
Before yesterday’s strike, experts had widely predicted that the two
sides would reach an agreement, noting that it was in their interest to
find common ground to better ensure their survival.
Even Mr. Gettelfinger seemed disappointed at the outcome. “This is
nothing we wanted,” he said at the news conference. “Nobody wins in a