Stakes Rise in GM Strike Over Parts 'Outsourcing'
GENERAL Motors Corp. has idled 87,000 workers in a high-stakes showdown with labor over a central issue: Will auto parts be made at unionized GM plants or at nonunionized outside suppliers?Skip to next paragraph
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Since workers struck March 5 at two GM brake-parts plants in Dayton, Ohio, GM and the United Auto Workers have deadlocked, and the size and stakes of their dispute have rapidly snowballed.
GM could lose $250 million in pretax earnings each week now that it has closed 21 of its 29 assembly plants and nine parts plants in North America, industry analysts say. It is the largest shutdown related to a GM strike in 25 years.
The No. 1 US automaker seeks to ensure that it can choose sources for auto parts free of union interference. GM sees such leeway as vital to its effort to cut costs, beat back competitors, and arrest a market-share drop.
''The union believes that if it's GM business, then it belongs to GM's unionized workers. But the world has changed and at GM we have to compete with outside suppliers,'' says Jim Hagedon, a spokesman for Delphi Chassis Systems, the GM maker of brake parts targeted by the strike.
For the UAW, the dispute is part of a rear-guard effort to halt the steady decline in the power of organized labor in the US auto industry.
The purchase of auto parts from independent suppliers has badly undercut union ranks; only about 1 in 5 workers at independent suppliers is unionized. This ''outsourcing'' and greater production efficiency have caused UAW ranks to fall by more than half since 1979.
The union has struck in order to flex its muscle over outsourcing prior to bargaining this fall over a new three-year contract with the Big Three. By punishing GM, the UAW reckons it can make Ford Motor Company and Chrysler Corp. think twice before expanding outsourcing, says Sean McAlinden, a researcher at the University of Michigan's office for the study of automotive transportation in Ann Arbor.
After capitulating in several recent strikes, GM has dug in to show that it is not the industry's doormat. It is determined to retain the ability to channel capital to the highest return. Talks with strikers were scheduled to continue yesterday.
Though Delphi produces some of the world's lowest-cost antilock-brake systems, GM ''still tells the union, 'Either we'll squeeze more dimes out of you or we'll outsource the work,' '' Mr. McAlinden says.
Outsourcing has roiled labor-management relations at the Big Three for years. Ford and Chrysler expanded reliance on low-cost outside suppliers after stumbling into severe financial trouble early last decade.
General Motors, which has long made more of its parts in-house than its US rivals, began increasingly turning to independent parts makers after a severe downturn early this decade.
Outside suppliers account for 57 percent of the dollar value of a typical GM car, compared with 52 percent two years ago. At Ford and Chrysler over the same period the percentages have changed little, now registering 61 percent and 67 percent respectively, the University of Michigan center reports.
''GM has drawn a line in the sand,'' says Jim Harbour, an auto consultant in Troy, Mich. ''The central issue is who will [decide] where GM will buy its parts - GM managers or labor?''