General Motors, the world's largest corporation, is head to head with Canada's strongest union, the Canadian Auto Workers, in a strike that could shut down most of GM's North American operations in two weeks, analysts say.
By yesterday, the CAW strike included all 26,000 GM Canada workers at four assembly plants and numerous other facilities. It began Oct. 2 in an Oshawa, Ontario, assembly plant and spread to GM's other Canadian operations, including parts plants that supply many of GM's US factories.
Because GM operations in North America are tightly integrated, the cutoff in Canadian parts and vehicles flowing south has already had a domino effect. Two GM plants - one in North Tonawanda, N.Y., the other in Ypsilanti, Mich., have temporarily laid off 1,850 workers.
Despite early reports of GM stockpiling parts in anticipation of a strike, analysts say closing one plant in Oshawa that makes metal stampings - door and structural panels - is having a big impact on US operations. By the end of next week most US operations would be slowed or stopped by the Canadian strike, they predict.
"If the strike continues, we calculate that most of GM's North American operations will be shut down by Oct. 21," says Lincoln Merrihew, auto analyst at DRI/McGraw-Hill, economic consultants in Lexington, Mass.
The strike is costing GM US$50 million a week in lost profits just from the sale of 1,100 full-size pickup trucks made each day in Oshawa. But Merrihew estimates GM's lost revenues could expand far beyond to about $1.8 billion a week should all its operations be shut down.
Why is GM sticking to its guns with such titanic costs looming?
"We've got certain things that will cripple the company if we don't get fixed right," Jack Smith, GM chairman, told reporters in Detroit Wednesday.
At stake for the company is future profitability: Even though GM made a record profit of $1.4 last year, the company is still the industry's "high-cost" producer. Unless it can "outsource" - or farm out - parts production it currently makes in-house, it will rapidly lose market share and be unable to compete five years from now, its executives say.
At stake for the union is job security. The CAW is demanding that the big automaker keep the same number of employees it has now, whether or not it closes or sells factories by "outsourcing" parts production. The Canadian union also wants the right to decline overtime work.
Chrysler recently signed a deal with the CAW that promises to replace any jobs lost to outsourcing. The CAW would like the same from GM. And in recent years each of the Big Three automakers have followed the contract "pattern" set by one or the other of its competitors.
But GM says its needs are too different from the pattern set in the Chrysler contract. Ford, for instance, already outsources 62 percent of its work, and Chrysler 66 percent to low-cost suppliers. GM trails at just 57 percent, according to recent estimates.
"General Motors is behind the eight-ball," Mr. Merrihew says. "They've got to come up with a way to reduce their costs. They are saying: 'We'll take a strike now to cut the work force, because if we don't, then five years from now we're going to be in trouble again.'"
Some suggest the CAW strike happened, in part, because CAW leader Basil (Buzz) Hargrove verbally put himself in a corner by demanding that GM match Chrysler's job guarantees - or else. GM is currently negotiating with the United Auto Workers and may be loath to give the Canadian union job guarantees the US union will not get.
"There are going to be plant closings," says Michael Flynn, associate professor at the University of Michigan. "But they can't all be south of the border. Think of the political problem if GM says: 'We aren't going to close any Canadian plants, but we'll be closing 15 in the US.... It would give the UAW a deal difficult to sell to its membership."
Still, Mr. Hargrove is insisting on a "made in Canada contract." That has been the pattern since 1984, when Canadian members of the UAW split from the US parent union for a different deal. The CAW says it has about $36 million in its strike fund and can last until Christmas. A strike that long would be costly for GM. But the company has $13 billion in cash reserves, Mr. Smith noted.
Worst of all, for GM, a long strike will delay the company's debut of up to 14 new models, losing momentum and market share to Ford and the rest.
"If GM wins, pattern bargaining will end in the auto industry," predicts Pradeep Kumar, professor of industrial relations at Queen's University in Kingston, Ontario. "Outsourcing is a big issue - and if the pattern is broken it will have long-term implications across North America."