Strike Averted, but Union Still Targets Car Suppliers

Bargainers for the United Auto Workers (UAW) and a key automotive supplier this week narrowly averted a strike that could have had a devastating impact on US automakers.

But the settlement falls short of resolving a growing crisis within the industry.

The dispute threatened to shut five plants operated by American Axle & Manufacturing Inc., which supplies parts for popular General Motors Corp. sport-utility vehicles and light pickup trucks. Ford Motor Company and Chrysler Corp. would have felt the impact, but less severely.

No settlement details were released, pending a ratification vote. But the UAW had sought pay equal to wages at Big Three plants. American Axle wanted lower wages, citing competition from non-union suppliers.

America's parts suppliers are caught in a crunch, notes consultant Donna Parolini in Detroit.

"Right now, 80 percent of the US supply base is non-union," says Ms. Parolini, with companies like American Axle the rare exception. That could change, she adds, as the UAW moves aggressively to organize suppliers.

The UAW has good reason, she says, "because that's where the jobs are going." Since the 1970s, the auto union has lost nearly half its membership. Many jobs vanished to foreign competition and productivity gains. But others simply switched to non-union supplier operations.

General Motors, for example, once produced 75 percent of the parts used on US assembly lines. Now GM spins off these operations - such as American Axle, which it divested three years ago.

Independent suppliers want to stick with their non-union tradition. And their carmaker customers want price cuts. Ford demands cuts averaging 5 percent a year.

But while Ford is clear on its pricing strategy, its approach to unionizing suppliers seems contradictory.

Management at Johnson Controls, Inc. (JCI) was shocked when Ford pressured the supplier to acknowledge the UAW at a Michigan seat plant last spring. Meant to curry favor with the union, the move backfired last month. The UAW struck JCI, and Ford suddenly faced a shortage of seats for its hot-selling Expedition sport-utility.

Johnson hired replacement workers, but Ford refused to take the non-union parts.

"Our relationship with the union, and the respect we have with the team inside Ford, are too important for us," says Ford executive John Devine.

A week later, Ford canceled its contract with Johnson and switched to archrival Lear Corp., another unionized supplier. The walkout cost Ford an estimated $44 million in lost profits.

Johnson Controls lost a contract worth millions and now may close its plant, throwing the striking UAW employees off the picket lines and onto the unemployment lines. And other suppliers may show more resistance to unions.

Even so, Parolini says union gains are only a matter of time. "As more and more work moves away from the automakers, the union will come with it. A union of some sort will be in the supply base, sooner or later."