The Impact of the Strike at GM

Seven-day stoppage slows GM. Outcome could affect airlines, textiles, and more.

As the strike in Flint, Mich., by 3,400 workers at a General Motors stamping plant drags into its seventh day, the ripple effect is widening beyond the No. 1 US automaker to encircle labor-management relations in countless other industries.

The key issue in the strike - job security for workers who can now be replaced by state-of-the-art robots and low-wage workers overseas - resounds in industries across America. From autos to textiles to airlines, union officials and management teams are watching to see how this strike will tip the balance in the debate.

Technically, the walkout at the Flint Metal Center is about a backlog of health and safety grievances. But the real issues pit job security against productivity.

The United Auto Workers union (UAW) argues that GM has reneged on a promised $300 million modernization program - a move that would have guaranteed the Flint jobs for the foreseeable future. Workers suspect management is planning to send work overseas rather than invest in its domestic factories.

"Nothing is going to cause a union to get more defensive than when a company moves work to a nonunion plant," says Ken Goldstein, a labor economist at the Conference Board in New York.

It's hard to say which side holds the upper hand. GM is under intense pressure to boost efficiency, needing to play catch-up with Ford and Chrysler, both of which increased productivity years ago through outsourcing.

"GM wants to reduce the number of workers and increase productivity with new technology. Like many American companies, it's trying to get lean and mean," says Danny Hoffman, coordinator of the Labor Studies Center at the University of Michigan.

Though a report by Detroit-based Harbour & Associates shows that GM plants have made the biggest gains of any of the Big Three automakers, the manufacturing giant remains the least competitive of all car companies operating in the US.

When GM signed a national agreement with the UAW in 1995, it was estimated it needed to trim as many as 50,000 hourly jobs to match the productivity of its competitors. So far, it has reached about half that goal, but with each cut, workers have become increasingly militant.

And so has GM. When hourly employees at another Flint plant, the Buick City assembly complex, wouldn't grant concessions, GM canceled plans to build a new body shop at the facility. That all but ensures the factory will close in a year. Other plants that couldn't or wouldn't meet tough new productivity targets - or where workers have remained militant - have also been sold, closed, or given notice.

Furthermore, internal GM documents unearthed by The Oakland Press newspaper in Pontiac, Mich., show that the company plans to more than double its vehicle production in Mexico over the next decade.

For all this, workers in Flint are now striking back.

And because of their walkout, so far seven plants have shut down in New Jersey, Michigan, Kansas, Ohio, and Ontario. The domino effect could worsen by the day, especially if workers at another Flint component plant follow through on threats to launch their own strike, which they planned to do last night.

How GM and the unions resolve their dispute could spill over into other negotiations. Northwest Airlines is currently involved in similar negotiations with its machinists to reduce costs. And if Northwest is successful, other airlines may also start negotiating.

In Flint, meanwhile, the Metal Center strike is touching off a mixture of emotions. This is the city that gave birth to both GM and the UAW. There are some residents who embrace the traditional union notion of solidarity. Others worry about the long-term impact on a town that has lost more than half of its GM jobs over the past 20 years. The long decline, which has decimated the community, was the subject of the sharp-edged film "Roger and Me" by satirist Michael Moore.

GM's tough stance is winning praise from some investors who feel the automaker shouldn't have caved in during previous confrontations with the UAW. GM has faced a series of local strikes over the past three years that have cost it hundreds of thousands of units in lost production and more than $1 billion in lost profits.

But the timing is not exactly favorable. Early this year, with its market share sagging to record lows, GM launched an aggressive incentive program.

The payoff was a fast rise in sales and market share. But now, as one assembly line after another is forced to close, dealers are sweating it out with abnormally low stocks of new cars and trucks.

In the past, potential customers might have waited, but these days they're likely to switch to the competition, warns Mr. Goldstein. "GM can't afford a situation where they lose additional customers."

GM's biggest concern is the fate of its new full-size pickup trucks, code named GMT800. Collectively, they should account for nearly 800,000 units of sales next year and as much as $4 billion in profits. To keep the GMT800 launch on schedule, GM quietly pulled the stamping dies out of the Flint Metal Center in late May.

There's no way to guess just how long the Flint strike will continue, says David Cole, director of the University of Michigan's Office for the Study of Automotive Transportation. Walkouts give both sides a chance to vent their anger, and there's plenty to vent right now. "When fear takes over, people start getting rational," he says.

The bottom line, most observers say, is that neither GM nor the UAW can afford to let the walkout run very long. Neither side will win if GM loses more market share. For GM, it would mean lower profits, and for the UAW, it would eat into the job base the union is so desperate to preserve.

* Ron Scherer contributed to this report from New York.

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