In calling a strike against General Motors Corp., the United Auto Workers took a bold gamble that it could get a stronger contract by shutting down an already weakened company.
Monday saw 73,000 UAW members at about 80 U.S. facilities walk off the job, citing concerns over job security and health care. The dramatic move came after 20 days of negotiations. The talks continue.
If the strike does drag on, it could take a huge toll on both sides.
If the strike lasts longer than a week or two, it could cost GM billions of dollars and stop the momentum the company was building with some of its new models, industry analysts said.
A strike lasting close to a month or more would cause GM to burn up $8.1 billion in the first month and $7.2 billion in the second month, assuming the company can't produce vehicles in Mexico or Canada, according to Lehman Brothers analyst Brian Johnson.
Otherwise, a strike of two weeks or less would not hurt GM's cash position and would actually improve its inventory situation, Johnson said in a note to investors.
Harley Shaiken, a labor expert at the University of California at Berkeley, said that although GM has a lot of unsold vehicles, the work stoppage could hurt newer models that are pivotal to the company's turn around.
Talks broke down after 20 consecutive days of negotiations. The UAW had imposed an 11 a.m. Monday deadline in a bid to finalize a deal. But the cutoff was dismissed as a mere bargaining stunt until workers started filing out of plants.
Thousands of union auto workers were hoisting placards that read: "UAW on Strike." It is the first nationwide strike against the U.S. auto industry since 1976.
GM has 80 manufacturing facilities in the United States, including car and truck plants, engine and transmission plants, metal stamping factories and parts warehouses.
And the strike could also affect overseas plants that make parts for vehicles made here.
"They are losing money every day the strike takes place. Very shortly it will paralyze their Canadian and Mexico operations," Shaiken said.
But the longer the union stays on the picket lines, the more it could encourage GM to ship more jobs abroad.
"They are globally integrated like they have never been before, so they have an option whether to invest here in the U.S. or invest in other places," said David Cole, an industry analyst. "They have basically said that if we have a contract that enables us to be competitive we will invest; if not we will disinvest in the U.S. and use our money where we think we can get a better return."
Negotiations Revolve Around Quid Pro Quo
GM has been asking the union to take over responsibility for crippling retiree health-care obligations.
In exchange, the union wants the company to guarantee jobs and new products in the U.S.
UAW President Ron Gettelfinger said he decided to strike when GM failed to give him those guarantees.
Job loss is a real issue for auto workers. In the last several years, GM has cut costs by paying 30,000 workers to leave.
And many union members like Anthony Adams, a 55-year-old worker in a GM engine plant outside Detroit, complain about continued off-shoring.
"As a matter of fact, they shipped out a whole department to Mexico. They came back two months later and got all of the machines," he said.
Like his fellow union members, he sees the exporting of jobs as an overwhelming trend that's hard to reverse.
"They're outsourcing a lot of things — nothing we can do about it," he added.
But Cole said that General Motors might be willing to commit to new products if the union can help it compete in costs with foreign firms like Toyota Motor Corp. and Honda Motor Co.
For example, GM owes 270,000 retirees more than $50 billion in health care. Meanwhile, Toyota has just 300 retirees in the United States and operates under its Japanese national health care system.
Cole said savings for GM could translate into more jobs for the union.
"There is a very interesting tradeoff that exists between costs — particularly health-care costs — and new product and investment in new product," Cole said. "If General Motors had Toyota's health-care costs in the U.S, the differences between that cost is equal to five new products every year by General Motors — that is how large that difference is."
The stakes are not high just for GM, Cole added, but also for Ford and Chrysler where negotiations will follow.
"This is not a healthy industry and absent a major restructuring of the contract one or two of these companies could fail," Cole said.
But the stakes are equally high for the union as well, Shaiken said. The auto workers need to get commitments to new products in the U.S. to halt the erosion of their membership.
"For the union, guarantees for future investment are pivotal to ensuring the sacrifices it makes today will pay off tomorrow," he said.
From reports by NPR's Frank Langfitt and The Associated Press
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