Showdown at General Motors

By Alexander L. Taylor III.

As the deadline for a new contract passes, the U.A. W. calls a selective strike

"As Yogi Berra says, 'It's never over 'til it's over,' and that's true of negotiations as well." So said United Auto Workers President Owen Bieber early last Saturday morning, after the midnight deadline had passed for a new contract agreement between the U.A.W. and General Motors. The union had just announced that it was authorizing workers at 13 key GM facilities to go on strike, purportedly because of local grievances, while it continued bargaining for a new labor contract.

Soon after midnight, picket lines began forming at GM plants from California to New Jersey. "Grab a sign and get in line," shouted union organizers at workers as they poured out of the GM factory in Pontiac, Mich. The signs read: U.A.W. ON STRIKE FOR JOB SECURITY and ONE DAY HEADLINES, THE NEXT DAY BREADLINES. At a Chevrolet plant in Van Nuys, Calif., most of the 4,045 U.A.W. members walked off the job, and the facility shut down. The company was forced to cancel two Saturday shifts at its Buick assembly plant in Flint, Mich.

During the contract negotiations that started in July, the union had demanded a series of wage hikes and added benefits, but the most important issue by far was job security. Thousands of autoworkers have been forced to leave the industry in the past three years, as more and more production was transferred abroad and robots moved into plants in the U.S. Now the union was fighting to protect as many of its jobs as possible.

Even though 62,700 of the company's 350,000 workers were involved in the selective strike action, GM and the U.A.W. continued to bargain through the weekend at General Motors headquarters in Detroit. The company had originally offered a lump-sum payment of $600 per worker in the first year of the contract and a $300 one in the second, in addition to a rather vague plan to protect existing jobs. The union pushed for an improvement of both offers, and by late in the week the differences between the two sides were narrowing. Once an agreement is reached, however, it still must be put to a vote of union members. U.A.W. leaders bargained hard last week, while remembering that restless rank-and-file workers had accepted the last contract in 1982 by only a close 52%-to-48% vote.

Bieber's unprecedented selective strike directive gave the union the upper hand in the negotiations. The plants targeted by the U.A.W. produce some of the company's bestselling models, which account for nearly half of GM sales. The cars include the Oldsmobile Cutlass Ciera, Chevrolet Monte Carlo, Cadillac Fleetwood and Pontiac Fiero. In addition, walkouts at the 13 plants threatened to cause shortages at other GM factories. Without a settlement of the strike by the end of the month, virtually all of GM's manufacturing facilities might be forced to close.

The union, however, has been facing a company in a powerful position. GM commands 59% of the American auto market (up from 46% in 1970); it is rapidly expanding abroad and diversifying into industries that include data processing and computer software. GM had been expected to earn nearly $6 billion this year, although it could lose tens of millions of dollars in profits a week during even a selective strike. Moreover, the company seems determined to keep labor costs down and continue a modernization program that has so far cost some $35 billion.

All last week many U.A.W. members were bristling for a showdown. Said Jim Zsigo, 37, a machine operator in the Chevrolet component plant at Parma, Ohio, a suburb of Cleveland: "We can't have them taking all the jobs to Mexico, and we can't have all our jobs replaced by robots. I can't really afford a strike, but I've been saving. I'm good for about eight weeks." Rick Herman, 39, a dyemaker in the Parma plant, was psychologically ready to walk out. Said he: "I'm looking forward to a strike. I've seen guys with 15 years' seniority out on the street or told to go to Texas or California or Toledo. The money you lose in the strike you never get back, but it's the principle. Labor has to take a stand once in a while."

As some of the posters carried by pickets indicated, many GM employees are still angry about the huge bonuses that company executives gave themselves. GM Chairman Roger Smith last year got a bonus of $865,490 on top of his salary of $625,000. While the award might have been merited in view of the $3.7 billion GM earned in 1983, it was a dreadful labor relations blunder. Workers, who had been enduring wage freezes for more than two years, were outraged. Robert Sidwell, 45, a machinist at the Chevrolet plant in Parma, still has neither forgotten nor forgiven. Said he last week: "One man doesn't deserve that much. I don't care if he's the Queen of Sheba."

Other workers, especially younger ones who have only recently returned from layoffs or who had large house payments to meet, were less anxious to walk the picket line. U.A.W. members could get just $85 a week in strike benefits and are ineligible for government unemployment payments. The average weekly salary for union members is now $506.80, and they can often earn much more with overtime. Al Manzie, 33, is a grinder at Chevrolet's gear-and-axle plant in Detroit. He has not had a raise in two years and has been laid off four times in the past 13 years. Says he: "I'm tired of being laid off. What good is having more money if you don't have a job?" Scott Debruit, 34, a maintenance welder apprentice at the same plant, was temporarily let go from May 1981 to January 1984. He wants to keep on working and voted against the strike authorization. Said he: "I need to catch up. I'm still paying bills from times when I was laid off."

In showrooms around the U.S. last week, dealers were gloomy about the chance of losing their bestselling models and the prospect of a national walkout. "A strike puts a pall on the entire industry, not just GM," said Ronald Kelly, a Ford dealer in Stamford, Conn. After the tough years of the late 1970s and early 1980s, dealers once again face a sales slump. Those with low inventory are especially worried. Said Clara Benjamin, co-owner of Bay Chevrolet in Queens, N.Y.: "A strike is going to affect us very badly. We will be laying off help if this turns out to be a long one."

The partial shutdown at GM came at a very healthy time for the U.S auto industry. For the first eight months of the year, car sales are up 24.1 % over the same period in 1983, and trucks are up 36.5%. Before the strike hit, the industry was headed for its second-best year in history, with sales of 14.9 million cars and trucks.

The good times, however, mean additional bargaining chips for the U.A.W. Robust sales and a new industry drive to keep inventories low have resulted in a relatively small supply of unsold cars. Even though GM's assembly plants are producing at close to capacity, the company's supply of cars is only 49 days, vs. a normal 60 days. Dealers are even worse off; many have only enough cars on hand for 31 days of normal sales.

Neither Ford nor Chrysler is in a position to earn windfall profits from GM's distress. Both companies also have low stocks of their popular models. Since both firms' assembly lines are operating at near capacity, they will not be able to increase production significantly to make up for the GM shutdown.

Japanese automakers are also unable to benefit from GM's woes, since their U.S. sales this year are limited to some 1.85 million vehicles under restrictions first negotiated in 1981. Said a Japanese automaker in Tokyo last week: "There is no room for us to take advantage of such a situation." Honda, the only Japanese company currently assembling cars in the U.S., expects to turn out 150,000 vehicles this year at a plant in Marysville, Ohio.

Any U.A.W. walkout would hurt the industrial states of the Rust Bowl. Despite attempts to diversify into new industries, Michigan, Ohio, Indiana and Missouri are still heavily dependent on the auto industry. Michigan factory towns like Pontiac and Flint, now enduring unemployment rates of 18.8% and 12.4%, respectively, could suffer an economic earthquake. Steel, rubber and glass producers could lose their biggest customer. GM, for example, buys about 10% of all the steel produced in the U.S. Sales in stores and restaurants are likely to slip when striking workers stay home, and tax revenues will slide.

Nonetheless, even if the union decides to expand its walkout, a GM strike is unlikely to repeat the damage done to the U.S. economy by the 1970 shutdown, which helped trigger a temporary recession. The auto industry today simply does not enjoy the commanding position in the economy that it had 14 years ago. During the intervening years, banking, retailing and other service industries, plus the new high-tech fields of semiconductors and computers, have become more important, and foreign manufacturers now hold 23% of the U.S. market, vs. 15% in 1970. One American worker in six was employed by the auto industry either directly or indirectly in the 1960s. Today that figure is only about one in twelve.

The declining economic signficance of the U.S. auto industry created the quandary that led the U.A.W. to call last week's strike. Japan can build small cars for $1,500 to $2,000 less than American producers, in part because the hourly wage and benefit costs of a Japanese autoworker total only about $12. By contrast, the U.S. hourly cost is $23. U.S. automakers have chosen two main solutions to meet the Japanese challenge: construction abroad and automation at home. By 1990 GM expects to be building 500,000 small cars overseas for import to the U.S. Ford is constructing a plant in Mexico with Japan's Mazda, and both Ford and Chrysler are holding talks with Korean manufacturers about building more cars there. A confidential GM study, obtained by the union earlier this year, showed that the company could cut its work force in the U.S. by as many as 100,000 over the next two years.

In addition, the automakers have been trying to increase efficiency and productivity by replacing blue-collar workers with steel-collar ones--robots. Over the past three years, the Big Three automakers have installed 3,000 robots to handle welding, painting and other tasks previously done by U.A.W. members. As company executives like to quip, those new workers never take coffee breaks and always show up for work on Monday.

U.A.W. leaders realized that developments like the moves abroad could mean disaster for the union. Even after seeing its membership slide by 20% over the past five years, the union figures to lose 500,000 more industry jobs by 1989 if the auto companies, led by GM, go ahead with their plans. Union leaders, therefore, decided to aim their demands for job security first at GM.

Early last week, it looked as if the autoworkers would be successful in gaining some concessions. On Monday, Alfred Warren Jr., GM's chief negotiator, presented a 20-page proposal on job security that he called "one of the most far-reaching and most important offers we've ever made." The next day, Bieber agreed that the GM plan "has the potential to be a far-reaching document," though he conceded that "we still have a great deal of work to do." But further study by the union showed that the proposal barely acknowledged its demand for less production abroad, calling only for "discussions" on "sourcing decisions."

At noon on Thursday, the company put its second wage proposal on the table. It represented only a modest improvement over GM's earlier offer to replace annual 3% pay increases with lump-sum payments totaling $900 during the first two years of the contract. The two sides then went into marathon sessions, but progress was slow. By late Friday night, Bieber saw that there was scant chance of reaching a final agreement by the midnight deadline.

The burly, 6-ft. 5-in. U.A.W. leader, who has faced the tough task of setting his mark on the union since he succeeded the popular and almost legendary Douglas Fraser last year, felt he had little choice but to authorize the selective shutdown.

The history of strikes at GM does not portend a short walkout. Past labor troubles have been long and rancorous. In 1945 U.A.W. President Walter Reuther led the autoworkers on a 113-day strike in an attempt to win a 330 an hour pay hike. Three months after the walkout began, Reuther was willing to accept an increase of 19.5-c-, but GM offered only 18.5-c-. As William Serrin recounts the story in The Company and the Union, the GM negotiator placed a cent on the bargaining table and said: "Walter, there it is, a penny. That's what this strike is all about. And you're not going to get it." Reuther never did. Thirty days later, he settled for 18.5-c-.

It has become a truism of industrial relations that nobody wins a strike. But in this case the union could lose by winning. If it succeeds in protecting jobs by keeping production from going overseas, prices for U.S. models will probably rise at a greater rate, thus making American-built cars less competitive with imports. And if the union wins increases in wages and benefits, that will raise the costs of U.S. automakers and make it harder for them to stand up to the Japanese.

Union officials are aware of this. They contend that increasing productivity through capital improvements and a more skilled labor force will compensate for the higher pay workers receive. In the long run, they hope to limit many auto imports with domestic-content legislation in Congress, which would require that all cars sold in this country contain a specified minimum percentage of U.S.-made parts. By opposing the movement of manufacturing functions to lower-wage countries, the union is fighting a rearguard action. It is the same battle that has already been lost by workers in the textile, toy, photographic, radio and television, shoe and other industries. The efforts of the autoworkers do not seem to have much greater chance of success.

Striking U.A.W. members in Linden, N.J., last week were proudly singing the union's anthem Solidarity Forever. The words, composed during the Depression:

They have taken untold millions

that they never toiled to earn,

But without our brain and muscle

not a single wheel can turn.

We can break their haughty

power, gain our freedom when we learn

That the union makes us strong.

As it struggles against competition from Japan, the U.S. auto industry today has a lot less "haughty power" than ever before. Likewise, the U.A.W. has lost much of its strength. Both General Motors and its workers have no choice but to put aside outdated confrontation and achieve more management-labor cooperation if both are to prosper. --ByAlexander L. Taylor III. Reported by Don Winbush/Pontiac and Paul A. Witteman/Detroit.

Reported by Don Winbush/Pontiac and Paul A. Witteman/Detroit

With reporting by Don Winbush, Paul A. Witteman