Expect no labor peace at GM.(General Motors)(Column)
Automotive Industries, August, 1998, by Maryann Keller
Both sides are guaranteering a less-competitive GM, with fewer and fewer employees.
Local labor strikes have become an annual event for General Motors, and the 1998 walkouts have been the most destructive since the United Auto Workers union's 67-day national strike in 1970. Even as settlements are reached, there is no reason to expect that labor peace will break out in the stormy relationship between GM and its U.S. hourly workforce.
The national contract will be renegotiated in 1999 and it promises to be extremely difficult for GM to avoid another confrontation in both the U.S. and Canada. At the heart of the problem is GM's real need to get control over its costs, which is in direct conflict with the UAW's desire to create jobs for another generation of auto workers.
This conflict, if not resolved, will produce two losers. Neither side seems to appreciate that inevitable fate, as they march over a precipice that guarantees a less-competitive GM -- with fewer and fewer employees.
Unfortunately for GM and the UAW, their problems are largely irrelevant to the car-buying public. Dozens of other automakers were ready to take advantage of shortages and long waits at GM dealerships. The negative publicity surrounding the 1998 strikes worsens GM's corporate image, while the UAW is seen as an out-of-touch organization trying to preserve a working environment not available to any other American industrial worker.
Furthermore, car buyers don't care where, or by whom, their cars are built. Vehicle prices are determined by the market, not by GM. Consumers will not pay more for a GM vehicle just because GM is a high-cost producer, or because it employs hundreds of thousands of well-paid workers. The UAW might hope for sympathy and support for its cause, but it won't get any. Once the shopper is in the showroom, price is all that matters.
GM has earned billions of dollars during the last five years, which may be creating the impression that the company has no financial challenges ahead of it. GM needs to earn those billions to fund capital spending, the bulk of which is spent in North America on, among other things, post-retirement health care and pension fund liabilities.
A decent vehicle market in North America and some cost improvements lifted GM out of the financial crisis it faced in 1992. But labor disruptions could easily cripple the company again. GM and the UAW have to find a basis for working together. The UAW, and GM shareholders, deserve more than they have been getting in terms of competitive product that would create jobs and produce profits.
A little internal housecleaning of the people responsible for GM's market share losses seems to be in order. GM must improve product development efficiency, launch effectiveness and vehicle quality, while continuing to improve factory productivity.
The UAW cannot restrict GM's need to eliminate work that can never be made competitive internally. Job classification and work rules that limit productivity gains cannot remain. The UAW cannot use national contract negotiations to tip the competitive balance away from GM, as it did in 1996 and in previous national contracts.
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