Monday, September 24, 2007

American Auto Workers On Strike

Financial Times

80,000 American auto workers at General Motors went on strike for the first time since the 1970s after contract talks stalled. The United Auto Workers, the labor union representing the employees, ordered a work stoppage in the seventy GM facilities in the United States. The stoppage came after the management and union were unable to come to agreement on a new four year contract. The previous contract expired September 14th, and the union authorized hour-by-hour extensions. The strike was ordered after ten weeks of talks produced no results. Management is keen to restructure its US operations and extricate itself from a $50 billion commitment in health-care obligations to retirees. While talks have currently stalled, union leaders stated that they would return to the bargaining table on Tuesday.

The strike is not expected to be a long one, and analysts predict that GM could survive a short strike. Furthermore, Teamsters union said it would not cross picket lines to work on GM vehicles. Nevertheless, by Monday afternoon, GM has already lost 4,000 vehicles in the strike, and an extended strike could cost GM $8 billion per month. The UAW strike also has regional ramifications, as a long strike may result in the loss of over 100,000 Canadian auto-related jobs.

Each side noted disappointment in the other in the inability to reach an agreement. UAW head stated that GM "had pushed the union into striking by not showing a willingness to meet it halfway on crucial issues such as job security." GM noted that "the bargaining involves complex, difficult issues that affect the job security of our US workforce and the long-term viability of the company." GM (like other US-based automakers Ford and Chrysler) are seeking concessions from UAW to shrink the labor cost gap with foreign automakers. This cost gap is claimed to be over $30/hour for the average worker. GM further claims that, unless concessions are granted by UAW, it may be forced to shut down more US operations. The three major US auto manufacturers have posted losses of $15 billion, and their market share in the United States has fallen below 50%.


How long can US auto manufacturers maintain US manufacturing plants in light of the increased union-labor costs?

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