The strike many believed never would happen shut down General Motors Corp. plants nationwide Monday, casting uncertainty on whether the U.S. auto industry can get the kind of revolutionary changes it says it needs to compete.
An end to the strike will depend on resolving the key union issues of wages and benefits, job security and investment in U.S. facilities and vehicles, UAW President Ron Gettelfinger indicated at a news conference Monday.
He repeatedly said that the strike was not related to talks over a landmark retiree health care trust on which the two parties are believed to have agreed to a general framework.
Everyone hoped for a short strike as talks continued Monday evening. They recessed and are expected to resume today.
Analysts and labor experts said the automaker and the UAW can manage a short labor stoppage without much trouble. GM has enough cash and inventory to manage a strike of a few weeks to a couple of months. The UAW had more than $800 million in its strike fund as of November – enough, in theory, to strike GM for a year.
But the frightening effects a national strike would have on UAW members, their households and the many other businesses and individuals who rely on GM for their livelihoods likely would come much sooner.
Even though workers knew a strike was a possibility, the call to walk off the job Monday morning stirred fear, surprise and anxiety in the hearts of many who won’t receive paychecks this week. Those workers will receive strike pay after eight days, worth just $200 a week.
“We can’t afford to be out,” said Nicole Sanders, 30, who walked out at Detroit-Hamtramck Assembly.
“I’ve got babies that got to be fed. We can’t afford it. Our economy is too bad. … I can hardly afford gas to come to work.”
The vast majority of workers were supportive of leadership’s decision to call a strike, saying the union needed to fight for equal rights and benefits for all workers, and to protect the hard-earned benefits that retirees were promised in earlier contracts. Rob Jones, a UAW electrician at the Romulus Engine plant, said he has been saving up for this day for several months.
“Workers who came before me made a number of sacrifices to give us the benefits we now have,” said Jones, who has a wife and two children.
But even among the hard-liners who believe the UAW needed to call a strike to stand its ground on job security and hold the line on wages and benefits, there was a sense the strike would have to be short to avoid causing irreversible damage to the automaker and the union.
GM is pushing the UAW to allow it to lower its labor costs – by doing such things as transferring responsibility for retiree health to an independent trust, freezing cost-of-living increases and instituting a new level of benefits for new hires – as the automaker battles to reach sustained profitability in its home market despite having a falling share of the sales market and higher costs than its foreign competitors.
And while the fate of union workers is inextricably tied to the fate of the company in the United States, the union must win commitments for middle-class jobs to sell such a deal to its 73,000 hourly workers, analysts and workers say. A majority of GM workers must ratify an agreement for it to take hold.
Gettelfinger said during a news conference at the union’s international headquarters in Detroit that he called the strike as a last resort.
“The number one issue here is job security,” Gettelfinger said. “We’re talking about investment, we’re talking about job creation, we’re talking about product being committed into the plant.”
GM spokesman Dan Flores said in a statement: “We are disappointed in the UAW’s decision to call a national strike. The bargaining involves complex, difficult issues that affect the job security of our U.S. workforce and the long-term viability of the company. We will continue focusing our efforts on reaching an agreement as soon as possible.”
Although both parties said they desire a prompt resolution of the issues, analysts said they have a little time before the matter becomes truly detrimental.
GM has 111 days of inventory on hand to sustain dealers for two to three months, according to estimates by Lehman Brothers analyst Brian Johnson.
“GM was facing the need, we believe, to cut production by about 15 days of production closure – making a two-week strike actually, ironically, a lower-cost way to adjust inventory,” Johnson said in a note to investors.
“Cash impact would be muted for a one-week strike – about $700 million for structural costs and warranties payments. An extended strike, and assuming no production in Canada and Mexico, would likely cause GM to burn $8.1 billion in the first month and $7.2 billion and $2.7 billion in the second and third months, respectively.”