UAW Gamble Targets Outsourcing, Health Care

Thousands of autoworkers are on picket lines a day after the United Auto Workers union begins a strike against General Motors. The union is taking a bold gamble. A lengthy strike could cost a weakened GM billions.

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RENEE MONTAGNE, Host:

It's MORNING EDITION from NPR News. Good morning. I'm Renee Montagne.

Thousands of autoworkers are back on picket lines today, one day after the United Auto Workers called a nationwide strike against General Motors.

RON GETTELFINGER: And this is nothing that we wanted. Nobody wins in a strike, but there comes a point in time where somebody can push you off a cliff. And that's exactly what happened here.

MONTAGNE: That's UAW president Ron Gettelfinger speaking to reporters after talks broke down yesterday morning. The union is taking a bold gamble in striking against General Motors. It's betting it can get stronger contract by shutting down an already weakened company. If the walkout does drag on, it could take a big toll on both sides.

NPR's Frank Langfitt reports from Detroit.

FRANK LANGFITT: GM and the union have a lot to lose in this strike. For the company, a lingering shutdown could cause it huge sums and further road its U.S. market share.

Harley Shaiken is a labor expert at the University of California at Berkeley. He says that although, GM has a lot of unsold vehicles, the work stoppage could hurt newer and more popular models that are critical to the company's turnaround plans.

HARLEY SHAIKEN: They are loosing money every day the strike takes place.

LANGFITT: But the longer the union stays on the picket lines, the more it could encourage GM to ship jobs abroad.

Dave Cole is a leading auto analyst in Ann Arbor, Michigan.

DAVE COLE: They are globally integrated like they have never been before, and so they have an option whether to invest here in the United States or invest in other places. And I think they have basically said that if we have a contract that enables us to be competitive, we will invest. If not, we'll disinvest in the U.S. and use our money where we think we can get a better return.

LANGFITT: So far, the contract negotiations are revolved around a tradeoff. The company has been asking the union to take over responsibility for crippling health care obligations. In exchange, the union wants the company to guarantee jobs and new products in the U.S. Union president Ron Gettelfinger says he decided a strike when GM failed to make those guarantees.

Job loss is a real issue for autoworkers. In the last several years, GM has cut cost by paying 30,000 workers to leave. And many union members complain about continued offshoring. Anthony Adams is a 55-year-old worker in a GM engine plant outside Detroit.

ANTHONY ADAMS: A matter of fact, the plant that I'm working at now, the engine plant, they've shipped out a whole department to Mexico, and they've shipped all it out. They came back about two months later and got the rest of the machines.

LANGFITT: Like his fellow union members, he sees the exporting of jobs as an overwhelming trend that's hard to reverse.

ADAMS: They're outsourcing a lot of things. There's nothing we can do about it.

LANGFITT: But Cole, the auto analyst, says that GM might be willing to keep jobs in the U.S. or new product lines. That's if the union could help it compete on cost with foreign firms like Toyota and Honda. Consider, GM owes nearly 270,000 retirees more than $50 billion in health care. Meanwhile, Toyota has only about 300 retirees in the United States. Cole says savings for GM could translate into more jobs for the union.

COLE: There's a very interesting tradeoff that exists between cost, particularly health care cost, and a new product - and investment in the new products. And I think this has dramatically seen if you look at - if General Motors had Toyota's health care cost in the U.S. The difference between that health care cost is equal to five new products a year every year by General Motors. That's how large that difference is.

LANGFITT: Cole says the stakes surrounding this contract are huge not only for GM but also for Ford and Chrysler where negotiations will follow.

COLE: This is not a healthy industry. And the absent - a major restructuring of the contract, one or two of these companies could fail.

LANGFITT: Harley Shaiken, the labor scholar, says the stakes for the union are equally high. The autoworkers need commitments for more jobs and new vehicle lines in the U.S. to halt the erosion of their membership.

SHAIKEN: So for the union, guarantees for future investment are pivotal to ensuring the sacrifices it makes today will pay off tomorrow.

LANGFITT: Although, the workers remain out on strike, the union in GM are continuing to talk. Many observers see that as a sign that both sides want to end the walkout as soon as they can.

Frank Langfitt, NPR News, Detroit.

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Lengthy UAW Strike Could Cost GM Billions

United Auto Workers members picket outside General Motors' assembly plant in Wisconsin.

United Auto Workers members picket outside General Motors' assembly plant where Tahoes, Suburbans, and Yukons are built in Janesville, Wis. Scott Olson/Getty Images hide caption

itoggle caption Scott Olson/Getty Images

In Depth: The Man Leading the UAW

Right now, Ron Gettelfinger may have the hardest job in American labor. He runs the United Auto Workers, which imposed a nationwide strike against General Motors on Sept. 24. Negotiations continue.
Read a profile of the man who leads the union as it tries to play a weak hand in dangerous times.

UAW members walk the picket line during a strike at the GM Powertrain Plant i i

United Auto Workers walk the picket line during a strike at the General Motors Powertrain Plant in Warren, Mich., after a union-imposed strike deadline passed Sept. 24, 2007. Bill Pugliano/Getty Images hide caption

itoggle caption Bill Pugliano/Getty Images
UAW members walk the picket line during a strike at the GM Powertrain Plant

United Auto Workers walk the picket line during a strike at the General Motors Powertrain Plant in Warren, Mich., after a union-imposed strike deadline passed Sept. 24, 2007.

Bill Pugliano/Getty Images
A chain and padlock secure a gate to one of the employee parking lots outside the GM assembly plant i i

A chain and padlock secure a gate to one of the employee parking lots outside the General Motors assembly plant Sept. 24, 2007 in Janesville, Wisc. Scott Olson/Getty Images hide caption

itoggle caption Scott Olson/Getty Images
A chain and padlock secure a gate to one of the employee parking lots outside the GM assembly plant

A chain and padlock secure a gate to one of the employee parking lots outside the General Motors assembly plant Sept. 24, 2007 in Janesville, Wisc.

Scott Olson/Getty Images

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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