what happened? gm/ uaw strike: a primer last update...

What Happened? GM/ UAW strike: a primer Last update September 26th, 2007, 7:00am EDT

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WHAT HAPPENED? GM/ UAW strike: a primer

IF IT WERE EASY to get rid of $6 billion in health care costs, or to turn our back on the burden of close to three retirees for every active worker, we would have done it by now. So said GM Vice Chairman for Global Product Development Robert A. Lutz, speaking to reporters at the 2006 North American International Auto Show in Detroit. A month before Lutz’s comments, AutoExtremist.com’s Peter DeLorenzo warned, “the core issues facing GM – global competitiveness; U.S. trade imbalances; health care costs, and pension funding – are issues that the nation must deal with right now.” As GM hourly workers completed their first full day of strikes against the company on Tuesday, September 25th, those words were proving remarkably prescient. Almost two years after Lutz’s statement, GM and the UAW had spent more than a month addressing the issues Lutz cited, both trying to agree on how to bring GM’s costs somewhat closer to those of its Asian competitors.

By 3:06am EDT on Wednesday, September 26th, 2007, the two-day strike was over. Yet for two days, at least, things did not appear to be going well. At 11:06am EDT on Monday, September 24th, the United Auto Workers had launched a national strike against GM.

Some observers blamed General Motors; some, the UAW. Some blamed both. “Here we have the UAW and GM management blaming each other for the poisoned fruits of their shared arrogance, incompetence, intransigence and greed,” wrote one blogger. 73,454 hourly, unionized workers walked off the job at 77 General Motors facilities across



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thirty U.S. states. Speaking at a press conference, the UAW’s president explains that it is time to “draw the line” with regard to GM’s stance on job security. Talks to renegotiate the GM/ UAW contract had been ongoing for an unprecedented ten days of overtime bargaining between the team of GM CEO G. Richard Wagoner, 54, and that of UAW president Ronald Gettelfinger, 63.

In all, 180,000 active U.S. autoworkers and 400,000 retirees will be covered under UAW contracts with GM; Ford Motor Co., and Chrysler LLC.

With GM as the first target for negotiations, several issues were on the table. First and foremost, GM wants to adjust a health-care settlement reached in 2005. Vice Chairman Lutz predicts that foreign transplants will have a wake-up call in about thirty years, when their health care burden will be closer to General Motors’. Currently, however, GM is at a huge disadvantage. American Honda has just 1,700 retirees; Toyota, fewer still. GM has more than 340,000 retirees and surviving spouses receiving health care benefits today. Collectively, Detroit’s Big Three are staggering under a combined $114 billion in future retiree health care liabilities. Analysts regularly estimate Detroit’s competitive labor-cost imbalance with Asian competitors at between $20 and $30 per hour; roughly $1,000-$1,500 per vehicle. The gap partly reflects the dramatically smaller U.S. retiree base and lower health-care costs that Toyota; Honda, and Nissan transplants bear. GM estimates that its $5 billion annual health-care bill is growing by almost 15% a year. GM’s active workers contribute about 7% to their medical coverage, versus 25% for Toyota workers. While Honda has expressed dismay at the cost of health care for even the few retirees it has,

GM CEO Rick Wagoner and UAW president Ronald Gettelfinger

UAW president Ronald Gettelfinger



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GM’s health care costs were $5.2 billion in 2004, climbing to $5.6 billion through 2005. The company is thus seeking to shift $51 billion in unfunded retiree health care obligations to the union through a voluntary employees’ beneficiary association (VEBA), a union-controlled trust fund, which GM would fund with a combination of stock and cash, and which a trust, set up by the UAW, would manage for the next 80 years. Tentative agreements on VEBA have been reached, and indeed they may well have been reached before the strike. “VEBA is in our best interests!” exclaimed Gettelfinger to Detroit’s WJR 760AM on Tuesday, September 25th.

“That was never an issue for us.” Indeed, as Gettelfinger clarified after announcing the end of the strike the following day, the UAW could not have legally gone on strike over VEBA. Deutsche Bank analyst Rod Lache wrote in the firm’s daily note on Tuesday, in the midst of the strike, “we continue to believe that a health-care deal is a gamechanger for GM… (and would) improve free cash flow by $2.7 billion - $2.8 billion.

“Hourly labor cost could decline by $18 - $19 per hour, bringing U.S. autoworkers much closer to the hourly labor cost of Japanese transplants.”

GM is also pressing for a two-tier wage structure, enabling it to pay new hires less than veteran workers. This would help GM in coming years, because it has a relatively older U.S. workforce (average age, 50, versus 45 at Ford and 46 at Chrysler). 64% of GM workers are eligible to retire within five years, versus 31% at Ford and 30% at Chrysler.

Additionally, GM wants to reduce the number of job classifications in its factories, and to hire nonunion labor for jobs not directly related to building vehicles. The UAW’s position on these issues is not yet known, nor is it clear what the tentative agreement entails. Yet what CNN has dubbed the vanishing U.S. auto worker is a key issue for the UAW, and the current round of talks is believed to have broken down when the union demanded GM assurances regarding U.S. jobs; product commitments, and investments in U.S. plants. The number of UAW workers on strike – 73,454 – was half the roughly 140,000 who would have walked had a national strike against GM been called in 2000. The UAW has seen its membership at GM plummet by 70% since 1994, as the automaker dumped its parts unit and closed plants to try to align its production with its shrinking U.S. market share. UAW membership as a whole is down to 538,448, from 1.5 million thirty years ago. This was the first nationwide strike that General Motors had endured since 1970, and the first nationwide strike during auto-contract negotiations since 1976, when Ford Motor Company plants were shut down. For GM, it was the first significant contract-related labor strike since 1984, when 9,200 UAW members struck 25 facilities for 13 days. It was the first stoppage against GM since 1998, when a 54-day strike at parts-making operations in Flint, Michigan, shut GM production nationally, costing the company $2.5 billion. Today, analyst Brad Rubin at investment firm BNP-Paribas estimates that a month-long



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strike would have cost GM $4 billion1. At least one other estimate bandied about almost doubled that figure. Lehman Brothers analyst Brian Johnson went so far as to figure that 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. GM; Ford, and Chrysler are rated B with a negative outlook by Standard & Poor’s, putting all three companies deep into junk bond territory. GM’s rating has not budged since the beginning of the strike, but things are bad enough; a B rating makes it harder for a company to borrow money. General Motors lost a combined $12 billion in 2005 and 2006. Collectively, GM; Ford, and Chrysler lost $16 billion last year. GM’s turnaround is in full swing, thanks to an impressive slew of new products and gains overseas. General Motors beat market expectations to earn a third straight quarterly profit in the second quarter of 2007, turning a net profit of $891 million from April through June 2007, versus a loss of $3.4 billion in the same period of 2006. Yet GM’s North American operations have continued to post losses, and the American consumer’s perception of GM’s products – still rooted in the Detroit automaker’s hamfisted responses to the 1973 and 1979 gas crises - has yet to catch up to reality. The solution, the analysts say, is product. Yet these labor negotiations play directly into product planning. According to David E. Cole, chairman of Ann Arbor, Michigan’s Center for Automotive Research, if GM and Toyota could switch health-care costs, GM could launch an additional five new products per year. 1 ‘GM can handle short strike,’ The Detroit News, September 25th, 2007

Health care aside, GM gives its workers 20 days of annual vacation, versus Toyota Motor Corp.’s allowance of 16. “If GM had the same incentive structure as Toyota, it would be making money now,”2 states University of California-Berkeley UAW expert Harley Shaiken. In a normal week, a GM assembly worker averages $27.81 per hour and takes home nearly $800 (after tax, not including benefits). In a good week, several hours of overtime boost that cheque by a few hundred dollars. The UAW contends that labor costs account for just 10% of the cost of building a vehicle. The organization has, it would remind us, already made major concessions over the past several years, including acquiescing to a deal on retiree health care in 2005, and accepting massive buyouts and plant closings in 2006. Potential impact on General Motors

Roughly 73,000 people, of the 284,000 that General Motors employs around the world, had gone on strike, costing the company an estimated 12,550 vehicles per day (760 per hour). Production operations in GM’s largest market were shut down, and operations in its

2 ‘UAW sets 11 a.m. strike deadline,’ The Detroit News, September 24th, 2007



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third-largest market, Canada, were likely to have begun closing shortly.

GM these days is a truly global company, manufacturing its cars and trucks in 33 countries, and selling them across 200. That’s entirely why Gettelfinger’s negotiators may have asked for a commitment to U.S. manufacturing. The Detroit News’ Daniel Howes wrote that, “in private meetings earlier this year… GM North America President Troy Clarke said that GM could, over time, build two-thirds of its U.S. market volume in Canada and Mexico and import the rest from outside North America if need be.”3 Yet while the goings on in the U.S. might seem a world away to GMDAT operations in Korea, GM’s operations are now more interconnected than perhaps ever before. Between 80,000 and 100,000 members of the Canadian Auto Workers (CAW), who staff six GM plants in Canada as well as a number of supplier plants, could soon have nothing to do. GM’s UAW American factories supply to both Canada and Mexico, and parts supplies in these regions are expected to dwindle quickly.

3 ‘Automakers’ global focus raises the stake,’ Daniel Howes, The Detroit News, September 26th, 2007

Moreover, General Motors buys about 50% of all automotive parts that are manufactured in Canada. For a week, at least, the immediate financial impact upon General Motors would likely have been minimal. First and foremost, GM has $32.8 billion in liquidity (cash and marketable assets) to cushion the impact. Forbes reports that the company also has about $8 billion in credit facilities from which it could borrow. Morgan Stanley analyst Jonathan Steinmetz predicted that GM could make up most of the cash burned during a brief strike after a settlement. On September 1st, GM had an average 67-day supply of vehicles. At the time of the strike, Forbes estimates that the company had 950,000 vehicles in inventory. GM dealers had more than an 80-day supply of most of its profitable full-size trucks. On the other hand, supply of GM’s hottest-selling vehicles stood at less than a month; there was just a 26-day supply of Buick’s new Enclave, for instance. Enclaves spend around two weeks on dealer lots, marking one of the industry’s fastest turnover rates.

Ironically enough, GM officially launched its 2008 models on Tuesday, September 25th, the first full day of the strike. There is a feeling that GM’s ’08 product line is the most appropriate to market conditions that any GM

2008 Buick Enclave



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line has been in decades, what with the Buick Enclave; Cadillac CTS; Chevrolet Malibu, and Saturn Vue all new and highly anticipated in key segments. It is precisely these vehicles that would have been in short supply. A two-week strike would likely have cleared inventory of GM’s most popular products and, if the strike were to last a month, the company would certainly have felt the strain. The Detroit Free Press’ Mark Phelan recalled the brand new Oldsmobile Intrigue’s fate, as it launched a few months prior to the 54-day strike of 1998. “It’s an article of faith for some people within General Motors Corp. that the company’s last protracted strike – a 54-day slugfest in 1998 – drove the last nail into Oldsmobile’s coffin,” Phelan wrote.

“The brand had just begun a major push to sell its Intrigue midsize sedan, a very good car that many observers thought was a match for the Toyota Camry when it went on sale as a 1998 model. “The shutdown at a key components plant in Flint stalled the Intrigue’s momentum. “Commercials ran, but the assembly lines didn’t. By the time the Intrigues resumed rolling into dealerships, GM had to put its money into launching (its new line of) pickups. “The car never recovered, and GM killed Oldsmobile (little) more than two years later.”4

4 ‘Enclave, CTS, Malibu could be in danger,’ Mark Phelan, Detroit Free Press, September 25th, 2007

Phelan drew a parallel with Buick’s Enclave, a car from a “troubled brand with a disting-uished history… challenging established models like the Lexus RX350.

“Take the pot off the boil for long, and GM and the UAW risk spoiling the soup.”

That would have been a major risk for a company fighting a perception gap. Potential Impact on the U.S. auto industry “If they believe that they cannot be competitive here, GM can disinvest in Michigan – and in the U.S.,” warned Chairman of Ann Arbor’s Center for Automotive Research David Cole, speaking to Detroit’s WJR 760AM on Tuesday, September 25th. A long-term strike scenario would have been a blow to scores of GM suppliers who do not have GM’s liquidity, and who are marked with speculative credit ratings. GM; Ford, and Chrysler LLC impact 7.1 million supplier jobs across the country. GM by itself is likely responsible for slightly less than half of those jobs, somewhere north of 3 million. The auto industry buys most of its parts on a just-in-time basis, so the shutdown’s impact would have spread quickly. Yet a 10-day strike would reportedly have had limited impact on major suppliers. “Big Tier 1 (suppliers) have been very mindful that a strike could happen, and they’ve been preparing for this for six to nine months,” Craig Fitzgerald, a partner and auto analyst at Southfield, Michigan-based Plante & Moran PLLC, tells the Associated Press. Decreased business over a longer period of time could have dented suppliers’ bottom



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lines, already under pressure from the high costs of raw materials. GM-heavy suppliers, such as Detroit’s American Axle & Manufacturing (74% of whose worldwide sales are to GM) would be particularly hard hit. Delphi, which plans to exit bankruptcy by January 1st, may delay those plans if the strike is prolonged; GM accounted for 58% of its $9.19 billion revenue through July, and Delphi had idled more than 1,000 employees by Tuesday, September 25th. All 29 of its U.S. factories had been affected by the two-day strike. Potential Impact on the UAW The National Labor Relations Act (NLRA) gives employees the right to bargain collectively with their employers with regard to terms and conditions of unemployment, so long as a majority of employees agree. The employees cannot be fired for this collective activity, or for striking. From the UAW’s perspective, strength and solidarity were vital.

“If GM thinks you’re weak, your contact will be weak,”5 Bill Jordan, Flint Local 599

5 ‘Off a cliff: UAW felt pushed over edge,’ The Detroit News, September 25th, 2007

president, told hundreds of strikers on Monday. The following day, UAW president Ron Gettelfinger, speaking to Detroit’s WJR 760AM radio, emphasized that he did not want to call a strike, and questioned GM’s sense of urgency at the bargaining table.

“We’ve moved in areas that the company never even thought we would consider,” he said, adding, “I feel like we were pushed into a strike.

“I don’t believe, for a moment, that this could be the death of the Union, or of GM. “We’re not being unreasonable, and the agreement – when we reach it – will be proof of that. The agreement will speak for itself. “We hope that the strike will help bring a quick end to all this.”

The UAW must have been concerned that it was battling for job security with a global company, at a time that its contract has expired. Moreover, it had yet to conduct negotiations with Ford and Chrysler, and exhausting its resources in a strike against GM might erode its position. Finally, the UAW has shown interest in organizing foreign-owned,



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southern auto plants, and being seen as intransigent will not help its case. “They’re rolling bigger dice than I’ve ever seen them roll,”6 says David Cole, Chairman of Ann Arbor’s Center for Automotive Research, of the UAW, adding that the strike could devastate the union’s reputation while leaving GM relatively unscathed.

“They’ve basically shot themselves in the leg.”

Indeed, the UAW took a real risk by going on strike. Its four-year GM contact expired on September 14th, and was not extended past September 24th. Striking employees can be replaced with permanent workers and, if their jobs are replaced when the strike ends, they have to sit on a waiting list until a job opens up. However, if GM were to hire replacement workers, these new workers would have to form enough of a majority to vote the union out. For now, say several analysts, such concerns have yet to materialize. “GM is prepared both financially and operationally,”7 says David

6 ‘Off a cliff: UAW felt pushed over edge,’ The Detroit News, September 25th, 2007 7 ‘Off a cliff: UAW felt pushed over edge,’ The Detroit News, September 25th, 2007

Healy, an auto industry analyst with Burnham Securities Inc.

“Their workers will go bust before they do.”

The UAW prepared itself to pick up a tab for $200 per worker, per week, per striker, in return for four hours per week of picketing. It would also pay medical costs (except for dental and vision) for employees and retirees. Strike pay is taxable, and starts on the eighth day of the walkout. A taxable $200 per week is less than a quarter of average UAW pay at General Motors, and would hardly have been sufficient for a longer strike, particularly as gas prices have climbed to $3/ gallon, and as real estate prices have fallen amid a growing wave of increasing mortgage payments and a rash of home foreclosures. The union is believed to have started the strike with about $900 million in its strike fund. Some of that would need to be left as leverage for bargaining with Ford and Chrysler, later. Mind you, bargaining with Ford and Chrysler might be quite different. While UAW president Gettelfinger maintains that pattern bargaining is alive and well, analysts suggest that, at Ford and Chrysler, the UAW will need to grapple not with a VEBA (neither Ford nor Chrysler have the legions of retirees that are strangling GM), but with meaningful cuts in current costs: i.e: the shrinking of the workforce, and of their compensation. Morale at the UAW was high. The International Brotherhood of Teamsters, which represents nearly 10,000 automotive transport workers who ferry everything from components to completed vehicles, almost instantly said that it would honor UAW picket



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lines. “Teamsters will not cross a UAW picket line, and our 10,000 automotive transport members will not deliver GM cars,” said Teamsters General President James P. Hoffa in an official statement, explaining that GM had “failed its workers and its customers by outsourcing good jobs, creating a growing environment of economic and job insecurity.

“This struggle highlights the ever-growing crisis in our nation’s health care system and corporate America’s continued pursuit of unfair trade deals. “This approach has failed the American worker, and is destroying the middle class.”

Retirees and fellow union members alike were been seen delivering pizzas and homemade pies to striking UAW workers. Yet public opinion stood decidedly against the UAW. As Tony Trent, who installs filters and hoses for GM in Romulus, Michigan, says, “the UAW has absolutely no power because the public is against us.

“They think we prop up our feet and drink beer all day.”8

The number of workers assigned to Trent’s line dropped to 12 from 34 two years ago, with no cut in output, he says. If the UAW was hoping to bring out the human side of, and in, General Motors, then it must have been disappointed with the tide of public opinion. Since 2005, unbridled doom and gloom over GM’s prospects have run rampant in the media. Premature, and frankly

8 ‘The Fall of Detroit: Insider sees errors of 1970s in GM strike,’ John Lippert, Bloomberg, September 25th, 2007

false, talk of bankruptcy has raised the stakes, and the false idea that the foreign transplants have picked up the slack that the domestic industry and UAW have dropped has even been nurtured in some quarters. Certainly, some bad decisions were made – and not too long ago, either. In 1999, GM and the UAW agreed to wage and benefit increases totaling 23% over four years. “They’d only do that if they thought they’d sell pickups and sport utilities forever,”9 says Sean McAlinden, an analyst with Ann Arbor’s Center for Automotive Research. Yet reading some of the reports on General Motors, and on the UAW, over the past two years, one is reminded of a British media which, in the Summer of 2005, seemed intent on maintaining that national interests had no place in automotive production. The media was thoroughly callous toward MG-Rover’s passing from struggling British automaker to company-in-receivership. Only CAR’s Gavin Green (formerly the magazine’s editor) articulated the subject with any depth or eloquence. “Most of the pundits who pontificated on MG-Rover’s final failure implied that, actually, despite MG-Rover’s incompetence, it’s going fine for UK Motor Industry plc.

“The Japanese are here! The UK now makes more cars than it did a decade ago. Nissan; Honda, and Toyota are the new Austin; Morris, and Rover! “True, we make them here. But we don’t design; engineer, and develop them here. In a neat reversal of 100

9 ‘The Fall of Detroit: Insider sees errors of 1970s in GM strike,’ John Lippert, Bloomberg, September 25th, 2007



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years ago, we now provide Asia with low-cost, conveniently located labor. “They do the high-value; university-educated; creative, and managerial stuff. We build ‘em. The only mass maker with a hefty engineering presence left in the U.K. is Ford. “Yes, we have loads of companies making cars here, with good productivity and good quality. But none is British-owned. This matters in the car business. A company’s home is typically where it sites its senior management; engineers; designers, and key administrators – the important jobs that young people aspire to. “A company’s home is where it will always, even in the face of low-cost Third World options, locate some of its manufacturing. A company’s home is where it has loyalty; political affiliations; cultural empathy, and key suppliers. “The disparate U.S.; Japanese, and German-owned car makers which assemble cars in Britain help this country, so thanks very much, and the best of British to you.”

Green was, of course, right. Peugeot soon announced that it would not build its new 207 supermini in Britain. It would take the 207 to the Czech Republic and, worse yet, it would move production of its 206 from Britain to the Czech Republic, too. In April 2006, AutoExtremist’s Peter DeLorenzo pointed out that “it would be monumentally counterproductive – if not catastrophic – to the health and well-being of this country if the outstanding pension

obligations that hundreds and thousands of people are depending on suddenly evaporated.

“It would affect every citizen of this country, from LaJolla to Washington, D.C.”

Domestic automobile companies, DeLorenzo noted, directly or indirectly account for between 1 of 12 and 1 of 14 jobs in the country. The worst part about all of this is that the UAW is actually doing a rather decent job these days. Just as General Motors’ vehicles are better than the public’s perception of them, so too has the UAW’s productivity won awards over the past several years. Harbour Consulting’s 2005 survey found that seven of the thirteen most efficient assembly plants on the North American continent to be General Motors. This was all the more impressive when one considered that General Motors – unlike Toyota; Honda, and Nissan – reports all its plants to the survey. The three foreign automakers do not report statistics on their newest plants until they are up to speed. Toyota leaves out Princeton, Indiana, for instance; Honda neglects to officially record statistics for its Lincoln, Alabama plant. In 2007, General Motors took three of the top four plant award categories in the 2007 Harbour Report. Its Spring Hill, Tennessee facility is the most productive engine plant in North America; its Toledo, Ohio plant, the most productive transmission plant. American UAW plants also led North American productivity in 9 automotive segments: compact non-premium; midsize premium; midsize premium sports car; midsize premium crossover; large premium conventional; large non-premium pickup; large non-premium



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utility; large premium utility, and large non-premium van segments. Despite GM’s UAW plants being among the most productive on the continent, per the Harbour Report, and despite the risks that the UAW is taking by going on strike, the general consensus is that career autoworkers – specifically, autoworkers making $27.81 per hour, their benefits covered – are a dying breed. Their pay, say detractors, is not based on merit. They receive the same pay regardless of their job, with pay out of range for the work done. Tie in assumptions of questionable work ethics, and an ironic sympathy for the United Auto Worker whose dues, it is presumed, pay for lavish rep benefits, and it would appear that the UAW – much as does General Motors – has its own perception gap to bear. “There was a time that the union label on American-made products was a reason to buy something,” Center of Automotive Research Chairman David Cole tells the Detroit Free Press.

“Now I’m afraid it’s becoming a reason not to buy. There’s a real concern that there’s a negative sales reaction out there to union-made American brands.”10

Judging by commentary over the past several days, the UAW is viewed as being out of touch with reality, perhaps by people who themselves fear being outsourced, and who see the UAW as having clung to a bygone era for much too long, while others have made sacrifices and evolved in the hope that the

10 ‘A weakened union plays its only trump card,’ Tom Walsh, Detroit Free Press, September 25th, 2007

metaphorical Titanic – i.e: the interchangeability and outsourcing of both skilled and unskilled American jobs – can be turned around. One Internet poster on GMInsideNews.com writes, “I don't want to see any American scraping bottom… (but) I'll tell you what I do want to see:

“I want The Brothers of the UAW to stop viewing General Motors as the enemy. I want them to stop waging economic warfare on their employer. “I want them to figure out how they can be more productive than they are. I want them to tell GM’s engineers how quality can be improved. “I want GM’s workers to make their employer so much money that GM will not be able to hand out bonuses fast enough. “I want the workers to make GM great again, not destroy it in an effort to ‘gain concessions.’

If there is any sympathy for the UAW, it is in that no one can quite define what a ‘fair’ deal would be in today’s tough market. Of course, say those who sympathize with reported demands for job security, it is not in the union’s interest to make labor costs competitive, and watch jobs go overseas. A Detroit News editorial on the second day of the strike wrote, “GM and the other domestic automakers must come out of these talks with a transformational contract.



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“Anything less, and they may as well shut down. A strike simply hastens the inevitable.”11

It does not help that Michigan has this week been facing the likelihood of a state government shutdown over the inability of a Democrat-controlled House and Republican-controlled Senate to come to an agreement in budget negotiations. The population of Detroit, which peaked at 1.9 million in 1953, is down to 840,500, according to Southeast Michigan Council of Governments estimates. “The strike puts even more people out of work; reinforces Michigan’s image as a retrograde labor stronghold, and amounts to one more blow helping to bring a stumbling state to its knees,”12 cautioned Detroit News columnist Daniel Howes. “Michigan’s economy labors under the dual burden of its reliance on the Detroit Three and the longstanding reputation of Detroit and Michigan as a stronghold of truculent; overpaid, and inflexible labor unions,” notes Howes’ Detroit Free Press counterpart Tom Walsh.

“The old antibusiness, pro-labor image is a hard one to shake – and any nationwide automotive strike, no matter how brief, sends the wrong message to growing companies looking for the best place to invest.”13

11 ‘What’s good for GM is good for the UAW,’ The Detroit News, September 25th, 2007 12 ‘Tactics from 1970 don’t fit ’07 reality,’ Daniel Howes, The Detroit News, September 24th, 2007 13 ‘A weakened union plays its only trump card,’ Tom Walsh, Detroit Free Press, September 25th, 2007

Michigan; General Motors, and the UAW may well bear the brunt of what is a national problem. All three, it would appear, suffer a perception problem. “This is not some isolated bad tiding that will only affect the Rust Belt in the forlorn flyover states; no, this situation spells trauma for the entire country,” warned AutoExtremist’s Peter DeLorenzo in December 2006.

“The U.S. will either continue to be a vital producer of goods and service and a manufacturing force to be reckoned with in the world, or we’ll be relegated to becoming one giant consumer nation with little or no control over the vagaries of the global economy – or our economic destiny.”

It bears noting that persistent rumors suggest the strike to have been nothing more than the opportunity to vent. The strike, said Fortune senior editor Alex Taylor III, “sends a signal to the union membership that its leaders are working hard on their behalf, and will squeeze GM as much as they can.

“So, to demonstrate toughness to their own members, they let them go out on strike.”14

Wall Street appears to have viewed GM’s willingness to weather a strike as a sign that the automaker is drawing a hard line on cost cutting. The strike was also seen in some circles as simply part of the bargaining process. “Any agreement must be ratified… this is part of that process,” Chairman of Ann Arbor’s 14 ‘Is the UAW strike for real,’ Alex Taylor III, Fortune, September 24th, 2007



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Center for Automotive Research Cole told Detroit’s WJR 760AM on Tuesday, September 25th, adding, “I think that Ron Gettelfinger is a very honorable man, and I think that he has the best interests of the Union at heart.

“This is not something we should panic about, this early. I think we’ll have an agreement in a few days or so.”

GM, which remained silent on the issue, said in its official statement that “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 are fully committed to working with the UAW to develop solutions together to address the competitive challenges facing General Motors.”

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