AP Explains: Why auto workers went on strike against GM

DETROIT — More than 49,000 union auto workers at General Motors are walking picket lines, silencing more than 50 company factories and parts depots in a strike over contract negotiations.

The strike that began early Monday crippled production of Chevrolet, Cadillac, GMC and Buick vehicles made by the nation’s largest auto company, and if it lasts a long time, will cost both sides millions.

The dispute boils down to this: GM has been highly profitable since emerging from the Great Recession, and now that the company is healthy, workers want a bigger slice. GM, though, wants to protect profits as it faces a global sales slowdown, tariff threats and another possible recession.

Some questions and answers about the strike and its impact:

WHY DID THE UNION WALK OUT?

GM has made over $30 billion in the past six years, and workers say it’s time they got a bigger share. Although they received profit-sharing checks that totalled $52,500 for the same period, workers want pay raises that will show up year after year, even in a downturn.

They gave up cost-of-living pay raises and made other concessions to keep the company afloat during its 2009 bankruptcy, and now they want to be repaid. Longtime workers have received only two raises since 2010. Also, workers hired after 2007 still make less than older workers, and the union wants to erase that gap.

GM, however, is facing a global auto sales slowdown and would rather give workers money that is tied to earnings. The company also says health care costs are too high, and it wants to cut labour costs so they are closer to U.S. factories owned by foreign competitors. Senior GM workers now make around $30 per hour, but with benefits, it’s $63. Total labour costs run an average of $50 per hour at the foreign plants, according to the Center for Automotive Research.

WHEN WILL THE STRIKE HIT GM’S PROFITS AND WORKERS’ WALLETS?

That depends on how long it lasts. If it’s only a couple days, workers will lose a relatively small amount of pay. But a longer strike would force them to live on strike pay of only $250 per week.

Even though factories aren’t running, GM has fixed costs to maintain equipment. Citi analyst Itay Michaeli estimates that the strike is costing GM $100 million in lost earnings per day, or 6 cents of earnings per share every day. GM may not see the effects immediately because it has a 77-day supply of vehicles available at the current sales rate, far above the industry average of 61 days, Cox Automotive calculated.

So buyers still would have a lot of cars, trucks and SUVs to choose from. But a week or so in, dealers will run short of vehicles and shoppers might go to other brands. That could cost GM market share and profits.

With a short strike, GM would make up production by increasing assembly line speeds or running plants on overtime, and that could replenish vehicle supplies and erase some losses. A 54-day strike in 1998 at a plant in Flint, Michigan, crippled GM’s production and cost the company $2 billion and 2 percentage points of market share that GM never got back.

WHEN WAS THE LAST NATIONWIDE STRIKE AGAINST GM?

It was a two-day walkout in 2007, in an era when auto sales were strong but a bloated GM was losing money due to big discounts and the burden of huge health care, pension and wage costs for 74,000 U.S. factory workers. That’s about 25,000 more workers than today.

At the time, the company was headed for bankruptcy, in part because it was supporting about 80 U.S. factories and parts depots, compared with 55 today. It lost $39 billion that year due to an accounting charge because GM’s prospects for making profits were low. The union sought guarantees of new vehicles at plants to preserve jobs, plus pay and benefit increases. It got lump sum payments, but made big concessions, including an agreement to take on GM’s multibillion retiree health care costs. It also agreed that new hires would be paid less than older workers.

WHY DID THE UNION AGREE TO CONCESSIONS?

A union analysis of GM’s books showed the company was in deep trouble, and without union help, would have trouble staying afloat.

WHAT’S DIFFERENT NOW?

GM unloaded billions in costs during its 2009 bankruptcy and closed factories and cut white-collar workers to reduce expenses. Now it can make money even if total U.S. auto sales drop to between 10 million and 11 million per year. In 2018, U.S. sales were a strong 17.3 million vehicles. The company also shed money-losing brands and streamlined its management structure. It made close to $8 billion last year.

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WHAT ROLE DOES THE FEDERAL INVESTIGATION OF UAW LEADERSHIP PLAY?

The scandal started at a Fiat Chrysler-UAW training centre in 2015 with allegations that a top union official took payments to keep the UAW “fat, dumb and happy” in contract talks. Fiat Chrysler’s top labour negotiator took money as well. That made workers suspicious of union leaders and whether they were acting in the workers’ best interests.

The scandal spread this year when federal agents raided UAW President Gary Jones’ suburban Detroit home. Last week a UAW regional director was charged in an alleged scheme to divert $600,000 from union dues to buy golf clubs, expensive wines and cigars and long stays in luxury villas in California.

Jones was not named in charging documents, but he was director of the same region until last year, when he became president. The strike could show workers that the union is on their side in trying to get much as from GM as possible.

WHAT’S HAPPENING AT FORD AND FIAT CHRYSLER?

Workers are still on the job under contract extensions as talks with GM continue. Any agreement with GM will be used as a template for the others. But additional strikes are not out of the question, especially at Fiat Chrysler.

Tom Krisher, The Associated Press