- Scrambling to find auto parts, GM car dealers feel pinch in UAW strike
- 75,000 non-GM workers hit by strike
- Service techs pinched first
- 'Doesn't have the same feel'
- What happened back then
- Key sticking point: GM and UAW at odds over what will be made in America
- Going after Mexico
- the box
- A reasonable demand
- High wages boost economy
Scrambling to find auto parts, GM car dealers feel pinch in UAW strike
Car dealers are leaning on General Motors managers to find spare auto parts as the strike slows the output of oil filters, valves, rings and other items mechanics rely on to maintain the 30 million-plus GM vehicles on the nation's roads.
The pipeline stretching from factories to technicians working on GM's Buick, Cadillac, Chevrolet and GMC brands is far from dry, although car dealers and service managers report they regularly phone other dealers and salaried GM personnel in search of spare parts.
“We're starting to see parts in short supply,” said Russ Clark, general manager at Cadillac of Knoxville. “That’s where we're going to see it hurt most if the strike goes on for a couple of more weeks.”
Even with the walkout edging up on week five, auto dealers remember this one isn't quite as dire at that long one 21 years ago. There's a reason. This isn't General Motors of yore.
Auto technician, Mitch Lickteig works on the lifters of a 2015 GMC Sierra truck at the Landers Buick GMC in Southaven, Mississippi, on Friday, Oct. 11, 2019. (Photo: Ariel Cobbert, The Commercial Appeal )
75,000 non-GM workers hit by strike
Once the largest corporation on the planet with more than 600,000 workers worldwide and more than 100 major factories in the United States, GM has been pared down to 33 U.S. plants. Rather than make the bulk of the components fashioned into a vehicle, GM has followed rivals such as Chrysler, Nissan and Toyota and now buys a large share of auto parts from independent suppliers.
That has lessened the impact of a strike on motorists taking their car to the service center for repairs.
Independent plants making items such as filters and valves didn't send all the workers on the shop floor home when GM closed down.
As a result, the pipeline of parts flowing into dealers such as Cadillac of Knoxville is less full, Clark said, but hasn't had time to empty out since the strike began.
United Auto Workers union leaders in Detroit ordered the walkout against GM after the four-year labor contract expired, putting about 48,000 UAW members on strike beginning Sept. 16.
Late Friday night, UAW made a proposal to GM executives it said, if accepted, would constitute a “tentative agreement,” according to a letter posted to the UAW website.
The sides are reportedly divided over health care costs, use of temporary workers, production in Mexico, pension issues, wage gains, the decision to close four U.S. car assembly plants and lower anticipated employment levels in plants making future electric cars.
When GM production ceased, hundreds of independent factories slowed down and reassigned workers to maintenance tasks. As the strike went on, these independent suppliers gradually laid off workers:
- UAW Local 1853 President Tim Stannard estimates independent suppliers have idled about 2,500 autoworkers in Middle Tennessee factories that make parts used in engines and vehicles assembled at GM's complex outside Nashville at Spring Hill, Tennessee.
- In Tennessee, GM employs about 5,000 workers at Spring Hill, including about 1,400 independent contractors, and nearly 200 workers at the Memphis distribution center. Most of these 5,200 workers are now idle.
- Throughout the nation, independent factories have laid off or reduced wages for 75,000 autoworkers, estimated Anderson Economic Group of East Lansing, Michigan, on Tuesday, according to the Detroit Free Press.
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Service techs pinched first
Auto dealers had a substantial amount of new vehicles on car lots when the strike began and many have been continuously resupplied new autos that were in storage awaiting delivery. That leaves the service center as the first place on the car lot to feel the early pinch of idled assembly plants.
“We're already seeing the effects of the strike, but it's mostly in parts,” said Brett Gilmore, general manager of Beaman Buick GMC in Nashville, adding “we're not being hit quite as hard as the others.”
Beaman's parts warehouse, said to be the largest GM parts inventory of any dealer in the Southeastern U.S., has supplied the dealer's service technicians with necessary items, Gilmore said.
In Knoxville, Clark's dealership regularly phones other dealers, including dealers in neighboring cities, to locate a needed part or swap items. No consumer has missed repairs or maintenance. So far the shortage is just that, a shortage rather than a complete absence of necessary products, Clark said.
Auto technician, Mitch Lickteig works on the lifters of a 2015 GMC Sierra truck at the Landers Buick GMC in Southaven, Mississippi, on Friday, Oct. 11, 2019. (Photo: Ariel Cobbert, The Commercial Appeal )
In the Memphis suburb of Southaven, Mississippi, Landers Buick GMC has resorted at times to another tactic. Landers officials phone GM salaried employees and alert them to looming shortages. These employees have included district and regional sales managers and executives responsible for replacement parts, a term known as aftermarket parts in the industry.
“So far the strike has not been a real issue for us but with time it could be,'’ said Randy Paton, Landers general manager. “The only drawback we've had is the parts availability. We've been talking to (GM's) managers, the aftermarket guys, and they're pulling parts for us.”
GM salaried employees have combed through warehouses and engine plants, located needed items such as valves and rings, and immediately put the products into the distribution channel for delivery to the dealership. These channels are run by independent contractors not represented by the striking union.
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'Doesn't have the same feel'
In Knoxville, Clark compares this walkout to the last long GM strike, in 1998, and remembers the shortages back then seemed more burdensome for dealers.
“This one doesn’t have the same feel,” Clark said. “The inventory levels are good.”
That's largely because the network of auto parts manufacturers has been changed over two decades, analysts say. GM now relies on independent suppliers. Back then the company made far more of its own auto parts.
Under the present system, many independent suppliers continued output even after the strike began on Sept. 16. They waited to see if the strike would be short. As a result, more inventory has been available in the auto parts distribution pipeline going to the car dealers than was common two decades ago.
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What happened back then
That 1998 strike is widely considered the event that opened way for GM to rework the supply chain into its present shape reliant on independent factories.
During the 1990s, GM and the UAW tangled in 18 major strikes as the company relentlessly streamlined in search of lower operating costs. The strategy was driven by GM's market share falling to Japanese rivals. The 1998 strike was the longest of the decade.
UAW members walked out at a pair of metal stamping plants that June in Flint, Michigan. The repercussions spread swiftly. Auto parts made at the Flint stamping plants were routinely shipped to 26 of GM's 29 vehicle assembly plants.
Short of the Flint parts, assembly lines shut down and in turn almost all the 59 GM parts factories in the nation sent workers home. By mid July, about 200,000 GM employees were laid off. One of the few assembly plants spared was GM Spring Hill, then a self-contained division named Saturn Corp. It continued running.
When the strike in Flint ended after 54 days, GM had lost more than $3 billion. GM executives in Detroit had sparked the strike. They had ordered important die machines' removal from one of the Flint stamping plants.
After the strike, the UAW was regarded as too exhausted to stop GM's broad turnaround strategy. The company, founded in Flint on Sept. 16, 1908, aimed to engineer and make vehicles and engines and buy most of the parts.
GM spun off its 100,000-employee auto parts empire in 1999 as a new corporation named Delphi. It also separately retired the Oldsmobile, Hummer, Pontiac and Saturn brands. It weathered a 2009 bankruptcy that slimmed it further.
And it recruited a network of independent suppliers rivaling Delphi.
Since then, Delphi has moved its head office from suburban Detroit to the United Kingdom, renamed itself Aptiv and spun off its powertrain and aftermarket business as an independent company named Delphi Technologies. Flint, meanwhile, has shrunk from a city of 80,000 GM employees in the 1960s to fewer than 10,000 currently.
The shrinking of the old GM auto-parts empire, once concentrated in the industrial North, helped spur on the automotive industry in Mexico and the Southeastern United States. Currently, 336 auto parts plants in Tennessee employ about 55,000 workers. Another 20,000 people are employed at the GM, Nissan and Volkswagen assembly plants and offices in Middle and East Tennessee.
Last year, GM estimates, the company paid 203 vendors in Tennessee about $722 million for supplies.
Elaina Sauber of The Tennessean contributed to this article.
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Key sticking point: GM and UAW at odds over what will be made in America
Made in America tops the list of sticking points to be resolved between the UAW and General Motors to get to a tentative contract agreement.
For the 46,000 UAW members in the fourth week of nationwide strike against GM, a promise that the company will build upcoming vehicles in U.S. plants equals job security. The two sides negotiated throughout the day Wednesday. The were expected to recess in the evening and resume Thursday morning.
Securing promises of jobs over the four-year life of the next contract is so important for the union that labor experts say no other contract win will matter without it.
“Nothing else matters if you do not have job security,” said Marick Masters, director of labor at Wayne State University. “GM's decision to close several plants in November is what set the stage for these tense and prolonged negotiations. Any solution requires addressing job security.”
The union was angered in November when GM said it would not assign new vehicles to two U.S. assembly plants, Lordstown in Ohio and Detroit-Hamtramck, and no future work for transmission plants in Warren and Baltimore. Lordstown and the transmission plants are idled; Detroit-Hamtramck is to operate at a reduced level until January.
“A lot of the UAW folks who were at Lordstown, Detroit-Hamtramck, Warren and Baltimore transmission plants are now at other UAW locals because they were transferred when those idled,” said a person familiar with the negotiations. “So when it comes to ratification, job security is important because those people feel it. It hits close to home.”
Going after Mexico
The UAW has consistently said its membership made concessions during GM's bankruptcy that it never recouped and that it contributed to GM's record profits in recent years. Now it wants a share.
“Hardworking middle-class taxpayers didn’t think bailing out General Motors would be a wide-open invitation for large executive bonuses and not sharing the $34 billion profit it made the last few years with its middle-class workforce.
In fact, they understood that there is no job security for us when GM products are made in other countries, not here in the USA,” said Brian Rothenberg, UAW spokesman. “We all stood up for American jobs.
All we are asking is that GM stand up for us now that they have profited from our sacrifices.”
UAW members stand in the rain at the north gate of Flint Assembly while on strike with General Motors over contract negotiations on Wednesday, October 2, 2019. (Photo: Ryan Garza, Detroit Free Press)
Tuesday evening, the UAW's lead negotiator with GM, Terry Dittes, told union members that GM has not shown a “solid commitment” to building vehicles in U.S. factories. He said that commitment remains one of the union's top agenda items with “little progress to report.”
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But just how realistic is it to expect GM to make production promises in such a highly competitive and volatile global market that is constantly evolving? Some observers say it's very realistic; others say it will require complex trade offs.
In recent contracts, the UAW has listed various plants and the specific products GM intended to build at the plants, often with the note: “This work was originally intended for Mexico,” said Kristin Dziczek, vice president of Industry, Labor & Economics at the Center for Automotive Research.
“So going after what is intended for Mexico is what the UAW is trying to do. But it’s not guaranteed, it’s market dependent and GM might not make those investments,” said Dziczek. “But at all three Detroit automakers, they have overperformed on the jobs and product promises they’ve made in the 2011 and 2015 contracts.”
But they could underperform if the market tanks, said Dziczek.
“It’s not saying you have a job,” said Dziczek. “It’s saying, ‘We intend to allocate these products if the market performs.' It’s the company’s way to say we intend to keep employing you.”
Here is a list of GM's current products and plants:
The number of jobs GM is willing to commit to in the contract depends on how much those jobs will cost, Dzcizek said.
“So it depends on what happens on the other parts of the agreement that GM and the UAW are working toward that will determine what GM will commit to in production,” said Dziczek.
GM declined to comment on Dittes' letter Tuesday to members. But it said it has invested $23 billion in its U.S. manufacturing base since 2009. Its initial offer to the UAW included investing $7 billion more and some 5,400 jobs over the next four years. But the Free Press reported some of that $7 billion will come from joint ventures and only half of those jobs will be newly created.
GM would be reluctant to commit to building all of its future products in U.S. plants because of uncertainties over demand, the pace of developing electric vehicles and self-driving cars and shifting consumer preferences, said Masters.
“The letter from Dittes suggests that solving this predicament is key to ending the strike,” said Masters. “The solution will require that the parties think outside of the box to flow more production to the U.S. for products for which there will be a clear demand.”
Marick Masters, director of Labor@Wayne. (Photo: Marick Masters)
Masters said creating a bigger role for UAW workers in the production of new technologies is one possible solution. Also, GM partnering with other companies to expand its production portfolio to include new technologies is another way to create more jobs, he said.
But this is the “toughest issue” for negotiators, said Erik Gordon, professor at the University of Michigan Ross School of Business.
“It’s life or death for GM,” said Gordon. “But it’s job or no job for the workers.”
“The way the box is to kick the can down the road … in an agreement,” Gordon said. “But the actual issue is a hard one because GM needs manufacturing flexibility more now than it’s ever needed it in the last 50 years. But workers’ needs for job security hasn’t changed in 50 years.”
Gordon said a possible realistic solution would be a two-part commitment:
- GM says it will build a particular product at a particular plant for a set time frame.
- GM makes a general commitment to give preference to U.S. plants for other future products, if it makes economic sense to do so.
“GM can’t just flat-out say all future manufacturing will take place in the United States, unless the UAW says, ‘We will adjust our wages downward, if necessary, in order for the U.S. manufacturer to be competitive,’ ” said Gordon.
And that’s the problem.
“The UAW is saying give us a raise and commit to all future manufacturing being here, when your costs are already line and going to go up,” said Gordon, referring to GM's $13 per-hour labor cost disadvantage against nonunion foreign carmakers who build in the United States.
American flags and UAW strike signs sit attached to a fence outside of General Motors Flint Assembly as workers remain on strike with General Motors over contract negotiations on Wednesday, October 2, 2019. (Photo: Ryan Garza, Detroit Free Press)
But those close to negotiations have argued that only 5% of the cost of a car pays for labor. One person familiar with the UAW's demands said that if GM implemented everything the UAW has asked for, it would add about $150 to the cost of a GMC Yukon SUV.
In the past, GM has agreed to such terms and then “the CEO would have retired in two years,” said Gordon. “That’s how GM got into bankruptcy. But Mary Barra is not expected to retire in two years, so she can’t give away GM’s future.”
Another solution hinges on future wages, Gordon said.
- The UAW could agree to fewer workers who earn higher wages.
- The UAW could agree to more workers who earn lower wages.
“Both sides are placing bets on the future,” said Masters. “What they must do is find a path to good-paying job growth in a changing industry. For this to occur, trade-offs are necessary. There is no easy sell.”
A reasonable demand
But the UAW’s demand is “in fact realistic and vital for the union and certainly for its members,” said Harley Shaiken, a professor at the University of California Berkeley who specializes in labor.
For one thing, there is the concern that new product GM has quietly assigned to Mexico to be built could one day be sold in the United States.
Last month, GM announced that the Chevrolet Onix, a subcompact first launched in China and then in South America, would go on sale in Mexico. It will be built at GM's San Luis Potosi plant in Mexico. While it will primarily be sold within the country, the Onix will also be exported to other markets in Central and South America.
A billboard in front of the General Motors assembly plant says in Spanish “Built here” featuring pictures of the Chevy Aveo and the Chevy Trax, in Villa de Reyes, outside San Luis Potosi, Mexico in January 2017. President-elect Donald Trump sent tweets in early January threatening to impose heavy tariffs on GM and Toyota cars produced in Mexico for the U.S. market. (Photo: Rebecca Blackwell, AP)
“The reality could prove different and GM realizes the sensitivity of an announcement that,” said Shaiken. “That’s the exact vehicle that, if it succeeds, could come to the U.S. or if gas prices go up, whoa! you could be producing that in Mexico and it's being sold here.”
The cost of labor in Mexico is minuscule compared with U.S. wages. GM workers hired after 2007 earn $17 an hour and can move up to $28 an hour over eight years. Whereas in 2016, GM paid workers in Mexico $1.90 an hour, said Shaiken.
“You don’t buy a Chevy Blazer earning $1.90 an hour,” he noted. GM builds the Blazer at its Ramos Arizpe plant alongside its top-selling SUV, the Chevrolet Equinox.
High wages boost economy
While the UAW is open to building electric vehicles and autonomous vehicle at GM’s U.S. plants in the future, union leaders see the lucrative jobs for the foreseeable future in building traditional vehicles, said Shaiken.
Indeed. The Free Press reported Monday that the union was seeking a stronger guarantee that GM will build traditional vehicles, as opposed to electric or autonomous cars, in U.S. plants. Barra has said GM envisions an all-electric future and more self-driving cars.
That vision is at odds with the UAW's desire to ensure job security.
“GM is not interested in cars in the future,” said a person close to the negotiations. “We’re still a ways away from the electric vehicles and the autonomous vehicles. As you go to the electric vehicles and autonomous vehicles, they don’t take as many parts and less manpower to assemble.”
UAW members want GM to be a competitive company that provides future jobs, said Shaiken. But that can happen with competitive wages too. He said the U.S. auto industry has succeeded by paying the highest wages in the world. He noted that German automakers pay significantly higher labor costs and deliver big profits.
“GM has a highly skilled, experienced and motivated workforce in the U.S. and it’s shown the ability to make very high profits in a high wage rate,” said Shaiken.
GM has made $35 billion in the last few years, he said, and 95% of those profits come from the United States, which is crucial to GM’s future success.
“This could be a very long and costly strike if it deadlocks over this issue,” said Shaiken. “When you do the production here, the high wages that are paid translate into a higher purchasing power and that underlies a consumer-driven economy.”
Contact Jamie L. LaReau: 313-222-2149 or firstname.lastname@example.org. Follow her on @jlareauan. Read more on General Motors and sign up for our autos newsletter.
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