The UAW-GM strike lasted 31 days before a tentative agreement was reached. It is unusual for work stoppages to last this long. Usually, each side has an idea of what the other will accept, which leads to an agreement being reached quickly. Why go through a prolonged strike, costing millions in lost wages and profits, only to reach that same agreement?
Prolonged work stoppages occur because there is little middle ground and thus, each side wants the other to capitulate. The UAW’s requests are clear: now that General Motors is profitable, they want the company to undo concessions that were made to save the company in bankruptcy. These include undoing the two-tiered wage system, moving temporary workers to permanent status, and keeping plants open that are slated to be idled. The UAW would like to return to the pre-2008 status quo.
The $10.8 billion in profits GM earned in 2018 masks some underlying weaknesses. In 2008, the company had a 22 percent share of the U.S. new vehicle market. This slid to 19 percent in 2009 during bankruptcy and continued to slide post-bankruptcy to 17 percent today. This loss of market share represents a loss of about 875,000 vehicle sales per year. Consequently, many of GM’s plants are underutilized, with the majority of assembly plants running at under 80 percent capacity. Compounding this issue is that at $63 per hour, General Motor’s labor costs are $13 per hour higher than its nonunion competitors.
Much of the profit GM earns is fueled by sales of pickups and SUVs. Even though these vehicles are extremely profitable, they are sensitive to gasoline prices. Light truck sales, which include pickups and SUVs, declined in the mid-2000s when oil and gas prices approached record-high levels, while car sales remained relatively unchanged. Gas is currently cheap by historical standards, which has fueled record-high light truck sales and a decline in car sales. GM recently made the decision to scale back car production and focus on truck and SUV production. Even though this increases profit in the short-term, it leaves the company vulnerable to a future spike in oil and gas prices. If pickup and SUV sales decline again, GM’s profits will take a substantial hit.
Traditionally, the UAW has been successful in getting concessions out of GM during work stoppages. However, these concessions helped put the company on the path toward bankruptcy. The 1998 strike cost the company $2 billion in lost profits during a strong economy. Previous strikes, which won union members the right to retire after 30 years with a pension and benefits, resulted in legacy costs and ultimately resulted in bankruptcy. The auto industry bailout was politically unpopular in the other 49 states, so General Motors cannot expect another one in the next recession. Even though General Motors has never “won” a strike against the UAW, this might explain why they took a harder line and prolonged this one.
