$2 Billion and Counting…The increasing cost of the UAW Strike

Stuck in the throes of a strike now in its fifth week, the United Automobile Workers (UAW) and GM are continuing negotiations with no end in sight to the. After talks stalled a few weeks ago, they have resumed. The economic effects, however, are being felt in Michigan and throughout the nation.

Aside from the more than 50,000 UAW GM workers who declared a strike on September 16, suppliers around the country are reporting layoffs of almost 160,000 employees, and that number stands to climb even higher as the work stoppage continues. In fact, since the initial strike began, UAW members working in the Mack Truck divisions have also taken to the picket lines as of October 15.In Michigan, the economic drain has already been damaging. According to the consulting firm Anderson Economic Group, the state has lost more than $12 million in income tax revenue alone.

According to GM spokesman Dan Flores, GM has incurred losses of over $1 billion and that number continues to rise. Additionally, parts shortages have had a domino effect and forced GM truck and transmission plant closures in Silao, Mexico, where more than 6,000 workers have been furloughed. The company’s losses are mounting to the tune of $82 million per day.

The Silao plant shutdown puts more pressure on GM to bring an end to the strike, but in agreeing to end the standoff the company has to calculate its short-term losses against the extra costs that could come from a settlement, according the Center for Automobile Research, a think tank located in Ann Arbor, Michigan.

In a report to investors, JP Morgan analyst Ryan Brinkman confirmed GM’s billion-dollar financial loss thus far. Notably, further plant shutdowns mean disruptions in GM’s supply lines for its top-selling, light-duty Chevrolet Silverado. Other plant closures include an engine plant in Mexico, and an assembly plant in Canada, each of which are directly related to the strike and are bound to cause further havoc in the supply chain.

Brinkman wrote that GM could recover some of its lost profits by increasing production in the fourth quarter once the strike is over, but the company likely will be limited in the production of vehicles that are already in high demand, or where models are being launched, such as the Silverado or the Sierra pickup trucks. Over the short term the company is certain to continue its losses, but it must consider if the things it gives up are worth paying for in the decades to come.

But it’s not simply losses of a financial nature, because even if the strike ended tomorrow there are long-term consequences for both GM and their parts suppliers; laid-off skilled trades workers can easily transition to other jobs as a result of the current low unemployment job market. These companies are challenged: can they get the laid-off workers to return to their old jobs, or will they lose them to other industries.

There are several primary reasons that the workers went on strike when their contract expired, not the least of which is job security. According to Terry Dittes, UAW Vice-President, “We have made it clear there is no job security for us when GM products are made in other countries for the purpose of selling them here in the U.S.A.” The negotiations turned ugly, and the union called for “basic decency” as GM began shifting health insurance costs to the union.

While the UAW sought to have GM pay for health insurance through the end of the month, the automaker has said it is now halting those payments as a result of the strike. The move places additional pressure on the UAW with a further drain on the union’s strike fund.

Another reason for an extended delay in a contract agreement is GM’s desire to transition away from the traditional gasoline models to electric and autonomous automobiles. The union also views this as a threat to r job security and prefers the status quo. Meanwhile, GM has reportedly made a confidential offer to the union, but as yet there’s been little movement.

Union leadership recently announced an increase of 10% in strike pay going from $250.00 per week,  to $275.00, and members may now seek outside employment to supplement that income so long as they fulfill their time on the picket lines.

The members have a broad range of support, especially from the NAACP Detroit Branch. President Rev. Dr. Wendell Anthony issued a statement saying, “We contend that one of the most profound ways for any worker to maintain his or her dignity is to pay them based on the work that they perform, the value that they hold and the progress that the company has made. Let us all stand in solidarity with the workers.”

In addition, UAW workers also received backing from the Wayne County Commissioners who recently approved a resolution of support for the union members. The resolution strongly backs UAW members in their efforts to attain a fair and equitable contract with GM and calls on both sides to continue negotiating. “It was important to take a stand now, when workers begin receiving strike pay substantially below their regular wages,” said Commissioner Diane Webb (D-Livonia) who introduced the resolution. “These people are standing up not just for themselves but for all working people.” Commission Chair Alisha Bell (D-Detroit) called on the public to help workers by dropping off food and personal care items at local UAW halls.

Neither GM nor the UAW responded to The Chronicle’s request for comment citing the sensitivity of the negotiations.

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