Sunday, September 22, 2019
The UAW-GM Strike is for the Future - the Future of Detroit
GM and the UAW are battling for the future not only of GM, the UAW, and Detroit, but also the American automobile industry. Detroit is facing an experiential crisis today and foresees a second one in the near future. UAW workers want job security, an increasing share of GM’s profits, wage increases, end of the three tier wage structure, and reopening of the Lordstown assembly plant and continuous of Hamtramck. That is the past – not the future. Detroit’s existential crisis is that Americans have reduced their purchase of sedans, Detroit’s traditional car markets. Sedan sales are down to 30% of the car market with pickups and SUVs’ 70%. “Made in Detroit” sedans, except for Mustangs, chargers/Challengers, Camaros and Corvettes, do not sell in Southern California. Americans are still buying sedans from Japan and Korea and their luxury sedans from Germany and Japan. A combination of high prices and poor quality has driven Detroit out of the sedan market. GM’s roughly $10 billion in profits, as well as those of Ford and Fiat Chrysler, is from pickups and SUVs. Therein is the upcoming existential crisis. Gas prices shoot up; gas guzzling SUV and pickup sales dive. It was $5/gallon gas a decade ago. Detroit collapsed. Chrysler and GM entered bankruptcy. Ford mortgaged everything. Detroit is scared of $6 gas. The collapse of the American sedan market has resulted with excess capacity of 1 million vehicles for GM. Assembly plants have to close. That is the reality for GM and the UAW. The market controls. GM’s workers are living in the past. They talk of the givebacks and concessions they made a decade ago. They had no choice. GM was bankrupt. Let us travel back in time to the two month 1970 UAW-GM strike, which the union won. Both GM and the UAW were at the height of their power. General Motors was by far both the largest and most profitable company in the world. It controlled 60% of the total automobile market, but that figure is deceptive. Cadillac owned the luxury car market. It was the (gold) standard of the industry. The Buick-Oldsmobile-Pontiac divisions dominated the mid-size market, while Chevrolet was the largest seller in the volume class. GMAC produced a full range of trucks, from pickups to big-rigs. GM dominated the motor coach business. GMAC was a money gusher for GM. Frigidaire was a major appliance manufacturer. The Electro-Motive division produced ¾ of the nation’s diesel locomotives. Terex manufactured construction and mining equipment. 500,000 UAW workers went on strike. GM caved because they could afford to. They didn’t have to worry about competition. They had the capital to survive any recession. The UAW was peaking with 1.5 million members. The Detroit automobile industry was roughly 100% unionized. Then came the two Arab oil embargoes of the 1970’s. Gas jumped from $3-4/barrel up to $50/barrel. Many Americans wanted economical cars with good gas mileage. Detroit offered big boats. Toyota with the small, seemingly always blue, Corona and Honda’s Civic caught on: inexpensive, high quality, and high gas mileage. Detroit offered big boats. GM’s leaders made the decision to cut by commoditizing its cars. GM devalued the individuality of its brands, such that they lacked identity. A Buick became a Chevrolet, an Oldsmobile and a Pontiac, and even sometimes a Cadillac. Take the Chevy Trailblazer, give it $2,000 in accouterments and voila, you have a Cadillac Escalade. Even GMC vehicles come off the Chevy assembly line, also with some accouterments. Detroit, especially GM, had trouble designing and building small cars; Corvair and Pinto became infamous. Chevy II, Chevette, Citation and Vega did not help GM’s image. Detroit could not compete on cost or quality – not even today. GM entered a gradual decline from 60% of the market to 17% today. Assembly plant after assembly plant was closed. Hundreds of thousands of workers lost their jobs – blue collar and white collar. Electro-Motive, Frigidaire, GM, motor coaches, Terex gone. GMAC – gone! Oldsmobile – Gone! Pontiac – Gone! Saab – Gone! Saturn – gone! Europe (Opel, Bedford and Vauxhall) – gone! GMAC – down to pickups and SUVs. Buick hanging by a thread with sales of 100,000 and few cars in the pipeline! Buick dealers survive by selling GMC trucks. Cadillac – down to fifth in luxury car sales! Buick and Cadillac survive only because of popularity in China. GM steadily declining from 60% of the market in 1970 to today’s 17%. $11.8 billion in profits can collapse overnight. GM knows it. 2009 – General Motors and Chrysler bankrupt. Detroit is a cycle of riches to rags to riches to rags. How soon the workers forget! The UAW workers want to share in GM’s largess. They received $8,000 each in profit sharing from GM last year. Ford and GM are both spending about $1 billion annually on health expenses. The UAW workers pay 3% of the premiums. UAW membership down to 430,000 members. 49,000 on strike – not 500,000!. The union lost 35,000 members last year. The United Auto Workers is in an existential crisis. Membership diving! Leaders in a corruption scandal! Michigan, Indiana, Kentucky and Wisconsin are now Right to Work states with workers free to leave the union. Ford and GM are going electric, which means fewer parts in cars and fewer workers. Failure means failure for the UAW, an increasing shadow of its former self - sadly. Globalization has been destructive of America’s heartland. The industrial heartland, centered around Detroit, has hemorrhaged jobs. GM’s 5 decades of insipid leadership hasn’t helped. The workers have paid, and continuing to pay, the price for a half century of globalization and bad decisions. The United Auto Workers at its peak built much of the middle class of the Midwest. GM is building for the future. The UAW is living in the past.