Rod Meloni: Q&A on day 3 of the UAW-GM national strike

UAW union members form a picket line on Sept. 17, 2019. (WDIV)

DETROIT – While the watched pot never boils, the activity around it is at high heat.

The pot here, of course, is a new UAW-GM national contract. When we left off Tuesday, GM had put the rank and file on COBRA. You know, that high cost health insurance you buy when you lose your job. With the stroke of a pen, it forced the union's hand by making it pay the multi-million dollar-a-week tab. There is no question that's a provocative decision. Yet, it came after GM viewed the union's actions as equally provocative. GM did what any domestic three automaker does in a national contract negotiation; submit a substantive offer shortly before the deadline, expecting the union to extend the contract.

The UAW did not do this. It instead opted to allow the contract to expire and announce a national strike, shutting down the entirety of GM's U.S. operations. Then, the union went on to publicly admit this strike that didn't have to happen, saying roughly if only GM had ponied up a few hours earlier. Well, GM decided without a contract, it didn't have to pay for member health care anymore. Now that both sides are shaking off figurative bloody noses, they are incentivize to wrap up this costly strike quickly.

But provocative actions come with emotional consequences. Outside the Ren Cen on Wednesday, another rowdy picket line cropped up. UAW Local 163 member Stephanie Carpenter fumed about the COBRA decision and called it "dirty negotiations" going on to say, "and no we are not happy about it!" The UAW itself put out its own highly charged statement: "GM's failed attempt to hurt our members and force us into a bad agreement was cold, heartless and immoral. One minute they say they care about their workers and next, GM is cutting off people's lifeline.  We will not allow our members and their families to experience the added burden of worrying about their health coverage while on strike. We are united. We're organized. And we are in solidarity as we fight for a strong deal that provides middle-class wages, affordable health care, job security, a fair share of GM's record profits and a better deal for temporary workers."

The company didn't elaborate any further Wednesday than it did Tuesday. Its statement about the COBRA decision read: "We understand strikes are difficult and disruptive to families. While on strike, some benefits shift to being funded by the union's strike fund, and in this case hourly employees are eligible for union-paid COBRA so their health care benefits can continue." By not returning fire Wednesday, GM appears ready to resume the traditional radio silence during national negotiations.

Now, there are reasons outside of the supposed heartlessness and immorality GM would do such a thing. Former GM Contract negotiator and labor consultant Arthur Schwartz Ph.D. told Local Four today: "The contract is over, so they have no obligation. The company's position is they have no obligation to provide health care and the contract expired and the union did not extend the contract." He added, "It seems like the union was determined there was gonna be a strike no matter what and that makes it hard to bargain. It's very easy to take people out on strike and tell them to go on strike. It's a lot harder to bring ‘em back and that's because expectations go up." Schwartz also offered some perspective on the oft-heard claim the UAW did not prosper while GM made record profits. He said Wednesday that, "The average GM employee got $45,000 in profit sharing over the last four years and if you count signing bonuses and lump sum payments it's over $64,000."

The reason the UAW opted for a national strike is to shut down the entire U.S. operation, cost the company a lot of money to force a quick end. One of the ripple effects of this strategy is it shutters component plants that ship parts to other GM facilities in Canada and Mexico. Today we saw the first domino to fall. GM laid off 1,200 line workers at its Oshawa Assembly plant because it depends on parts from the U.S. and the parts supply dried up. Expect more of this in the days ahead. This we know because the just-in-time parts program sets all this up. We also have been getting work smaller suppliers are starting to lay off employees because GM isn't needing their parts. We heard from the Original Equipment Suppliers Association CEO Julie A. Fream, who answered the obvious questions:

Q: What supply issues are expected to occur during a strike, based on past strikes -- will GM suppliers experience a backlog of inventory?

A: If the strike is a few days, there will be minimal effect on suppliers.  If the strike goes more than a few days, supplier facilities will look to rebalance plant workload to products for other customers, if possible. If a supplier plant is dedicated to supplying GM, they are likely to curtail production after a few days.  Suppliers generally won't build more than a few days of inventory.

Q: Is it business as usual for suppliers now, and if so, how long will that last. Days? Weeks?

A: It would be business as usual, for next day or so.  After that, most plants will stop production on GM products and rebalance production to the extent possible.

Q: How long would the strike have to go before shipments would be stopped?

A: This is dependent on each supplier.  Some suppliers ship "just-in-time" sub-assemblies to the GM assembly line, with almost no inventory in the GM plant. These lines would stop production within a few minutes or hours.  Other products have a much longer transit time and will continue to be built for several days before the supplier plant makes significant adjustments.   By the end of the week, if all GM production remains on strike, the vast majority of North American supplier plants shipping product to GM will need to adjust their production schedules.

Q: If shipments are stopped, would it mean that suppliers would have no choice but to start laying off workers themselves?

A: Facilities with multiple customers may have an opportunity to rebalance other customers' production to support higher than usual production requirements from other customers.  Suppliers may use this time to perform maintenance, provide employee training or other types of required employee activities.  Depending on the length of the strike, some plants may decide to put a reduced work schedule in place.   For most suppliers, laying off workers would be a last resort, particularly in this time of low unemployment.

Last Tuesday night, negotiators knocked off early, around 7:30 p.m. Wednesday, they started early, around 7 a.m. We are hearing there has been good progress throughout the day. We will still look to hear whether the negotiators are going around the clock, pushing through fatigue to end this walkout. So far, they aren't there. That watched pot sure is frustrating!

About the Author:

Rod Meloni is an Emmy Award-winning Business Editor on Local 4 News and a Certified Financial Planner™ Professional.