Auto-Industry Leadership Goes On Hot Seat As GM Workers Strike Nationally

At the leadership level, the national strike that began today by 46,000 unionized auto workers at General Motors plants pits one of the most confident and accomplished car-company chiefs in CEO Mary Barra against an embattled United Auto Workers president in Gary Jones.

And while at first glance, there doesn’t seem to be a reason the quadrennial contract talks between GM and the union had to break down into a walkout that began at 12:01 a.m. today, the drama at the top of each organization may explain a lot about why it occurred anyway.

Jones and colleagues are embroiled in a deepening federal criminal investigation that keeps implicating more top UAW officials, so a Wag the Dog scenario – in which a leader fabricates a bonfire to distract attention from a major scandal involving him – is possible. Meanwhile, Barra is casting GM’s final contract offer to the union as a generous next iteration of a relationship that has gone basically well during the industry’s decade-long boom, even taking the unprecedented step of sharing the broad outlines of the company’s proposal with union membership and the general public.

Meanwhile, there’s the strike to deal with. It’s the first national walkout by the UAW since 2007, before the global financial crash and Great Recession that involved a huge recasting of the unionized Detroit Three automakers, including bankruptcy and government revival by GM and Chrysler, now Fiat Chrysler. UAW members at 55 GM facilities across the United States didn’t show up today, and no new talks were known to be scheduled.

While UAW members each were entitled to $250 a week during the walkout from the union’s $800-million strike fund, GM was estimated to be losing about $400 million a day from the shutdown of its North American production, according to an estimate by the Center for Automotive Research. While GM has been scaling back output of sedans as it moves to discontinue a handful of models, and while it has closed some big plants this year, the company remains strongly profitable because of robust sales of its high-profit pickup trucks and sport-utility vehicles.

GM has a 77-day supply of cars, trucks and SUVs nationwide, well above the industry average of 61; about 60 days is considered the ideal level by companies and dealers. But the huge Chevrolet Tahoe and Chevrolet Suburban, for instance, are in short supply.

“If a strike occurs, GM has enough inventory on the ground so as not to hinder sales in the short run,” said Michelle Krebs, analyst for Autotrader. “Strong sales in August helped trim overall industry inventories to the lowest level in three years.” So only a strike of a few weeks or more would pinch GM significantly, as customers would begin to experience a restriction of choices in options and colors.

Meanwhile, there’s the issue of settling the walkout. UAW leaders – though not Jones personally – are casting the action in typical human terms. “We are standing up for our  members and for the fundamental rights of working-class people of this nation,” said Terry Dittes, the union’s GM department vice president.

But the walkout also could be aimed at rallying the union rank-and-file as federal investigators close in on the very top leadership of a union whose proud tradition mostly has been corruption-free over the decades. So far, the probe has uncovered UAW officials using member dues to rent villas in California and rounds of golf at prominent West Coast courses, among other abuses. It began with the conviction of an official in the UAW’s Fiat Chrysler department, and intensified last week with corruption charges against Vance Pearson, head of a regional union office in Missouri that Jones led before taking the union’s top office last year.

As for Barra, she has been leading GM on an increasingly proactive pare-down over the last few years, not only shedding the U.S. plants but also most of the company’s presence in Europe. And while sales of trucks and SUVs are keeping GM in the pink for now, challenges are looming in the face of trade disputes, a possible recession and the cost of developing electric and autonomous vehicles.

So GM cast the proposal it made public over the weekend as a reasonable enhancement of union members’ compensation at a time of challenges for the company. It includes higher pay, more than $7 billion in new U.S. investments, enriched profit-sharing, retention of existing health-care benefits, an $8,000-apiece “ratification bonus” for approving the new contract, and what it called “solutions” for some of the shuttered plants.

“We presented a strong offer,” GM said in a statement, “and it is disappointing that the UAW leadership has chosen to strike.” The company’s goal, it said, “remains to build a strong future for our employees and our business.”

But until Barra and Jones can come to a meeting of the minds, that goal must remain on hold.

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