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Lengthy GM strike "threatens to put everything in a spiral"

GM strike leaves some workers without a job
GM strike leaves thousands of outside workers without a job 01:53

While the United Auto Workers and General Motors are back at the bargaining table this week, the toll from the longest nationwide strike against GM in more than a decade is accelerating — for the company, for more than 100,000 workers at GM and its suppliers and for local economies in several states. 

As 46,000 UAW members walked picket lines for a 23rd day Tuesday, economists and analysts predicted the labor dispute would have longer-term ramifications for the auto industry and organized labor. Shorter term, the damage to GM — losing an estimated $450 million a week — depends on how quickly the automaker can get its operations up and running once an agreement is reached.

"Americans won't wait forever to get the car they want, and taxpayers aren't bailing out GM again," Patrick Anderson, CEO of the East Lansing-based Anderson Economic Group, told CBS MoneyWatch. "This is not only threatening the economy of Michigan, but the ability of General Motors to sell cars with UAW labor in the United States."

"A turn for the worse"

The length of the strike now threatens to hurt auto dealers performing repairs as parts get scarcer and selling from a shrinking selection of vehicles, a scenario that could harm the GM brand even after a contract agreement is reached. 

"I'm particularly concerned that we'll see damage in the retail side," Anderson said. "There's no two ways around it — the fourth week in, the damage grows."

After talk of a possible breakthrough in negotiations last weekend, the UAW on Sunday said it had rejected another contract proposal. Negotiations, it warned, had taken "a turn for the worse." 

Auto workers strike against General Motors for better pay and benefits 01:53

GM is "working hard to reach an agreement that builds a stronger future for our employees and our business," a company spokesperson said, declining further comment.

The negotiations, which resumed Monday, center on wages, health care and GM's use of temporary workers.

"The strike has gone on longer than almost all analysts anticipated, and reflects that GM has taken a tough line," according to Harley Shaiken, a labor relations professor at the University of California at Berkeley. 

"The longer it lasts, the more severe the economic impact," Shaiken said.

Auto layoffs up nearly 200% in 2019

The standoff exacerbates layoffs in a sector that's already seen pink slips piling up, according to Challenger, Gray & Christmas, a recruitment and outplacement consultancy that tracks job losses. 

Auto companies announced 4,912 job cuts in September and 41,060 so far this year, an increase of 194% from the 13,963 layoffs announced through September 2018, according to Challenger data. 

"Cuts in this sector will likely continue to rise, especially if the strike at General Motors continues and the fallout impacts suppliers," Andrew Challenger, vice president at the Chicago company, said in a statement.

GM on Monday shuttered an engine plant in Ramos Arizpe, Mexico, laying off another 415 workers and adding to the tally of non-union workers impacted by the stoppage. 

Loss of income for GM and non-GM employees leads to less consumer spending at local retailers and restaurants, Anderson said, estimating the walkout resulted in $412 million in lost direct wages from strikers and suppliers during the first three weeks. According to his tally, the total 149,000 workers impacted by the strike include 74,000 hourly and salaried GM workers and 75,000 non-GM, non-UAW workers, with some of the pay cuts coming in the form of reduced hours rather than outright layoffs.

""People aren't going to restaurants"

The loss in local  income is a major concern for James Fouts, the mayor of Warren, Michigan, home to GM's Warren Technical Center, an engineering and design hub that employs 20,000 mostly white-collar workers. In addition, GM's Cadillac luxury brand is based in Warren, not far from the tech center. 

"People aren't going to restaurants the way they used to — this threatens to put everything in a spiral," said the mayor, who added that the town was having to spend extra money to have police officers protect entrances to the local GM plant and contend with related traffic problems.

A quarter of auto production in the U.S. takes place in Michigan, with the car industry representing about 8% of the state's GDP. 

"In Michigan and Ohio, job growth in 2019 has basically been zero," said Charles Ballard, an economics professor at Michigan State University in East Lansing. "Barring some unexpected good news, employment growth will be negative in Michigan for the year."

Fewer workers required

It's a wrenching situation for the auto industry, whiplashed by global competition, changes in consumer preferences and the fact that it "takes a lot fewer workers to make a car than it used to," said Ballard, who noted the parking lot at the GM's Lansing Delta Township assembly plant nearby is smaller than the one it replaced. 

Should Michigan slide into recession, surrounding states would feel the impact. States with auto factories, including Ohio, Illinois, Missouri and Tennessee, also are vulnerable. 

That said, while the GM strike is "another point of uncertainty" for the U.S. economy, the potential nationwide damage these days is less so than in years past, given the diminished size of the company, Shaiken said. "It's not the GM of half a century ago that employed 400,000 auto workers in the U.S.," he explained. 

Biden and Warren join striking GM autoworkers 01:48

Still, the GM of today is racking up weekly losses of about $450 million, according to Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research. She estimates GM's losses at more than a billion dollars so far. 

The UAW has a roughly $800 million fund to help subsidize striking workers, while the walkout is costing the union about $11.5 million a week. In principle, the labor group could afford to keep the strike going for more than a year, Dziczek said. The question for GM is at what point does the cost of the strike — in lost sales, reduced market share and relations with workers — exceed the cost of meeting the union's demands, she added.

"If GM drives a hard bargain and workers don't get much, some potential buyers might think, 'GM treats its workers like dirt, so I'm going to buy a Ford,'" Ballard said. He cited a Gallup poll showing a majority of Americans now have a more favorable view of unions than they did several years ago.

"Unsustainable for both sides"

"Both sides are dug in, but that money is going to wear out after awhile," offered Fouts, whose father was a UAW member. "The root of the issue is everybody has to come to the agreement that we want to stop jobs from going overseas."

The strike is a "microcosm of the situation across the board in the United States," Ballard said, citing increased income inequality across the country and the fact that production line workers no longer make the inflation-adjusted wages of 40 years ago. "It sounds to me like workers are willing to suffer the short-term consequences of a strike if that's what it takes. I don't think autoworkers are the only ones who feel like they've gotten the shaft over the last few decades."

GM and the UAW knew they were gearing up for a big fight, Dziczek said, with union members looking for payback for past concessions from a formerly bankrupt company that is now quite profitable and the automaker looking at the risk and expenses ahead as it adapts to electric and autonomous vehicles and an uncertain economic climate.

In the long run technological advances increase the overall standard of living and makes the economy grow, "but it you're the guy who lost his job to a robot, it's not so good for you," Ballard said.

The contract dispute is "unsustainable for both sides right now," Anderson said. Both the UAW and GM should be looking to "avoid a scenario in which the first to bleed out is the one to accept the other's offer" because their interests are intertwined," he said, arguing that the future of both depends on their ability to make and sell cars profitably. 

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