GM strike settlement means ‘no more excuses’ for automaker

The end of the GM strike could be just the beginning for the automaker and its union, and create a blueprint for other U.S.-based automakers. Or, historians will look on this strike as the beginning of the end of the importance of the American automobile in a global marketplace. Most experts agree on one thing: General Motors is out of excuses for being able to produce a financially competitive...
By Plant Engineering Staff October 15, 2007

The end of the GM strike could be just the beginning for the automaker and its union, and create a blueprint for other U.S.-based automakers. Or, historians will look on this strike as the beginning of the end of the importance of the American automobile in a global marketplace.

Most experts agree on one thing: General Motors is out of excuses for being able to produce a financially competitive car in the global market. The legacy health care and retirement costs were negotiated into the hands of the United Auto Workers as part of the settlement of the two-day strike, and the Chicago Tribune reported that analysts believe that part of the deal narrows the cost gap between GM and Toyota by about $1,000 per vehicle, dramatically closing the gap with Toyota. The Center for Automotive Research in Ann Arbor, MI, estimates that shifting GM’s $50 billion retiree health-care liability to the UAW and other savings in the contract will reduce GM’s per-vehicle cost for labor and benefits to about $2,300, just $400 more than Toyota’s.

“This means GM doesn’t have a lot of excuses any more,” said Rebecca Lindland to London’s Guardian news service. “They can’t point to spiraling healthcare costs or a disparity in retirement benefits. They have to perform.”

That view was shared by the Detroit Free Press, the hometown paper of America’s auto industry. “As second chances go, they don’t get much better than the agreement reached Wednesday by GM and the United Auto Workers,” stated a newspaper editorial after the settlement. “The key, going forward, is for GM to use its new financial flexibility wisely. Invest it in girding for the future, rather than bailing out the mistakes of the past. And the United Auto Workers, now responsible for providing health care to some 320,000 retirees, has got to manage the risks of that burden carefully.”

CNN quoted Lansing, MI union president Chris “Tiny” Sherwood as saying his members weren’t as concerned about the pension issue as other provisions of the new contract.

“They’re worried about the fact that they’ve eliminated the cost of living increases,” said Sherwood. “I understand why it was done that way though. There’s talk about a two-tier wage system for some new hires. But nine out of 10 haven’t mentioned the (pension costs).”