The General Motors Strike Threatens What Gives GM Life
The GM strike doesn’t just pose the threat of a slowdown to auto production. It also threatens the supply chains that give it global life.
The strike has seen about 49,000 workers walk off of GM plants, with the closure of 12 vehicle assembly plants, and about 33 powertrain and other facilities in nine U.S states.
The union has been fighting to stop GM from closing plants in Ohio and Michigan, arguing that workers deserve higher pay and other benefits after years of record profits for GM in North America.
More importantly, the strike threatens a process that has become essential to auto production - supply chains that have made the car companies more productive and increasingly profitable. Because of GM profits, the UAW is striking - and thereby endangering the very process that has made the profits possible.
Because the supply chain is so closely integrated, Mexican and Canadian plants will soon be unable to continue working because of a shortage of parts. And that could happen quickly, given GM’s use of just-in-time delivery, which means thousands of cars are driving across the borders every day.
And just as U.S plants may soon be unable to feed assembly plants in Mexico and Canada, plants in those countries may be unable to feed U.S facilities.
GM has not said how many days of parts it has in reserve. It would be about two months before cars at sales lots would be affected, the company has said.
The last UAW strike lasted only 17 hours, with little impact on Mexican or Canadian operations. However, a 54-day strike in Flint, Michigan in 1998 shut down much of GM’s North American operations.
It is difficult to overstate the importance of supply chains in fostering the competitiveness and growth of the North American auto industry. Vehicles cross the Mexican and Canadian borders on average about eight times for parts before they are assembled.
The result is an auto industry in which the United States has a smaller proportion of a much bigger pie. The proportion of production has shifted across the Mexican border. But the dispersion of profits and jobs to the U.S economy has actually grown. U.S diehards worried about a decline in the proportion of production should be pleased by the higher overall tally. Since the agreement on NAFTA, North American auto production has increased from 19 percent to 22 percent, a production bonanza for all three countries. Cross-border supply China’s have made that possible. Sealing them off - even temporarily - threatens that.
North American car sakes boomed over the past three years, but are stagnating this year as young consumers put off purchasing them until incomes increase. Meanwhile, GM is trying to hoard its cash in light of its decision to focus on electronic and self-driving vehicles, and the need to meet the upfront costs they bring with them.
The GM strike potentially threatens to bring North American production to a halt - along with the supply chain management that has fostered efficiencies and made increased production possible.
