General Motors Death Watch 32: How to Get A Head in Business

Robert Farago
by Robert Farago

Today's 11th hour deal between GM and the Canadian Auto Workers (CAW) is yet another example of The General's singular inability to take the bold action needed to avoid bankruptcy. Instead of reasserting its ancient right to fire workers it doesn't need, GM once again agreed to subsidize idled employees. The General will point to the 1000 jobs sliced from its Canadian operations, but the cuts will be achieved through attrition. CAW President Buzz Hargrove knows what's what, and he isn't afraid to spell it out: 'People will either have work or wages."

The idea that an auto worker deserves full salary for not working is insane. But it's not half as crazy as subsidizing the concept with shareholders' money. In case you thought, well, at least GM exchanged impregnable job security for some benefit reductions, forgeddaboutit. The General's 16,400 Canadian blue collar workers also received a 3.5% pay increase over the life of their contract AND increased pension contributions. Industry experts estimate that the pension top-up will cost GM an EXTRA $179m during the three-year period.

As a warm-up for the '07 negotiations with the United Auto Workers (UAW), GM's Canadian caving expedition is roughly equivalent to a prize fighter preparing for a title bout by working on his tan. The General's crack negotiators couldn't even get CAW assembly line workers to reduce their break time by two minutes. Of course, GM's abject failure to stem the spurting artery of red ink known as "legacy costs" is neither new nor surprising. Rabid Rick Wagoner and his minions have continually staked their fortunes on changing the bandages covering the company's wounds, rather than radical surgery. And by surgery, I mean a strike.

There's no question that a tough stance by GM against its Canadian workers would have triggered a walkout. It's equally true that a strike would have severely dented GM's US operations. In 2004, The General's Canadian factories built 824,619 transmissions, 682,000 engines, 603,660 cars, 320,055 trucks, 24.6 million parts and shipped 117,022 tons of steel. Even if the UAW didn't walk out in sympathy with their neighbors to the north, the disruption to GM's food chain– and its effect on beleaguered suppliers like teetering Delphi– would have been catastrophic.

But survivable. GM's Gulfstream-friendly execs wimped-out because A) they're chicken and B) they don't think they need to draw a line in the sand, ever. Simple logic will convince the UAW to surrender members' entitlements. Shrewdly enough, the UAW has catered to this delusion by commissioning an "outside review" of GM's financial health. GM's leaders believe the UAW will read the report, see the writing on the wall and take one for the team. The General's generals figured a Canadian showdown would have put the UAW in the wrong mood for the conciliations to come.

Hello? Am I the only one actually listening to Big Ron Gettelfinger? When asked about the possibility of surrendering union benefits to ensure GM's continued existence, the UAW Prez said: "There comes a point in time where you think, 'We either move forward or we all go down together…' You can't just take, take, take, take, take and that's the mood that's out there right now.' I'm no labor relations expert, but Big Ron doesn't sound like the kind of guy who will extend the hand of friendship across a bargaining table in the name of mutual self-interest. I mean, if Big Ron thinks he's being abused NOW, what hope is there in '07?

None. GM should have forced the CAW to strike. Considering the inescapable fact that GM will eventually face a UAW strike (and/or Chapter 11), it would've been better for The General to have its labor showdown start in Canada. From a PR point-of-view, Americans would be a lot less likely to support a strike on behalf of Canadian workers than one mounted on behalf of UAW employees. This is also a time when GM's inventories are low, and the company's prospects dim. Better to have it out now, heading for the winter doldrums, than later, when sales will be there for Toyota's taking.

A crippling strike would've also offered GM an excellent opportunity to kill half its brands– and blame someone else. But hey, who am I kidding? You only have to look at the timing of the Solstice, HHR or any one of the company's "new" gas-guzzling SUV's to know that the word "proactive" simply isn't in The General's vocabulary. They're used to playing defense. That's what they'll do until the opposition rips off their head and uses it for a football.

Robert Farago
Robert Farago

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