Popular models hit by walkouts
By Katie Merx, Business Writer Detroit Free Press
May 6, 2008
A strike was launched Monday by the UAW at a General Motors Corp. manufacturing plant in Kansas that makes the new Chevrolet Malibu.
This walkout, coupled with a continuing strike at its Lansing Delta Township crossover assembly plant, could drain the automaker's inventory of its fastest-selling car and crossovers in as little as a month.
Industry experts say the work stoppages put the union in a position of power.
The UAW, negotiating local contracts at both plants, is hitting GM at two of its most important North America plants in a move that some say is meant to press GM to facilitate resolution of the American Axle & Manufacturing Inc. strike.
UAW President Ron Gettelfinger has said the strikes are about local issues not American Axle. And union leaders in Kansas City, Kan., said they walked out because the union and GM remain "far apart" on a variety of local contract issues, including seniority, job selection and the use of outside contractors.
Disrupting production of the Malibu, Saturn Aura and GM's popular Buick Enclave, GMC Acadia and Saturn Outlook crossovers -- at a time when consumer demand is shifting to smaller, more fuel-efficient cars and crossovers -- is a move that could really hurt GM, analysts and workers say.
GM's labor spokesman Dan Flores said: "We are disappointed that UAW Local 31 ended the bargaining and took strike action at Fairfax. We remain focused on reaching an agreement as soon as possible."
The newly redesigned Malibu, the fourth best-selling midsize sedan, has been rising up the charts since its launch in November, with an average transaction price $4,000 higher than the previous model. Dealers say the new sedans are often sold even before they arrive on lots.
"The vehicles under threat from the strike are some of the most critical for GM right now," Jesse Toprak, an analyst at Edmunds.com, said Monday.
The automaker manufactures the Chevrolet Malibu and Saturn Aura in Fairfax. It has only a 21-day retail supply of the Malibu and a 23-day retail supply of the Aura, according to CNW Marketing Research President Art Spinella.
Delta Township's crossover vehicles are in short supply as well, Spinella said, with the Buick Enclave at 36 days retail supply, the Saturn Outlook at 41 days and GMC Acadia at 53 days.
Delta Township workers are in their third week of a strike, after walking out April 17.
Industry analyst David Healy of Burnham Securities said Monday: "The union has got 'em where they want 'em."
The question remains: Where is that?
Motives debated Healy is among those who say the local union strikes against GM were originally designed to pressure GM to facilitate a better deal in an ongoing UAW strike of American Axle. The supplier wants to severely cut wages for its hourly workforce.
The two sides are believed to be discussing a deal that includes buyouts and buy-downs -- onetime lump sums of money offered in exchange for the lower wages.
Now, Healy said, with leverage at what are two of GM's most important U.S. manufacturing facilities, he believes the UAW also is hoping to win better local contracts.
A question of respect But others say the strike is about winning respect and fair work rules.
"I think it's a tad far-fetched to think the UAW would take GM workers out in Fairfax to resolve the American Axle strike in Detroit and Buffalo," Richard Block, a professor and labor expert at Michigan State University, said Monday.
Delta Township worker Sam Jennison said he doesn't believe the GM strike has anything to do with American Axle, but he does think the added blow of a strike at Fairfax should speed a settlement of local contracts.
In addition to strikes at GM's Fairfax and Delta Township plants, union locals in Warren, Wyoming and in Mansfield, Ohio, have threatened to strike over local contracts.
"With the hit to Malibu production, I think that will make us move a little faster," Jennison said. "GM can't afford to have all of its hottest sellers down."
While GM may have some ability to shift some production of the Malibu to its Orion Township plant, it won't blunt the strike's impact.
Orion Township produces both the Malibu and the Pontiac G6, and analysts say it won't be able to make up for production lost in Fairfax.
Workers say GM already has been running overtime for weeks and producing more than 1,000 vehicles daily in Fairfax and Orion Township.
"This will affect retail sales on the Malibu very quickly," Healy said. "Probably, the incremental profit on" the Malibu "is about $4,000 each. So if you're losing 1,000 vehicles a day, that's $4-million-a-day hit to their profit, which hurts because they're in a loss position, because of the weak sales environment. My own feeling is this will be settled very quickly."
Fairfax worker Sheila Collins told the Kansas City Star she certainly hopes that is the case.
"The Malibu is doing so well, it's just hard to believe GM would let this happen," Collins said. "It feels like, 'Here we go again,' but we've got to have job security at the local level."
The UAW struck GM for two days in late September before settling its national agreement.
Workers who talked to the Free Press on Monday said the strike against the Malibu plant comes at a time when gas prices and a weak economy are driving consumers to favor cars over trucks and that means the strike will be resolved quickly.
Monroe barber Gary Rogoff, who bought a new Malibu in January, said hitting that plant seems like the kind of move that would facilitate the UAW's case.
Rogoff, 59, said his Malibu is the first car he's ever owned that strangers regularly stop to ask him about.
"Last week I had three people stop me to ask how I like it," Rogoff said.
J.D. Power & Associates says the Malibu was the fourth best-selling midsize sedan -- after the Toyota Camry, Honda Accord and Nissan Altima -- through the first four months of the year.
Whatever the motives of the strike, Rogoff said, it sounds like the UAW found the right pressure points to get GM's attention.
"It's the only car GM can't keep up with," Rogoff said. "It sounds like this is a way for the UAW to get something done."
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