Why GM strike is expected to be short-lived

September 18, 2019 11:34
GM workers want the automaker to share a bigger share of its profits with the employees, among other demands. Photo: Reuters

Forty-nine thousand workers of General Motors (GM) went on strike in the US from Monday, the biggest protest by the United Automobile Workers union (UAW) since 2007, amid a dispute over contract negotiations and factory relocation moves. 

The 84-year-old UAW has 390,000 active members. GM now has around 53,000 workers in US, and over 90 percent are UAW members.

GM and UAW negotiate a deal every four years, but the two sides have so far failed to reach a new agreement as the last deal expired on September 14.

A key point is that GM intends to close two assembly factories in Ohio and Michigan, and set up new facilities in southern states where the union is less powerful.

Assembly factory is where workers assemble different parts to make a car. This is the most labor-intensive part of the car making process, and hence the main battlefield between GM and union.

Tesla founder Elon Musk once targeted to lift the automation assembly ratio of Model 3 to above 70 percent, only to discover tons of problems and was later forced to rely on workers again.

UAW claimed that the union had helped GM ride through difficult times after the 2008 financial crisis, when the automaker was on the brink of bankruptcy. However, “after years of tirelessly helping GM reach record-level profits….GM refuses to give even an inch to help hard-working middle-class families,” the union complained.

GM posted a net profit of US$42.8 billion over the last four years.

However, analysts believe GM’s improved profitability was the outcome of its globalization strategy. The firm's American factories still lag in terms of productivity.

Currently, GM has 180,000 workers worldwide, including 58,000 in China. The labor cost of Chinese workers is just around one third of their counterparts in the US.

Talks are still going on. But it’s widely expected that the protest will be short-lived, as most American workers live paycheck to paycheck. UAW only provides them US$250 subsidy per week during the strike.

This article appeared in the Hong Kong Economic Journal on Sept 17

Translation by Julie Zhu with additional reporting

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Hong Kong Economic Journal columnist