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50,000 Union Workers Strike At GM: Here’s What It Might Mean For The Employees, Employer And Economy

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On Sunday, 50,000 United Automobile Workers of America went on strike against General Motors—America's largest automaker. Union workers walked out of their 50-plus factories and facilities across nine states, centered mostly in the Midwest and heartland of America. This is the first walkout and work stoppage to occur in the U.S. automobile industry in over 12 years. 

The union representatives claim that GM places profits before its employees. They are particularly bothered that the employees helped turn the company around after it filed for bankruptcy in the midst of the financial crisis and, ultimately, received a federal bailout—paid by taxpayers—to help extricate GM from financial implosion.   

The union demands higher hourly wages, job security, better healthcare benefits and profit-sharing plan. The union wants GM to limit the use of temporary workers and offer those part-time workers a path toward permanent employment. 

GM asserts that it has offered its workers a substantial offer, including higher pay, profit sharing and a commitment of $7 billion to keep and add new jobs. The company also said it promised a "solution" for two of the four plants targeted for closure.

This is not a clear-cut issue. The U.S. automotive industry is facing incredibly fierce global competition from other car companies, such as Toyota, the Volkswagen Group, Daimler AG, Bayerische Motoren Werke AG (BMW) and a host of other car manufacturers. 

Similar to other industries, automation, robotics and technology are quickly replacing people. With these strong headwinds, the UAW is pushing for more than $20 an hour for entry-level workers, along with top benefits and pension plans. 

GM claims that it is more than generous offering the average hourly employee roughly $90,000 per year, which does not include top-notch benefits.  

The timing of the strike is very curious for two reasons.

UAW officials have been accused of misappropriating union funds—using the money to support lavish lifestyles, including top-shelf liquor, private villas, fancy dinners and golf outings. These funds were intended for the blue-collar union workers at Ford, GM and Fiat Chrysler. 

UAW Region 5 Director Vance Pearson faces charges of embezzlement, fraud, filing false reports and conspiracy and is the first sitting official to be charged in the prolonged investigation, according to the Wall Street Journal

UAW President Gary Jones and former UAW President Dennis Williams have also been implicated. 

Moreover, unions have historically been big Democratic supporters. They have contributed heavily to Democratic campaigns and union members vote for them in extremely high-percentage rates.  

In a recent piece, I discussed the role that politics plays in pushing the fortunes of preferred political parties. It would be reasonable to suggest that the strike—at the beginning stages of the 2020 presidential race—has some political motives behind it. 

Democratic presidential candidates have quickly jumped on Twitter to voice their complete support for the union workers. 

“I'm proud to stand with the hardworking members of @UAW in their fight for fair wages, health care, and job security. @GM should do right by the workers who fuel its profits," tweeted presidential hopeful, Pete Buttigieg, mayor of South Bend, Indiana. 

The other presidential candidates followed suit in their praise for the union workers and condemnation of GM executives. Former Vice President Joe Biden, former Housing Secretary Julián Castro, Sen. Elizabeth Warren, D-Mass., Sen. Bernie Sanders, I-Vt., and Sen. Kamala Harris, D-Calif., also tweeted their support to the workers. 

If this strike drags on, it may hurt the economy, which is President Donald Trump’s key claim to success. Specifically, he has pushed for manufacturing to return from abroad to the U.S. His Democratic opponents can point to the work stoppage as a failure of his presidency and the need for a Democrat in the White House. 

The last strike in 2007 caused GM to lose over $600 million. It has been reported by Dan Levy, an analyst at Credit Suisse, that this current strike may cost GM about $50 million per day due to lost production. GM’s shares have fallen about 3% Monday morning. 

With intense global competition and the possibility of GM hemorrhaging money, it looks like everyone involved will end up losing. 

It has been demonstrated in other industries that once worker wages rise to a certain level, companies will invest in technology, which limit the need of workers in the future. Advanced robotics will make it relatively easy to replace scores of factory workers—if their demands become too onerous. 

Other countries do not compensate their workers as high as America does, which will make the U.S. and GM specifically even less competitive as wages, benefits and pension obligations dramatically increase. Other car makers will be able to produce automobiles and trucks more cheaply and steal market share from GM. The company will not be able to invest in new plants and become constrained due to its financial  burdens, which will further hurt GM’s competitiveness. 

This goes to the heart of the manufacturing issue in America. While we would like manufacturing to return to what it was in the past, the world has since changed. 

Cars are manufactured globally in the places where companies can get the cheapest labor, lower cost real estate and tax incentives. Technology, automation and robotics are rapidly decreasing the need of factory floor workers. The fight between GM and the UAW ignores these intractable trends—and it will be to the detriment of the union workers, GM and its shareholders. Both sides would be better advised to confront this new reality and the potentially devastating impact that globalization and technology will have on the manufacturing industry in America. By ignoring this, it will only lead to disaster.  

Both UAW and GM will be meeting on Monday to negotiate.

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