General Motors Strike Settled

This article was originally published in Maclean’s magazine on October 28, 1996. Partner content is not updated.

For picketing Canadian autoworkers, it was a symbolic gesture. With the strike against General Motors of Canada Ltd. dragging into its third week, tempers flared at a cavernous GM plant in Oshawa, Ont.

General Motors Strike Settled

For picketing Canadian autoworkers, it was a symbolic gesture. With the strike against General Motors of Canada Ltd. dragging into its third week, tempers flared at a cavernous GM plant in Oshawa, Ont., when company officials said they would seek a court injunction allowing them to remove machinery used to stamp out components for other auto manufacturers. In protest, about 300 workers forced out security guards and welded shut the doors to the plant. Unknown to them, Canadian Auto Workers president Buzz Hargrove was holding a simultaneous secret summit meeting with GM worldwide chairman Jack Smith in a Toronto hotel room. After two hours of negotiations, they emerged with what appeared to be a potentially strike-ending compromise: the automaker would be able to reduce its costs by purchasing more parts from outside suppliers, but union jobs would be protected even as the company downsized. Hargrove then raced to Oshawa to deliver the news to the protesters, who emerged jubilant. "Now, there is light at the end of tunnel," said Dave Broadbent, a 35-year GM employee. "There is hope."

The breakthrough at the bargaining table was dramatic. Hargrove had vowed to shut GM down until it agreed to protect about 3,500 union jobs at stake under plans to sell a fabrication plant in Oshawa and a trim plant in Windsor, Ont. GM aims to become more efficient by reducing its manufacturing capacity and purchasing more parts from outside suppliers who can produce the products more cheaply. The dispute over that outsourcing project prompted walkouts by 26,000 workers from GM plants across southern Ontario and in Ste-Thérèse, Que. In the United States and Mexico, GM laid off 13,000 employees who make parts for vehicles assembled in Canada.

Hargrove was forced to bend on a key part of the CAW's bargaining strategy. In the past, the union would concentrate on reaching a deal with one of the Big Three automakers, and the other two would fall into line. But Hargrove admitted that a deal reached with Chrysler Canada Ltd. in September, under which Chrysler agreed not to cut back its unionized workforce, might not fit GM after all. As a result, analysts speculated that the CAW was poised to give GM the flexibility to cut both staff and capacity. Said Hargrove: "We recognize that they are a different corporation than Chrysler."

In return, said Tayce Wakefield, GM's vice-president of public affairs, the automaker would "meet its employees' needs." David Cole, director of the University of Michigan's Office for the Study of Automotive Transportation, said that likely meant a guarantee that the new owner of any parts plants GM sells off will have to honor the CAW contract. GM and the United Auto Workers reached a similar U.S. agreement three years ago involving the sale of parts-making operations in Cleveland. Hargrove told Maclean's that at one point the CAW had reached a comparable deal with GM Canada, but he said GM officials in Detroit killed the plan. "We thought we had a deal," said Hargrove. "But it was pulled off the table at the last minute."

Last week's compromise caught many analysts by surprise. Detroit-based Paul Ballew, chief economist with the influential auto research firm J. D. Powers and Associates, said that since 1991 when GM lost $10 billion on operations, the company has been trying to shed excess capacity and thousands of workers. It also wanted to introduce a number of redesigned vehicles, including the Chevrolet Malibu, Buick Century and Oldsmobile Cutlass. And with nearly $12 billion in cash on hand now, GM had not been expected by analysts to give in to the CAW. But with the strike threatening to disrupt the supply of new cars, chairman Smith's hand may have been forced. "This strike was very untimely for GM," said Ballew, "because part of GM's recovery plan involved the new models."

As well, a prolonged strike would have derailed GM's restructuring just as it was gaining momentum. The company reported third-quarter profit of $1.27 billion - almost double the amount from the same period the year before. (Ford Motor Co. jumped 92 per cent to $686 million and Chrysler's profit also surged 92 per cent to $680 million.) Despite GM's profitable surge, analysts insist that the world's biggest auto manufacturer is still highly inefficient. In 1995, while Chrysler's profit as a percentage of revenues set the industry standard at five per cent, GM trailed at 1.7 per cent. Even with its strong third-quarter performance, GM has a long way to go. "While GM earns $200 a vehicle, Chrysler earned $1,000 a vehicle," said Detroit auto analyst James Harbour. "GM is still so far behind it isn't even funny."

Against that background, the CAW strike was a major gamble for Hargrove. His U.S. counterpart, UAW president Stephen Yokich, had negotiated three-year pacts with Chrysler and Ford. If Yokich had also concluded an agreement with GM that allowed the firm to dump union workers - while the CAW was still striking - Hargrove's position would have been undermined. Dale Brickner, a labor economist at Michigan State University, said there were clear advantages to the U.S. union in having the CAW strike first. For one thing, he said, UAW members laid off because of the Canadian strike still received almost 95 per cent of their pay. As the layoffs spread in the United States, GM would still be forced to pay the wages of U.S. workers who had been idled by the Canadian strike. He also said the strike could have become a political issue if the UAW had started it first, because it might have embarrassed President Bill Clinton's re-election campaign - especially after heavy union donations to that campaign. But those concerns were far from the minds of striking CAW members. "When we walked out," said Bill Allin, a technician, "we thought we would be out to Christmas." But for Allin, last week's signs of a settlement raised hopes that the celebrations may be just around the corner.

Maclean's October 28, 1996