9/25/07

Economist downplays UAW strike ripple effect

The national strike by 73,000 United Auto Workers against General Motors Corp. was having a ripple effect on parts supply workers at other companies within hours of pickets being set up Monday at GM plants in Oakland County.

"Our company alone has 200 workers and we were told to go home after the strike was announced," said Kimberly Chamberlain, who works for the Pontiac facility of Logistics Insights, a GM parts supplier.

"It's not just the UAW that is affected by this strike, but it's everybody that works for GM or its suppliers," she said. "If my bills don't get paid, I won't have a roof over my head," the Waterford Township woman said. Chamberlain is a member of the Teamsters Union.

Dana Johnson, chief economist at Comerica Bank, said the impact of the strike on the national economy will be "small," noting that GM's workforce is a lot smaller than it used to be as its market share declined because of stiff competition from foreign automakers. "But, obviously, there're a lot of GM workers in Michigan and the impact on the state economy will be more visible," he said.

If a prolonged strike occurs, the ripple effects will hit workers in the supplier base and all the people in Michigan who sell goods and services to GM.

"We've seen the indirect impact that loss of jobs have had on Michigan's economy," Johnson said. "This will intensify the sense that Michigan is lagging behind the national economy.

"There's not a lot going right in Michigan now," he said.

The UAW walkout was the first nationwide strike since 1970. GM operates 82 U.S. facilities.

Johnson said Michigan is in a "one-state recession" and the addition of the strike "will really take a toll on Michigan's economy."

Michigan's August jobless rate was the highest in the nation at 7.4 percent, according to the U.S. Dept. of Labor.

Lawmakers in Lansing have been unable to hammer out a new fiscal budget for next year and only have until the end of September to do so.

If no state budget is reached, the state government could be shut down, eliminating state-provided services to the state's 10.2 million residents. Michigan has an estimated $1.75 billion deficit for the new fiscal year, which begins Oct. 1.

"(Providing) medical coverage is a problem for employers all throughout the nation," said Johnson referring to GM's request to create a Voluntary Employees Beneficiary Association and letting the union manage it to provide medical coverage for some 339,000 retired GM workers and their dependents. GM has an estimated $51 billion in unfunded retiree health care costs.

"There's a national consensus that in the next election we have to make changes on how we finance and provide medical coverage," Johnson said. "I think that's coming, but it's not something that's going to be immediate or soon enough before this contract will be settled."

Michael Robinet, vice president, global vehicle forecasts for CSM Worldwide, Inc., based in Northville, said the GM strike will "impact the supplier base during the next couple of days."

"The supplier plants for GM will continue a day or two but for the most part, GM won't be accepting any components.

"Essentially, just-in-time facilities will close down very quickly."

Just-in-time plants receive parts as needed to keep up with production, making it unnecessary to build up parts inventories.

GM will immediately lose production of 12,200 vehicles per day, or 760 vehicles per hour, in the United States "as long as the UAW strike against GM continues," said Robinet.

If the walkout continues more than 36 hours, Canadian production of 4,000 vehicles a day will cease by Wednesday or Thursday, he said.

If the walkout continues more than 72 hours, "it is expected that the ceasing of GM engine and transmission production in the U.S. will affect vehicle production in Mexico by Friday or Saturday."

Engine and transmission production in Mexico fed by U.S. component plans "would essentially cease as well," Robinet said.

And, he said "if the walkout lasts into this coming weekend, vehicle production and engine/transmission volume could be lost in locations fed by GM North America such as Venezuela, Thailand, Australia, Korea and selected countries in Western/Central Europe."

"It is our view" this walkout will not be protracted -- past more than one week, he said.

GM's current inventory situation "is high" for many offerings -- more than 80 days for full-size pickups and SUVs and about 65 days for cars, making the short-term impact at the dealer level "minimal at best," he said.

However, if the walkout continues for more than two to three weeks, dealers will begin to feel an impact, Robinet said.

Auto supply workers such as Chamberlain, who were idled because of the GM strike, are eligible to receive employment compensation of between $81 and $362 a week for 12 to 26 weeks, depending on their weekly pay rate.

(dailytribune.com)

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