The GM strike has come to a close, and it’s time to look at a post-mortem. The ultimate cost of the GM strike is said to have been $2.9 billion, all told. That’s a huge blow to the auto manufacturer, when the auto manufacturing industry is already struggling due to off-shore manufacturing and the rising cost of steel.
Let’s take a look at the bigger picture to determine the overall impact.
GM Closed for 40 Days Due to Strike
The GM strike lasted over a month. While the company and its employees were in constant negotiations, they weren’t able to fully come to terms until 40 days had passed. That’s an extraordinary amount of time for a manufacturing company to be down, and it had some widespread consequences for the business. At the end of the day, there was a $3 billion hit to the bottom line.
31 factories were shut down, in addition to nearly two dozen other factories. 50,000 hourly employees were on strike during that time. But it wasn’t a complete loss for GM. Though the company was unable to build new cars, it had already built up an inventory of cars that it could keep selling. Consequently, it was able to continue to sell, but it cut through its buffer. Now, it needs to rebuild that buffer, and whether it can or not will control how it performs in the future.
A Consequence of Shifting Industry
There were many reasons for the GM strike, but one of the primary reasons was a shift from permanent labor to temporary labor. GM had stopped staffing employees and had started hiring temporary employees contract-by-contract. Employees alleged that this hiring of temporary employees was intended to dodge required benefits.
Temporary employees didn’t have paid vacation, retirement plans, or other benefits, and were consequently at a disadvantage. Because they were temporary, they could be let go at any time, without unemployment. And because these temporary employees could be hired at cheaper rates than permanent employees, it made it less likely that permanent employees would be hired, as well as dragging the wages for permanent employees down.
A large part of this has to do with the way that hiring has changed in the United States. Temporary employees and independent contractors are becoming a norm throughout a lot of companies, as companies no longer want to take on the burden of having to manage permanent employees or pay benefits for them. However, employees are fighting back for their rights as well.
The Benefits of the Strike
The employees benefited significantly from the strike, which is understandable when the cost of the strike is considered. The employees were able to secure an $11,000 signing bonus, in addition to a pay increase to $32.32 an hour, given out over the terms of a four year contract. This will represent a significant increase of 6% for employees. Further, temporary workers will be able to become permanent employees, which is one of the major things sought.
The employees did lose one aspect of the strike. The work that was shifted to Mexican plants rather than American plants will remain in Mexico. And this could signify a more significant shift, as if GM is able to shift more work to its Mexican plants, it will need to pay fewer American auto workers. In fact, for GM as a company, this could only be an increased incentive to move more manufacturing to Mexico.
GM plans to close three United States factories. More may be on the way. And the Mexican plants were impacted as well. Since parts weren’t being manufactured on time, some plants in Mexico were idling, and a significant amount of employees in Mexico were fired. But, these employees can still be rehired in Mexico at a lower rate than employees can be retained in the US.
The catch when employees organize, strike, and demand more is that the strike itself leads to the company losing money. A company that loses money is not going to be able to employ as many people. When it comes to GM, there’s already an incredible allure to manufacturing near shore, through Mexico rather than the United States. Ultimately, this strike may incline the United States to work more frequently in Mexico.