UAW Strikes at American Axle; GM Truck Production Threatened

Negotiations between American Axle Manufacturing Holdings (AAM) and the United Auto Workers (UAW) union broke down in the early hours of Tuesday (26 February) morning, forcing a walk-out of UAW hourly employees and bringing American Axle's production lines to a halt. As of late on Tuesday, the two sides had adjourned and negotiators reportedly have returned to their locals in Michigan and New York, indicating that a strike could possibly last longer than the brief picket lines seen at the Chrysler and General Motors (GM) late last year during contract talks there. A new four-year contract has been the subject of weeks of marathon negotiations according to reports by several sources, but the two sides are reportedly wide apart on exactly what the next four-year contract should look like.

AAM reportedly wants to recoup the US$3.0 billion investment it made in five U.S. plants, as well as slash wages from an average US$70/hour level including benefits to a much more competitive US$20-30/hour. Such cuts would match the two-tiered wage system seen at all of the Detroit Three automakers, as well as the levels of pay seen at a number of other UAW-represented suppliers at which the union has agreed to significant labour changes. "All of the changes we have proposed have been accepted by the UAW in agreements with our competitors in the United States," Chief Executive Dick Dauch said. According to union officials, AAM also wants to close four facilities—three in New York (near Buffalo) and a forging operation in a Detroit plant. The moves would eliminate 700 jobs; American Axle already employs about 3,600 in facilities spread through New York and Michigan.

But the UAW is claiming that American Axle is using "unfair labor practices" in its quest to match the contracts seen at other suppliers. The demands are coming at a time when the company is profitable, say union representatives, and do not address the concerns of the workers. "Our members cannot be expected to make the extreme sacrifices American Axle is asking for with nothing in return," UAW President Ron Gettelfinger said in a statement. The union claims that AAM has not shared financial information with the UAW in the manner that previous negotiation partners have, which could lead up to an actual complaint of unfair labour practices made to the U.S. National Labor Relations Board (NLRB). Such a move would effectively prevent American Axle from hiring replacement workers, should the strike drag on for a long time.

Outlook and Implications

Given that American Axle is an important supplier to GM and Chrysler, the question on everyone's mind is how long it will be before the shut-down of operations at AAM begins to affect vehicle production, which in turn affects other suppliers' production. The answer may be not for some time yet. American Axle has confirmed that it has banked several days of parts thanks to running overtime at its plants last week, and that it will be able to continue supplying parts to GM and Chrysler for the short term. No move yet has been made by UAW workers to block incoming or outgoing shipments from AAM plants, and the Teamsters union (which controls shipping) has not yet announced a sympathy strike that would prevent deliveries to GM and Chrysler. As such, the two sides are able to take a couple of days apart to regroup without fear of shutting down GM or Chrysler. Should the sides not come to a compromise however, a production shutdown is likely to eventually happen. For GM, the situation would be critical—American Axle was born out of five plants purchased from GM in 1994, and nearly four-fifths of the supplier's revenue comes from the automaker. The biggest project and the one of most concern: the GMT900 family of full-sized pick-ups and sports-utility vehicles (SUVs), GM's biggest profit generators. AAM is the sole supplier for axles and a number of drivetrain components for the trucks, and has even announced that it has been named for the next-generation GMT10XX as well.

Looking at why the UAW would strike on issues that have been largely resolved with other suppliers leads us to an examination of what exactly those other suppliers and automakers have agreed to in their contracts. One can deduce from union representative comments that the demands being made by AAM are not new, unique, or unreasonable—but the biggest difference is that AAM may not be offering up what others have offered in return for the massive wage and benefit cuts that the UAW has previously agreed to. For instance, the UAW has agreed to a two-tier wage system that allows for workers to be hired in at US$14.25/hour for new hires at the Detroit Three automakers, which rises to just about US$27/hour when new, less-lucrative medical benefits are added in. But in return, UAW workers at GM, for example, were granted guarantees of future product at various plants around the country; the UAW was willing to trade away the idea of wage solidarity among all future union members for the opportunity to actually have future union members. But that distinction, that only future union members would be affected, is a huge one, as it meant that the deal was much more likely to be ratified by current members if their own wages and compensation were not immediately affected. In order to affect current union members' wages, as seen in the deal with bankrupt competitor Dana, the company had to offer "buy-downs," or cash lump-sum compensation in exchange for working for lower hourly wages. The benefit of such things are that new hires can then be had for the lower wages, and buyout offers can be levied at those typically looking at early retirement, thereby lowering the overall labour cost structure.

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