Selling more cars could help GM - and US employment
The only major economic news last week was the August unemployment rate, which remained unchanged at 7.5 percent of the labor force. However, observers were also looking forward to the end of this week, when the United Automobile Workers contract expires and a possible strike against the General Motors Corporation looms.
There is some opinion, in regard to the UAW-GM negotiations, that the union needs a short strike to demonstrate its usefulness to the membership. If there is a strike, the presumption must be that the union will get more than it would have without one.
Whether that is correct or not, the real battle in the auto industry is no longer between the unions and management, even though the high bonuses the industry paid its top executives this year did not sit well with the unions - or with much of the public.
The real battle is an international one. Like the steel industry, the auto industry has also become international. Within the working years of middle-aged Americans, the US industry has been transformed. Many of the smaller post-World War II companies are no longer around. For a while it was even questionable whether Chrysler would be around. American Motors is now allied with Renault. But when I drive into Boston each morning, it isn't only GM, Ford, and Chrysler cars that I see; in fact, it's more likely that there is a Subaru or Honda in front of me. Like the West Coast, this part of New England is very strong on the smaller imports.
Imports account for approximately 25 percent of the US car market today. Next year the voluntary quota agreement with Japan comes to the end of its fourth year; it is problematic whether it will be renegotiated. The automakers should certainly not assume that it will be. An industry that is priding itself on its comeback and that can afford the kind of management bonuses it paid is not in the strongest position to seek further governmental protection.
Without the quotas in effect, many observers expect that the import share of the market would jump ahead. Both the UAW and GM need to consider how to keep costs down so as to do better in the worldwide auto competition. Limiting the cost of the union settlement is certainly one such way, but not the only one. Another is to take a longer look at the profits curve, limiting the immediate gain to be gotten from raising car prices and trying to get a larger share of the worldwide market through lower prices.
If there should be a strike, 350,000 GM workers would be affected. During August both the size of the labor force and the total number of Americans at work declined by 425,000, using one way of counting - the monthly household survey. According to a survey of business payrolls, the number at work actually increased by 160,000. For two months there has been a discrepancy in these two sets of numbers, probably having to do with the way the statistics are seasonally adjusted for summer workers. In any case, the large gains in employment that came in the early stage of this economic cycle are apparently behind us. For three of the past four months the jobless rate has been 7.5 percent. The administration still expects the rate to go below 7 percent by year-end, and most private economists expect it to drift at least toward the 7 percent level.
There would seem to be little that is politically significant in the unemployment numbers. The country is clearly not yet at full employment, and there is some risk that major further gains will be hard to achieve in this business cycle. Since the overvalued dollar is hurting US exports, any change in the domestic situation that has produced the high interest rates and overvalued dollar would directly aid those companies that want to expand their foreign trade, and thereby their number of workers.