Chrysler strike vs. high-tech. Issues go beyond market share for No. 3 automaker
Workers picketing the Chrysler plants are a warning not just to other automakers, but to any industry trying to make the transition to high technology. The strike ``is not a real economic test, because both sides are strong enough to sustain it,'' says Arvid Jouppi, an automotive analyst and senior vice-president of Keane Securities Company. ``What is at stake is the new methodology of manufacturing.''
What workers are aiming at, he says, are the very methods that many believe will save the auto industry, other heavy industries -- and, ultimately, jobs. But to the worker on the assembly line, systems like Japan's just-in-time inventory, General Motors' Saturn project, and computer-aided manufacturing spell extinction, not progress.
The face-off between Chrysler and the United Automobile Workers (UAW) will probably end quickly, Mr. Jouppi says, but not because the union is desperate: With $670 million cash in hand, it could stay on strike ``indefinitely,'' he says.
Rather, Chrysler's own success has put it over a barrel. Sales, spurred by 7.5 percent financing, were at record levels in August and September. Even during the first 10 days of October -- when General Motors and Ford saw sales fall sharply after their 7.7 percent financing deals ended -- Chrysler sales were up 39 percent over the same period last year.
Now Chrysler is scraping the bottom of the barrel for inventories: The company says it has a 46-day supply, although Jouppi estimates it has closer to 30 days. With buyers still out kicking tires and GM and Ford pulling out the stops to increase market share (with new 8.8 percent financing for some models), Chrysler needs to keep cranking out the cars.
Imports are also jostling for a larger share of the market. The forecasting firm Data Resources Inc. estimates that imports will increase from 25 percent to 33 percent next year.
If the Chrysler strike lasts longer than a week -- and Jouppi says even an immediate settlement would delay production until Monday -- Chrysler will begin to lose market share. That would be a blow to the No. 3 automaker, which has gained 21/2 percentage points since last October. Even a very short strike could be devastating to the company. Some analysts say that the six-day strike against GM in September of '84 was the reason GM lost two points in market share in the last year. Each point is worth abo ut $1.7 billion in revenues.
A prolonged strike could also wreak havoc on Chrysler's bottom line, costing $12 million each day the plants are shut down, Jouppi estimates.
The Chrysler negotiations are unique for a couple of reasons. First, Chrysler is bargaining on its own, a year after GM and Ford settled with the UAW. Management likes it that way, because the 80,000 union workers in Canada and the United States wield less influence than if joined by the approximately 475,000 UAW members at GM and Ford. The UAW wants to get back in step ``so Chrysler [workers] can take our rightful place in leading contract negotiations,'' says UAW spokesman Bobbie Barbee. The union wan ts a two-year contract; Chrysler is proposing a three-year contract.
Second, this is the first time an auto company has had to deal separately with the Canadian and American UAWs, which split earlier this year. The division does not appear to have weakened the unions' position vis-`a-vis Chrysler, however, only complicated the situation. The Canadian union, stung by the devaluation of the strong US dollar, wants to recoup its buying-power losses through increases in wages and benefits. The 10,000-strong union has more clout than its numbers would imply, since it makes C hrysler's most profitable product, the minivan. It is also the product on which Chrysler has an edge over its two bigger competitors, since GM and Ford came out with their versions two years after Chrysler.
The American union is more worried about job losses, and in particular ``outsourcing,'' in which a company buys parts from another company or country. ``The union knows Chrysler's looking at Korea, and it scares them because there are a lot of parts manufacturers in Korea,'' says John Reynolds, an automotive market analyst at Chase Econometrics. Outsourcing would not affect assemblers, he says, but there are more people making components than assembling cars.
Though Chrysler does not do much subcontracting, Mr. Reynolds says, ``they're looking to do a lot more.'' It is that future threat that is galvanizing workers today. But the die may already be cast, he says: ``I don't see how Chrysler can afford not to subcontract if it is to be competitive.''