General Motors strike has ‘been bubbling for some time’ says Lipscomb business professor

Lipscomb University professors are leading the way in discussing topics impacting the world around us.

Kim Chaudoin | 09/16/2019

The United States automobile industry plays a significant role in the nation’s economy as well as the routines of hundreds of millions of Americans every day. Approximately 4.5 percent of all U.S. jobs are supported by the strong presence of the auto industry in the U.S. economy.

Today, the industry is making headlines as an estimated 50,000 auto workers at General Motors at dozens of facilities across the country, including 3,300 employees of the GM plant in Spring Hill, Tennessee, located about 30 miles southwest of Nashville, went on strike Sunday night after negotiations failed between the United Auto Workers union and General Motors. Negotiations continue this morning.

The move could cost hundreds of millions of dollars. A two-day strike in 2007 — the last time the UAW called such a work stoppage — cost General Motors more than $600 million. UAW represents workers at 33 manufacturing sites and 22 parts warehouses across the country.

“The issue here has been bubbling for some time,” says Andy Borchers, professor and associate dean in Lipscomb University’s College of Business. Borchers spent 30 years in the auto industry, 20 of those years he was with GM, in Michigan before coming to Lipscomb in 2011.  

“GM has the highest labor cost in the industry and has factory capacity that is one million more than they need,” he continues. “Meanwhile the UAW took cuts during the recession and feels they need a bigger slice of GM’s $8 billion profit last year.” 

After spending years climbing out of the 2008 recession, the U.S. auto industry ended 2018 with sales of 17.3 million new vehicles which beat projections but this year the industry faces more uncertainty as sales have seemingly flattened. In 2018, GM had the largest share of US sales with 17.1 percent or 2.951 million units sold, while Ford had the second-largest share at 14.4 percent or 2.485 million units sold last year, according to data provided by MarkLines Data Center.  Japanese brands, however, have made consistent in-roads in market share over the past few years.

But this year General Motors and Ford are cutting production, especially of slow selling cars. They are also facing higher production costs  with tariffs on steel and aluminum, cutting into bottom-line profits. These industry stalwarts will continue to manufacture SUVs and larger trucks because as margins run higher on these items. Industry experts, according to supplychainbrain.com, project these companies will close plants and lay off personnel, along with discontinuing several car brands, at a savings of billions of dollars. 
“Meanwhile the industry faces additional uncertainty given the switch to electric vehicles and trade conflicts.  In North America the new USMCA agreement has yet to be approved by the US Congress.  In Asia tariffs and trade tensions continue with China,” he says. 
 
Borchers says even with an industry in flux, operations at the Spring Hill plant should remain settled for the foreseeable future. 
 
“Spring Hill should be solid for now given their product mix,” Borchers projects. 
 
The Spring Hill GM plant assembles the Cadillac XT5, XT6; GMC Acadia and Holden Acadia; and produces engines that powers the Chevrolet Tahoe, GMC Yukon, GMC Yukon KL, Cadillac Escalade as well as other products.