BuildingTeam Construction Forecast

Notes from Jim Haughey

Reed Construction Data Chief Economist Jim Haughey discusses how current developments in construction markets and the ecomony will bring opportunities and challenges for designers, contractors, and materials and services providers. His reports will cover near-term building demand, cost and financing changes, and will provide early notice on changes in the detailed two-year construction forecasts elsewhere on this site. Feedback and questions from readers are encouraged.

Monday, September 24, 2007

GM Strike: A Minor Problem for the Economy and Construction

Sep 24 2007 11:42AM | Permalink | Email this | Comments (0) |
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The surprise strike by the UAW against General Motors on September 24th is a “meow” compared the lion’s roar of national strikes against auto companies in the distant past. The last national auto strike was against Ford in 1976. 77,000 workers are on strike, a small fraction of UAW employment at GM in the postwar period well into the 1980s. The share of GM vehicles (and parts) made outside the US is many times the share when the UAW last struck GM.

The current strike will take a bite of yet undetermined size out of economic activity in September, probably October and possibly beyond October. But this is a minor event for the overall economy compared the collapse of housing starts early in 2006 which is still dominating economic trends. Reed Construction Data has not trimmed the outlook for the economy or construction but will have to do so if the strike extends into October. Michigan and Ohio will take the brunt of the strike.

The auto, steel, coal, railroad and electrical workers once had the power to bring the economy to its knees. But they lost that power several decades ago. The GM strike may be the last gasp of the UAW. The union has failed to protect its members’ jobs over the last twenty years and recently has not been able to protect its members’ income. Perhaps, the union leadership needs a token strike to protect their well paid positions from angry members before they agree to a face saving compromise with the company.

General Motors built inventory in August and September as a precaution against a strike and should be able to largely maintain sales even if US production is shut for 3-4 weeks.

The strike is reportedly over GM’s refusal to accede to UAW demands for job protection by guaranteeing that new vehicle models will be built in the US. GM’s decline from the world premier corporation to footnote status was due to paying employees wages and benefits for not working. GM may not be able to survive if it grants the UAW demand.

My first job after college was in the controller’s office at a Ford parts plant near Detroit in 1965. On my first day when I attempted to move a calculating machine — then the size of a microwave but much heavier — from a table to my assigned desk I was stopped by the accounting manager who told me my action would cause a major problem with the union. A millwright had to be called to move the machine less than 20 feet. I was obvious then that the auto companies gave too much to the union to buy labor peace. Now they have nothing left to give.

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