Like their Asia- and Europe-based competitors, the Big Three U.S. auto companies continue to produce more cars than the market can bear—that is, than can be sold at a profit. The overproduction has put an increasing downward pressure on prices. The Big Three are General Motors, Ford, and Chrysler—now DaimlerChrysler, after a 1998 merger with the giant German corporation that also produces Mercedes Benz-branded vehicles.

The deflation in auto prices is thinly camouflaged by the hefty price incentives and no-interest deals launched by the U.S. auto companies in the third year of lagging sales. The zero-percent financing on five-year loans that they offer, plus rebates of up to $3,200 per vehicle, have failed to put the brakes on the downward sales spiral, however.

At Chrysler, the annualized sales rate declined last month to 16.5 million units from 17.3 million units—a 4 percent drop over the past 12 months. The two larger companies have recorded even worse results. Ford is almost 7 percent down, and GM’s 9 percent drop includes a 26 percent slump in car sales.

“Until we get a real decent economic recovery, I think sporadic production cuts will have to happen,” said Michael Wall, a researcher at CSM Worldwide, a Detroit-area auto-analysis firm.

Since 1999 some 55,000 jobs have been slashed by the three manufacturers and at plants operated by Visteon and Delphi, the auto parts companies connected with Ford and GM. That year the Big Three began a major reorganization, instituting “lean manufacturing” through shutting down unprofitable plants, speeding up production lines, and combining assembly jobs to cut crews. A 15 percent reduction in the workforce was the result.

In addition, ongoing shorter-term plant closings have plagued the industry, as the capitalists try to counteract the buildup of unwanted inventory.

The deepening auto crisis contributes to the rising unemployment rate in Michigan, which stood at 7 percent in March, compared to the national rate of 6 percent. The state government reported that total employment fell 26,000 over the previous year, while the ranks of the officially unemployed swelled by only 7,000. When the 19,000 unemployed who left the state are counted, the unemployment rate in the state tops 8 percent.

The sweeping reorganization of the industry came on top of Ford and GM’s 1996 sale of their parts production plants, many of which were swallowed up by Visteon and Delphi, which became the direct suppliers for the two companies. Thousands of smaller parts production shops were also spun out of the Big Three.

Chrysler, for its part, has announced its intention to sell or divest its remaining parts plants.

Delphi and Visteon bosses say that in contract negotiations due to begin in mid-July they want wages to be brought down to levels comparable with those at other suppliers. At $22 to $33 an hour, wages at the two auto parts makers are equivalent to those won by assembly workers at the Big Three, and contrast with the $14 paid by other parts makers.

Meanwhile, thousands of nonunion as well as unionized workers at many other parts plants start at $6 per hour.

More than 60 percent of auto workers are employed by parts plants, not counting those at Visteon and Delphi.

The Big Three face heavy competition not just from each other but also from Japanese, Korean, and German auto manufacturers. Asia- and Europe-based companies are taking a bigger share of the total U.S. market—pushing the U.S. market share held by the Big Three down from 74 percent in 1992, to 62 percent in 2002.

The growth of Japan’s Toyota, “Detroit’s chief competitor,” is “frightening,” wrote Daniel Howes in a column that appeared on the front page of the May 4 Detroit News. “Toyota’s market capitalization of $80 billion—the best measure of how investors value a public company—exceeds by nearly $10 billion the total value of GM, Ford and Chrysler parent DaimlerChrysler AG combined,” Howes noted.

Toyota now commands 11 percent of the U.S. auto market and 9 percent of the U.S. truck market.  
 
Contract talks set for July
In the middle of this crisis the United Auto Workers (UAW) and the Big Three will begin contract negotiations in mid-July. The present contract, which covers 275,000 workers, expires September 14.

In the coming talks, auto workers face the threat of more layoffs, as the bosses hammer away at the need for greater “productivity” in response to the domestic and overseas competition. According to a report by Harbour and Associates cited in the Detroit News, it takes GM, Ford and Chrysler 26, 27, and 31 hours respectively to build a vehicle. In comparison, Japanese automakers need 17 to 22 hours.

GM and Ford both want a freer hand to close plants that they consider less productive—at the same time eliminating excessive capacity.

The auto bosses are likely to demand cuts in downtime between shift changes. Relief time, absenteeism, forced job changes and combinations, line speedup, and other issues that featured in the 1990s reorganization will also likely be on the table as the employers press their demands for ever higher productivity.

Pensions and health care will also be central issues. More than 2 million spouses, dependents, and retired auto workers rely on pension and health care benefits wrested from the Big Three. GM has by far the most retirees on its books with 360,000, followed by Ford with 115,000 and Chrysler with 80,000. After recording heavy losses in stock market investments, GM claims that its pension fund is underfunded by around $25 billion. Ford and Chrysler have also dipped into their funds.

The nationwide UAW contract covers workers at the Big Three, Delphi and Visteon. More than 900 locals, many of them amalgamated locals representing workers in more than one plant, have separate contracts.  
 
Strikes in Michigan and Indiana
Two such locals, in Michigan and Indiana, are presently on strike in response to company demands that workers foot more of the health insurance bill.

UAW Local 155 represents 115 members on strike against the Michigan Rivet Corp. in Warren, Michigan, just outside of Detroit. The company supplies nuts, bolts, and other small metal parts to the auto industry. Their contract expired April 6, and they worked without a contract until May 12.

The company had sales of more than $40 million in 2000. It is demanding major concessions from the union. The UAW says it is prepared to accept a 10 percent co-payment for health-care costs within the employer-approved network, and a 20 percent co-payment outside the network. But Michigan Rivet demanded twice as much. Previously, the company paid all these costs.

The union’s last offer was to increase co-pay on prescriptions to $20 for brand-name drugs—one half the company’s proposal—and from $5 to $10 for generic drugs. Company demands “would be too much for our retirees who have four or five drugs they have to take for like a heart problem,” said Dan Donnellon, UAW shop chairman at the plant. There are about 60 retirees from the plant, he said.

“We can’t go as far as they are pushing,” said Donnellon. “I think we are fighting over exactly what the Big Three will be dealing with later this year. A lot of other locals have been supportive of us, knowing that.”

Further southwest, 100 workers at Auburn Gear in Albany, Indiana, have been on strike for more than seven months. The company manufactures automotive differentials, as well as gear drives for light construction and agricultural equipment. The workers walked out November 4 after the bosses proposed terminating health insurance benefits for retired workers and their spouses. The company responded to their action by unilaterally canceling the benefits.

“What we do for those folks [the retirees] we do for ourselves,” said Sal Bevilacqua, president of UAW Local 825.

Fred Smith, a machine operator, said, “I’m going to be a retiree someday.” Like the other workers, Smith is receiving $200 in weekly strike pay, one-third of his usual wage.

The Journal Gazette reported that Auburn Gear “has continued to crank out parts by hiring replacement workers, but the tactic hasn’t arm-twisted the union into putting down their picket signs.”  
 
 
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