Unions gain new leverage Inventory system left GM vulnerable

September 06, 1992|By Kim Clark | Kim Clark,Staff Writer

Just when it appeared unions' strike threats were nearly worthless, 2,400 striking parts makers shut down nine General Motors Corp. assembly plants for more than a week and cost the automaker millions of dollars.

What happened to give the United Auto Workers the strength to cause such corporate pain?

It wasn't all the union's doing. The UAW exploited an opportunity caused by, of all things, GM's effort to emulate the Japanese.

Strange as it may seem, the GM strike showed that on the eve of Labor Day 1992, American unions can thank the management experts at Toyota for giving them back a powerful strike weapon.

Industry and union officials agree that GM was made vulnerable to the Lordstown, Ohio, parts plant strike because it adopted a Japanese management technique called "just-in-time" (JIT) inventory.

And, they say, the UAW-GM dispute that ended yesterday serves as a warning bell to the thousands of U.S. companies that have followed the Japanese lead and as a rallying point for the millions of workers who may be looking for bargaining power.

"Just-in-time inventory systems give unions leverage they didn't have before," says Sanford Jacoby, a University of California at Los Angeles sociologist who specializes in industrial relations.

GM spokesman David Sloane conceded last week that the automaker has become vulnerable to work stoppages at parts plants because it no longer holds big stockpiles of parts.

Instead, supplies -- seats, --boards, steering wheels and the like -- are delivered to plants daily in lots just big enough to keep assembly lines going for another shift or two.

When the workers at Lordstown stopped producing parts, it took only a few hours for that stoppage to halt production as far away as GM's Baltimore plant, which makes the Chevrolet Astro minivan, one of its most profitable vehicles.

"The ripple effect from JIT is going to happen," Mr. Sloane said.

Though Mr. Sloane would not say how much the strike cost GM, Wall Street analysts have estimated that the strike cost the nation's largest automaker more than $2 million.

Lou Viehl, manager of a small Sun Chemical Corp. ink factory in Baltimore, said the pain GM suffered from the Lordstown strike is making him rethink his decision to cut his inventory in half, to only two weeks' supply.

Now, when he can find only one supplier for a needed part or chemical "it makes me worried," he said.

So far, he hasn't done anything to change the JIT system at the factory, which is a subsidiary of Dainippon Ink & Chemicals Inc.

But Mr. Viehl says he and other managers and union officials across the country are waiting to see whether the Lordstown strategy can be used in only a few special cases, or whether the strike signals a general resurgence of union power.

A decade of decline

The revival of a strike threat could hardly have been predicted as recently as a few weeks ago.

After all, unions were still smarting from a setback in April, when a bitter four-month UAW strike against Caterpillar Inc. crumpled because the company started to hire replacement workers.

The Caterpillar episode came after more than a decade-long assault on unions launched in 1981 when President Reagan replaced 11,400 striking air traffic controllers. The courts followed with decisions that made it harder for union organizers to hand out fliers near a work site, for example, and allowed employers to delay negotiations.

The weakening of power translated into union unpopularity, further eroding labor's strength.

Union membership steadily dropped, from a high of 20.2 million in 1974 to 16.6 million in 1991.

And strikes -- the tool of last resort for unions -- became increasingly rare.

There were an average of 288 major work stoppages a year in the 1970s, according to the U.S. Department of Labor. Last year there were only 40 -- the fewest on record.

Just as the future of unions looked especially bleak, another trend appears to have come to the unions' rescue.

Global competitiveness

In the 1960s, executives from Toyota visited a California supermarket and were struck by the efficiency of the system: The store continually replenished shelves and consumers bought just what they needed, said Robert W. Hall, director of new programs for the Association for Manufacturing Excellence.

Toyota, strapped for cash and space, applied that "just in time" system to its car production, wiping out the need for costly inventories and improving quality in the process.

The rest is history. Toyota taught other Japanese manufacturers, captured huge shares of the U.S. market and forced overseas competitors to follow suit.

Ten years ago, there were a handful of U.S. companies paring down inventories to compete with Japanese manufacturers. Today, "it is a hot topic" and spreading to banking, insurance and other service companies, Mr. Hall said.

And despite the strike, executives in all kinds of businesses say JIT is the key to global competitiveness.

Even GM officials have said the strike wouldn't stop their progress toward JIT.

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