Why strikes are gripping the US car industry

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By Steve Schifferes Economics reporter, BBC News

Ford built a modern truck plant on the site of River Rouge,

The spectre of the first US-wide car workers strike in 30 years has emerged in Detroit.

Main union, United Auto Workers (UAW), has called out its 73,000 members at all General Motors (GM) plants across the country after negotiations with the company broke down.

The move comes after 10 days of tense talks over the substantial concessions that the "Big Three" US car companies - GM, Ford and Chrysler - want their workforce to make.

Under the UAW's pattern bargaining system, the union has been targeting the strongest company for strike action - GM - but expects Ford and Chrysler to fall into line if a deal with GM is finally reached.

(The strike threat) is meant to resolve the issues as quickly as possible Harley Shaiken, Professor of Industrial Relations, UC, Berkeley

The UAW has an $800m (Â£400m) strike fund, and plans to pay its members $200 a week while the strike lasts.

But that will be little consolation to many of its members, who earn more than $20 per hour (or $800 per week, not counting overtime) at a typical plant.

According to industrial relations professor Harley Shaiken, the union may be hoping that the strike is aimed at "resolving the outstanding issues as quickly as possible".

Losing market share

The stakes could not be higher for either the companies or the union, which represents 200,000 workers in the car industry.

GM, Ford and Chrysler - have been losing market share to their foreign rivals like Toyota, many of whom now produce in the US as well.

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They say that their costs are much higher than their rivals, and they must make cuts in benefits and working conditions to stay competitive.

In particular, they want the union to take over responsibility for generous health care benefits available to members - and retired car workers - by creating a special health care fund, partly funded by the company, but run by the workers.

One part of the dispute with the companies is how much GM would be prepared to put into such a fund - which would have obligations to pay benefits to 330,000 GM retirees and spouses as well as the workers.

A funding figure of $50bn is reportedly under consideration - but GM wants to pay for that mainly through its stock, which could be worthless if the company goes under.

But the deal would carry big risks for the union, as they would be assuming the risk of ensuring the future funding of these programmes, and would have to make cuts themselves if things went wrong.

Union in decline

For its part, the UAW union wants the companies to guarantee that, if workers make further concessions, their jobs and pensions will be safe.

The UAW's membership has plummeted as US car companies have cut jobs and moved production overseas, and it no longer has the industrial or political power it had 50 years ago.

<a class="bodl" href="#graph">See how union membership has fallen</a>

Now the companies are threatening to shift production - or, in the eyes of the union, to move jobs - abroad to China and other low-wage locations, unless they can get union agreement to further job cuts.

Some rank-and-file members told the BBC earlier in the year that enough was enough, and they did not want to be "pushed around" by the companies any more.

Many say they, and their family members, depend on the health care benefits they receive before they are eligible for government-funded Medicare benefits.

And the retirees, although they do not vote in contract negotiations, vastly outnumber active UAW members, with a total 419,000 retired members, and 120,000 surviving spouses, receiving company benefits from the three companies.

Company splits

However, one problem complicating the outcome of the negotiations is the differing financial situation of the Big Three.

Ford is virtually bankrupt, having mortgaged most of its assets, and is now in the process of selling at least part of its European luxury car division, which contains Jaguar, Land Rover and Volvo.

Chrysler is also heavily in debt, having been just taken over by a private equity firm after its former owner, the German car firm Daimler, decided to sell up.

GM, although still losing money most quarters on its North American car operations, is further along in its restructuring, so it could afford to make more concessions to the unions, on such issues as job security, in order to get a deal.

GM also has a more viable option of walking away from its North American operations and concentrating on its profitable businesses in Asia, Latin America, and Europe.

So even if GM agrees a deal with the unions, the cost of the agreement might still cripple its rivals - and cause them to balk at following suit.