BY cindy coopwood

Managing Editor, Delta Business Journal

When General Motors ratified the strike settlement with United Auto Workers, area car dealers and other businesses affected by the strike began to breathe a little more easily. The standoff which began with walkouts in early June at two parts plants in Flint, Michigan had a tremendous trickle-down effect nationwide with thousands laid off and many factories and other businesses closing. GM is estimated to have suffered a whopping profit loss of $2.6 billion during the seven week strike.

According to news sources, over three thousand people statewide were laid off and several Mississippi companies who supply GM with parts were shut down. Chuck Conditt, group HR manager at Irvin Automotive Products in Greenwood said his company did not suffer too greatly because they only make two products for GM. He said, Overall we were not hurt too much. We did have to close those lines and those employees were laid off, but only after being offered placement elsewhere in the company. And, fortunately they are already back at work. We only make arm rests and luggage shades for GM, so it is not our biggest customer.

GM is the nation's number one automaker, although it is the least productive in the area of labor cost. According to industry analysts, who had supported its efforts to fight the strike, deep cuts in costs are necessary for GM to be more profitable. Union deals made long ago when there was very little competition from the foreign car market make GM's cars more expensive to produce than those made by other automakers who are able to use lower-cost suppliers for parts. Ed Kossman of Kossman's, Inc. in Cleveland explains, It costs Ford about $1500 in labor costs to make each vehicle, it costs Chrysler $1600, but GM averages well over $2000 because they are using union labor, so they have a lower profit margin on their cars. Only because GM owns some successful outside companies that do well can it still offer cars at a competitive price.

Local GM dealers are relieved the strike ended when it did. If it had gone on much longer it would have been detrimental to us, said Kossman. He continued, We were fortunate that, like a lot of dealers, we had a good inventory. There is a rule of thumb that a dealer should carry about two months inventory. But we always carry about two and a half to three months inventory. That really saved us during the strike. Had it gone into August, dealers inventories would have been depleted and there would have been a void of four to six weeks from the time the strike was settled until they really started rolling in again.

Neil Draper of Nabors Chevrolet in Clarksdale agrees that his healthy inventory is what has pulled him through the last few weeks. Nabors carries all the GM lines as well as Toyota. When all the GM plants shut down our supply was cut off, but fortunately I was overstocked so we made it through the strike okay. But these next few months we are going to really hurt, because we are behind now and they did it right when the new 1999 models were supposed to be coming out. We are supposed to have the trucks in stock now, but we won't see them for another two months,' he said.

Single line GM dealers suffered even more. Richard Saxton, sales manager for John Weathersby Chevrolet explains, We were fighting with a short stick, because dealers who carry more than one line had something to fall back on. We had enough inventory at the time to carry us but we were not able to replace our inventory for an eight week period. And I think we will see limited merchandise for the next few months. He continues, Overall our customers were great, but we did lose some sales to competitors. These were people who wanted to buy GM and always have but if you didn't have what they wanted or needed in stock you just couldn't get it.

Kossman also said that most of their customers were willing to work with them during the strike. The main problem we had was the supply getting low on hot models such as Suburbans, Tahoes, Yukons and Cadillacs. We ran almost completely out of some of the hot Oldsmobile models. They went fast and the supply got so low that the person willing to spend $30,000 to 40,000 on that price vehicle really didn't have much choice in colors and in interior equipment. But most of our customers were understanding enough to give us maybe two color choices or make some compromises, he said.

With the 1999 models due out soon one dilemma facing GM is whether to continue making 1998s or, since production is so far behind, to just make more of the new models. The unions planned this timing to really hurt the dealers with the new models coming out. We should be stocking 99s right now, said Draper. Kossman also wonders what to expect from the new shipments. He said, There will be two GMC truck models, the current one as well as the new 99 model. They don't want to put a lot of 98s out this late in the year because it takes so long to get them to the dealer, so I would expect that they will be making and sending more 1999s.

Saxton said, ÒI believe that they will be on target getting us a 99 model on the ground, but as far as a volume of trucks, I don't think we'll see a whole lot of the new body style as fast as we would have. We have a couple of sold orders that are going to run about two or three months longer than they normally do. He continued, Our overall profit for the year has been hurt because we were not able to replace our inventory as we sold and now inventory is low. I know that production is cranking back up but I don't think it will be full scale since they had almost a two month shut down. So I believe we will see limited merchandise for the next few months.

Now that the strike is over and employees have returned to their factories, the parts distributors and GM plants have returned to normal production. The Delta businesses and car dealers that were adversely affected look forward to returning to business as usual. As to whether or not it could happen again, Saxton said, This is not the first strike we've had, there have been some small strikes in the past few years, but it's the first mass strike we've seen. It was soon going to get into problems with service because of the parts houses having to shut down. A strike like this is very far reaching. We just hope it's the last one we see for a very long time.

Now that the strike is over it is a wonderful sight for all Delta GM dealers to see transporters pulling up to their dealerships with loads of new cars and trucks. It's a sight they hope to see for a long time. DBJ

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