Tuesday, March 11, 2008

American Axle strike -- wide reaching, persistent, and ineffective

Although the American Axle strike has persisted into a third week and has shutdown or slowed 29 GM plants, it is not yet effective. GM has about 100 days of truck inventory and can watch from the sidelines, without intervening or tampering or nudging the UAW/American Axle talks toward closure.

GM expected truck sales to slow this year and the strike is almost doing them a favor. The company can cease production of vehicles that it can't sell anyway and can point to the action of the UAW as the cause for shutdown. It's an elegant solution for GM, as it shrugs and says "oh well."

Some have said that dealers will be the first to feel real pressure as their inventory offerings become limited. Yet, Ford and Chrysler are looking at ways to reduce the number of dealers in their pipeline. Could this be part of the GM plan as well?

The market for domestic vehicles will continue to shrink, according to the Center for Automotive Research, over the next five years. The whole system will need to shrink accordingly from parts suppliers to assembly to dealers.

So it begins, with the bold effort of the UAW at American Axle. Conventional wisdom would see that stopping production of axles would stop production of vehicles. In another day and age that would have put the UAW in a position of strength -- no axles, no cars and trucks. Now, it seems the UAW is just helping GM manage inventory.

Let's hope the American Axle workers are not striking in vain or shooting themselves in the foot.