Workers at General Motors have walked out, but maybe not for long

THE streets near General Motors' Cadillac assembly plant on the east side of Detroit are usually quiet. But now there is plenty of commotion as a line of workers, buoyed by coffee and mounting frustration, pace back and forth at the factory gates. On Monday September 24th, for the first time in over 30 years, the United Auto Workers union (UAW) launched a nationwide strike against one of America's big carmakers. Pickets surround scores of plants across America. Union leaders promise the strike will endure "for as long as it takes."

That tough talk is in sharp contrast to the mood at the bargaining table until the final hours before the walk-out. The union's contract with GM officially expired on September 14th, but steady progress persuaded the UAW to agree to an extension. But after ten days, the UAW's president, Ron Gettelfinger, apparently felt that a strike was the only way to break a deadlock over his top priority: job security.

Many observers thought that these tough talks could be resolved without confrontation. But not everyone was quite so optimistic. Making GM competitive again is likely to mean radical changes to industry contracts. And any deal between GM and the UAW will act as a template for similar agreements with Ford and Chrysler.

Not that long ago, negotiations simply served as a means for the car industry's unions and bosses to carve up an ever-expanding pie. But over the past 25 years, the situation has changed dramatically with the emergence of rivals, particularly from Asia. In July, for the first time ever, foreign brands captured more than half the new-vehicle market and few see the trend reversing.

Millions of foreign-badged vehicles pour off assembly lines in America. Nissan, Honda and Toyota produce well over half the vehicles they sell in North America in situ. Wages at these mainly non-union plants are far lower than for Detroit's "Big Three". There are many reasons for the gap, including costly pension schemes for massive numbers of retired workers. But nothing is more troubling than health care. Over time UAW has hammered out a system of coverage for both current and retired workers that, by some estimates, adds $2,000 to the cost of every vehicle that Detroit produces.

GM thinks it has a solution, or at least a partial fix, in the form of a Voluntary Employee Beneficiary Association--essentially a trust fund to pay for the health-care benefits of retired workers. GM's could shift obligations of about $50 billion off its books by letting the UAW take control of the programme. VEBAs are gaining popularity in America and the UAW already manages several. It is likely that a VEBA will end up as part of the ultimate settlement.

So why a strike? Job security, according to Mr Gettelfinger. Since America's carmakers came under serious assault from abroad in the late 1970s, the union's workforce has shrunk from 1.5m to a little over half a million today. Additional cuts are already planned as part of a previous restructuring deal. Still more seem certain as Detroit's carmakers attempt to outsource production to cheaper destinations abroad.

Well-placed insiders say GM is offering the union some form of job security but not enough to satisfy the UAW. However the union recognises that Detroit's carmakers cannot promise what they cannot afford. By one estimate, the labour gap between GM and Toyota swallows up enough cash to pay for four new-model programmes each year. And spending to develop cars that Americans want to buy is vital if GM is to reverse its decline.

Allowing GM--and, subsequently, Ford and Chrysler--to remove their current, modest job guarantees is hard to swallow for Mr Gettelfinger and his members. There is no certainty that a prolonged strike would force GM to back down although it could cost GM about $1 billion a week in operating profits and in two months the carmaker could well be pushed into bankruptcy. That would mean 73,000 workers losing their jobs, precisely what the UAW does not want. But a brief conflict will not cost either side much. So, the general belief is that workers will flex their muscles in the balmy autumn air but that a settlement will come before it starts getting cold outside the Cadillac assembly plant.