General Motors Corp. and Ford Motor Co., which are operating at full capacity to try to meet consumer demand, would suffer expensive losses if they are struck by the United Auto Workers union.
But the losses would be less painful than expensive, long-term labor agreements that could sideline both companies in the race for the international auto market, auto industry analysts say.
The auto makers and the union, which are negotiating a contract to replace one that expires Sept. 14, "are dealing with a very complicated long-term and short-term problem," said Len Sherman, an analyst with New York-based Booz-Allen & Inc.
"A strike certainly would be very painful in the short term" for GM and Ford, "especially with their inventories as short as they are right now," Sherman said.
But the companies "simply can't afford to take a costly contract settlement," because "they're already noncompetitive with foreign car companies in terms of production costs," he continued.
According to the latest industry report, GM had a 44-day supply of passenger cars as of July 1 and Ford had a 52-day supply. A 60- to 65-day supply is regarded as normal.
Analysts say a strike of several weeks would dry up that supply and cost the companies billions of dollars in lost production and sales.
The last UAW strike against GM, in 1970, lasted 67 days and cost the economy $162 million a day. According to the trade journal Ward's Auto World, the daily loss included $90 million in sales, $12 million in worker wages, $40 million in supplier billings and $20 million in taxes.
Analysts interviewed by The Washington Post yesterday said that those daily figures -- considering changes in inflation over the last 14 years -- could double or triple in a 1984 strike against GM, which had a 58-day supply of cars at the time of the 1970 walkout.
The UAW's executive committee tentatively has chosen GM and Ford as strike targets if no new agreement is reached by the expiration of the current contract. The union's rank-and-file members have authorized a walkout should their leaders decide that one is necessary.
But UAW President Owen Bieber has the option to choose one target if a strike is called.
The option is strategic. The UAW has a $550 million strike fund, which would dwindle quickly if it had to be spread among 464,000 UAW-represented hourly workers -- 350,000 at GM and 114,400 at Ford -- in a lengthy walkout.
Auto industry analyst Arvid Jouppi in the Detroit office of Colin-Hochstin said yesterday that "there is a 60 percent chance" that the UAW will strike and that the target would be GM.
"The issues are so broad and the companies and the union are so far apart at this point that I see no other mechanism to force a decision other than a short, decision-making strike," Jouppi said.
The UAW's primary push is for job security, represented by the union's demand for strict limits on the use of non-union-made parts and supplies -- foreign or domestic -- in U.S. cars. The union also wants GM and Ford to stop importing built-up cars.
But the companies say that their use of "outsourcing" is vital to remain competitive with foreign auto makers, particularly the Japanese, who produce small cars at a per-unit cost that is some $2,000 below their American counterparts.
GM and Ford officials said yesterday that they can not give their workers both job security and higher hourly pay.
"You have to look at overall costs when you look at job security -- you can have a solution that provides security at too high a cost," said Ford labor negotiator Peter Pestillo. He said that there would have to be "trade-offs" on job security and pay.
Alfred Warren, GM vice president for labor relations, said that the job-security issue would have to be resolved before wages and benefits can be addressed.
The possibility of billions of dollars in strike-related losses will not force Ford or GM to sign a contract that could cause even more harm, another Ford official said yesterday in private comments.
"The decision really has to be: 'Do you take a strike which causes some short-term loss of sales, or do you accept an excessive agreement that could do more damage in the long run?'
"The car-supply problem is in the back of our managers' minds. But we're not going to let that stand in the way of what we feel is a fair and equitable settlement," the Ford official said.
"Neither side can afford to lose big in these negotiations," said Booz-Allen's Sherman. The companies can't afford to pay too much to the unions because it would make them noncompetitive, and the unions have to get something to remain credible with the rank and file, Sherman said.