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In management's view, the strike will decide whether the U.S. auto industry is destined to join the long list of others —textiles, radios, shoes, barber chairs —that can no longer freely and vigorously compete against lower wage foreign manufacturers. In July, imported cars captured an alltime high 15.6% of the nation's auto market. Last week Chevrolet Chief John Z. DeLorean observed that U.S. wage rates are 2.1 times as high as Germany's, 2.8 times Britain's and four times Japan's. Though wages abroad are leaping ahead faster in percentage terms than those in the U.S., American wages are so much higher to begin with that the dollars-and-cents gap has actually widened.
How Long? The current collision between auto labor and management in Detroit hurts much of the rest of the U.S. and Canada. G.M. uses 10% of the U.S.'s steel, 5% of its aluminum and large portions of its glass, rubber and textiles. Last week in Lexington, Ky., Irvin Industries laid off 375 workers who make seat belts. In Stratford, Ont., the auto strike put 100 workers out of their jobs at Standard Products, which manufactures rubber parts. The beleaguered Penn Central railroad began laying off workers who normally handle shipments of G.M. cars and trucks. In a month, a million more men could be out of work across the U.S.
Moreover, the strike is likely to trim down any third-quarter economic upturn (see box, page 72). One consequence is that the industrial-production index, which declined in August for the first time in five months, will fall further. If the strike lasts more than six weeks, it will depress many businesses indirectly connected with the auto industry. In that case, lower corporate profits and more unemployment will sink the federal budget deeper in the red, increasing the prospects for a tax increase. The Nixon Administration expects that the strike will be over in six to eight weeks, but the consensus in Detroit is that it quite possibly could stretch out to twelve or 15 weeks, or even more. (G.M. dealers' supply of cars will last for six to seven weeks, including 1970 models.) Even after the auto strike is settled, the economy will be further distorted as General Motors and its suppliers work overtime to make up for lost production.
The walkout is one more sign that union members everywhere are marching to a martial drum. This year the pace of American life has been snarled by an unusual number of strikes, and the appetites of union members have been whetted by some outrageously high settlements. Construction workers in this year's first quarter squeezed out wage increases averaging 18%. Last June, the Teamsters won hourly raises of $1.85 over 39 months.
Now the railroad workers demand a 40% wage increase. Last week 45,000 workers halted trains for about twelve hours on Southern Pacific, Chesapeake & Ohio and Baltimore & Ohio railroads. The men returned to work under a court injunction, and late in the week President Nixon signed an executive order delaying any national rail strike for 60 days.