Detroit set for battle of the titans

RUPERT CORNWELL

Pontiac, Michigan

For this satellite city of Detroit, whose very name bespeaks car-making, it is the local version of the Apocalypse.

The vast General Motors complex, a full square mile of factories, administrative blocks and marshalling yards, might have been visited by the plague. The huge employee parking lots are four-fifths empty. Beyond them, hardly a vehicle or human being in motion disturbs the still-life landscape.

The Pontiac assembly plant is on hold, victim of the most devastating labour dispute to hit the American motor industry in a quarter of a century.

This is a strange mid-March in the Midwest. Tomorrow sees primaries in Michigan and three other states in the region which, it once seemed, might decide which Republican candidate faces Bill Clinton this autumn. But "Rustbelt Tuesday" is a foregone conclusion, a mere way-station on Bob Dole'sprogress to the nomination, reduced to near irrelevance by the strike at GM.

It began 14 days ago, at two brake plants in Dayton, Ohio, employing just 3,000 workers. At the core of the argument is "outsourcing", the practice of a company buying components from outside suppliers more cheaply than it could make them itself.

But the United Auto Workers in Dayton, guardian of some of the best paid factory-floor jobs around, felt the challenge could not go unanswered. So the union called out its men. Today 24 GM plants across America are shut for lack of brake-parts, 110,000 workers are laid off, and the tremors are reaching to the White House.

Nominally the stakes are puny, just 128 jobs that without "outsourcing" would otherwise be created at Dayton. In fact, they are nothing less than the very future competitiveness of the world's largest manufacturing company.

"GM is more vertically integrated - and thus less able to use outside suppliers - than its domestic and Japanese rivals," says David Cole, head of the car industry study department of the University of Michigan.

"The company's costs are a lot higher, and these costs get passed on, ultimately to the consumer. GM has been planning this for a long time, and has chosen to go to the wall on outsourcing. The unions. . . miscalculated. Unfortunately for them, they're dealing with a much tougher company than in the last few years, maybe in the last 30 or 40 years."

But in its desire to shake off a reputation for giving way in the crunch to organised labour, GM may have miscalculated too. As always with GM, the figures are mind-boggling.

The company's direct losses run at 110,000 vehicles a week, $40m or more of profits per day. Another week, and the ripple effect among sub-contractors could raise the number of those laid off to 500,000; if the strike lasts a month, Mr Cole estimates a million workers might be laid off work. And even those statistics understate the potential consequences.

GM's $100bn car and truck business represents around 1.5 per cent of US gross domestic product, and a long stoppage could knock half a point off what already was likely to be pretty feeble 1996 economic growth, conceivably tipping the country into an election-year recession. Small wonder the Clinton administration is pleading for an end to the strike, and that other analysts expect GM will yet again be forced to cave in.

Curiously though, the impact on the primary has been minimal. In theory, the strike should be ammunition for the conservative populist Pat Buchanan, voice of Joe Six-Pack, scourge of corporate downsizers and assailant of cheap foreign labour. "I understand what those workers are going through, GM is selling their jobs out," Mr Buchanan thunders on the campaign trail. "GM used to be the biggest employer in the US, now it's the biggest employer in Mexico."

Michigan however seems to have wearied of Buchananism. At least until the strike, its economy was on the mend, unemployment was at its lowest in 20 years and even Detroit, urban America's most infamous basket case, has been showing signs of renewal.

So how long will the strike continue ? On Friday, GM's top management sent senior negotiators to Dayton, where talks continued through the weekend. Logic would indicate a speedy settlement, but the union's talk and the company's tactics have given little hint of one.