Excess capacity, foreign competition, and national recession have forced automotive giant Browning Motors (BM) to tighten its belt and engage in broad restructuring with no end in sight. As a consequence, thousands of Browning Motors employees and thousands more of its suppliers' employees have lost their jobs.

To make matters worse for auto workers, BM has recently announced a radical step regarding parts acquisitions: all BM purchase contracts for components are open for negotiation. What makes this even scarier for auto workers is that notification of this shift in policy went to BM's own parts operations. This means that all suppliers, including BM's captive units, must clearly compete on the same terms. Thus, BM workers fear the loss of many more jobs to outside (especially foreign) sources.

Already facing BM's plan to close its tool-and-die shop and lay off 250 employees, disgruntled workers at the Gooden stamping plant reacted to the news about parts contracts with a strike. Feeling their efforts to help cut costs and improve efficiency had brought them no direct benefits, all 2,500 union members at the Gooden plant walked out on a wildcat strike.

The workers were prepared to concede earlier job losses, but their persistent anger against outside sources has made the most recent plans intolerable. Expecting that matters will only worsen if they continue to concede, the workers are prepared to show they still have clout. Within the current scope of BM's operations, the Gooden workers are apparently right.

Twenty-five hundred Gooden workers may have walked, but almost 43,000 workers are left idle. Due to shortages of key parts manufactured at Gooden, the impact of the strike has already spread to nine of the twelve BM plants which Gooden serves. The Galaxy plant, manufacturer of BM's best-selling new model, shut down only one day after the Gooden strike started. Eight other BM plants (which build vans, compacts, and luxury cars) did not last a week. The impact has been so quick due to BM's just-in-time inventory management in which plants keep only enough parts on hand to meet immediate production needs.

Browning Motors looks vulnerable to the effects of the strike. The company refuses to back away from its restructuring plans but realizes at some point it must restart operations. Its Galaxy plant has a heavy backlog of orders and company-wide after-tax losses from the strike are estimated at $50 million a week. The crippling effects of the logistics strike are reopening many issues which have troubled BM's broad cost-cutting program. The Gooden strike is forcing Browning Motors to re-examine all the links in its chain.

1. What do you think is the main issue at Browning Motors? (20 points)