PLANT

UAW strike could cost GM about US$1B and counting

Even as talks continue, the company is leery of settling the strike and saddling itself with costs that it will have to pay later.


DETROIT—With the United Auto Workers’ strike against General Motors in its third week, pressure is mounting on both sides to reach a deal, with the company losing an estimated US$1 billion and workers living on $250 per week in strike pay—about one-fifth of what they usually make.

Both sides are hoping the strike doesn’t last much longer, but while bargaining continues, the top union negotiator says they’re far apart on major issues including wages, job security, health care and a path for temporary workers to become full-time.

“We’ve got to last one more day than them, and I think we’re prepared for that,” said Gerald Lang, vice-president of a local union at a factory in Orion Township, Michigan, about 40 miles north of Detroit. “No contract, no cars.”

On Tuesday, a parts shortage from the strike forced the company to close pickup truck and transmission factories in Silao, Mexico, idling 6,000 workers and taking an important revenue source for GM. The plant makes light-duty versions of the Chevrolet Silverado pickup and had been supplying U.S. dealers with GM’s top-selling and most profitable vehicle.

UAW Vice-President Terry Dittes, the chief GM negotiator, told local union leaders in a letter Tuesday that a company proposal made Monday night fell short of union demands, and also sought further concessions. The UAW made a counter proposal Tuesday and is awaiting a reply.

GM said the company continues to exchange proposals and remains “committed to reaching an agreement that builds a stronger future for our employees and our company.”

Even as talks continue, the company is leery of settling the strike and saddling itself with costs that it will have to pay later, putting it at a disadvantage to foreign-owned factories in the South with lower labour costs, said Kristin Dziczek, vice-president of the Center for Automotive Research, an industry think-tank based. It costs GM $63 per hour in wages and benefits at its factories, while the foreign automakers pay an average of $50, she said.

“Short-term, this is costing them, absolutely,” Dziczek said. “It goes back to cost versus principles. Are the things that they would have to give to end the strike precedents that they would be living with for decades to come?”

The strike has cost GM just over $1 billion thus far, JP Morgan analyst Ryan Brinkman estimated Tuesday.

The losses mount each week the strike continues, costing about $480 million in the first week and another $575 million in the second, Brinkman wrote in an investor note. The company is losing $82 million per day, he calculated.

GM books revenue from building vehicles as soon as they change hands from the factory to the company that ships them to dealers. So revenue has been counted already for nearly all vehicles that are in dealer hands.

Chuck Browning, director of a UAW region in Detroit, told workers on the picket lines at an engine plant in Romulus, Michigan, Sunday that the union wants a small piece of the billions GM is making. “All those people care about is money, and you’re bleeding the money right now,” Browning said in a video posted on a UAW Facebook page. He said the time will come when GM’s board will say enough is enough and tell executives to give workers what they want.

Thus far, the strike appears to be having little impact on people searching for a new GM vehicle because many dealerships stocked up before the walkout began Sept. 16.

“My lot is packed,” said Mark Gratsch, general manager of Wally Edgar Chevrolet, who has enough supply to last him four months.

On the lot Monday, there were about a dozen Tahoe and Suburban large SUVs, which have been in short supply nationally since the strike began. There also were dozens of Silverados and Equinox small SUVs—GM’s top sellers. Dealers in the Washington, D.C., and Miami areas reported similar supplies.

But Gratsch said they are getting squeezed for repair parts, and it’s starting to cause appointments to be cancelled.

The strike has shut down many of GM’s 22 U.S. parts warehouses, but some remain open, staffed by management. GM has said it will provide loaner cars for people who can’t get recall or warranty service due to lack of parts, and it’s working to ship more parts or send them directly from parts factories.

On the picket lines, workers said they’re resolved to stay out as long as it takes, but acknowledged that some are facing financial hardship and want the strike to end.

“It all depends on what the people feel with their pockets,” said Jaleea Young, as she walked the picket lines in Romulus. A former temporary worker who went full-time three years ago, Young says she’ll stay on strike so temps can get permanent jobs. She also wants to preserve the union’s company-provided health benefits.

At the union hall near the Orion plant, where workers make the Chevrolet Bolt electric car and Sonic subcompact, the union already had to help a couple of members who were “down on their luck,” said Louis Rocha, the local president. The local has a food pantry to help it members in need, and it has received numerous donations, he said.

“I have high hopes that we’ll be getting things done,” Rocha said of the talks. “As long as they’re talking, things are moving. It just gets scary if they were to stop, but they’re not.”

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