Strike
GM, UAW resume talks as strike impact spreads
Union, automaker are back at the table while members hit picket lines for second day; impact of strike spreading.
Negotiators from the United Auto Workers union and General Motors came back to the negotiating table Tuesday morning, as the impact of the strike is expected to start spreading to other workers the day after 73,000 union members went on strike against the nation's largest automaker.
Talks got back underway a bit before 10 a.m. at the UAW-GM Center for Human Resources, the office building in between the GM headquarters in downtown Detroit and the union's main offices. The center has been site of intensive talks for the last three weeks.
Negotiators had been engaged in an all-night bargaining session Sunday night, which went right up to the start of the strike at 11 a.m. ET Monday. They met for five more hours, into Monday evening before recessing just before 8 p.m.
GM spokesman Tom Wickham had no comment on what was accomplished during the first post-strike round of bargaining Monday afternoon and early evening. A UAW spokesman also did not have a comment on the talks.
With the auto industry buying most of its parts on a just-in-time basis, it won't take long for the shutdown of 80 GM (Charts, Fortune 500) plants and parts centers spread across 30 states to start to spread to suppliers large and small, impacting millions of workers across North America.
Among the first to be affected are members of the Teamsters Union, who drive the trucks that carry completed cars from GM factories, as well as many of the trucks that deliver parts and supplies. That union has announced its members will honor the picket lines and stay off the job. The segment of the trucking industry that delivers new vehicles to dealerships is the sector where there are the fewest non-union alternatives to the Teamsters.
In addition, between 80,000 to 100,000 members of the Canadian Auto Workers (CAW), who staff six GM plants in Canada as well as a number of supplier plants, could also be off the job as soon at Tuesday, according to CAW President Buzz Hargrove. That's because GM's plants in Canada depend on U.S. plants to provide them with critical parts, including powertrains, and other components.
73,000 on strike at GM
Other U.S. parts suppliers could soon start to halt operations, since they produce parts to be used on a just-in-time basis by the now idled GM plants.
Estimates are that about 7.1 million U.S. supplier jobs depend on GM, Ford Motor (Charts, Fortune 500) and Chrysler LLC all together. Given its market share and size compared to its U.S. rivals, GM by itself is likely responsible for about 3 million of those jobs.
David Cole, the chairman of the Center for Automotive Research, says that the supplier base has already been squeezed to or past the breaking point in recent years, as the automakers pressed them to cut prices of components, and they faced increased competition from overseas plants. He said that this is the segment of the economy at most immediate risk from a prolonged GM strike, probably even more so than the automaker itself.
"The supplier business is pretty marginal anyway," he said. "A great number [of them] are on the edge. As this trickles down, it could have a great impact."
Still, he doesn't expect any additional bankruptcies in the supplier sector assuming the strike is over within a week. But there could be some companies, particularly smaller suppliers known as Tier 2 suppliers who sell to the parts companies that sell directly to GM, that could be in trouble after only a week or two.
The UAW could not give an estimate as to how many of its members work for the supplier companies, but they did confirm they have more members at suppliers than the 73,000 who work at GM. Many of those union-represented supplier jobs are not dependent on GM, though, and instead supply other automakers.
"That's another reason the union doesn't want a long strike," said Cole. "This is a fragile situation right now. If this thing got out of hand, it could be a serious issue for some union suppliers."
The UAW members at GM get only a nominal strike benefit of $200 a week, compared to the $27.81 an hour that the UAW estimates is he average straight-time pay for a member at GM. The low level of strike benefits means that the UAW has more than a year of money available to pay strikers at GM, although few expect the dispute to go on nearly that long.
The last strike to shutdown GM operations nationwide was in 1998 and went on for 54 days. In that strike only two local unions were on strike, but that disrupted operations at all other GM facilities in North America. The last national strike at GM in 1970 lasted 69 days.
If negotiators can reach an agreement and get workers back on the job quickly, the lasting economic impact could be limited. And it is unlikely that the strike will have a meaningful impact on the nation's overall economic activity, even if specific companies do end up taking a hit.
Rich Yamarone, director of economic research at Argus Research, said that the only way that the economy would show even a one-tenth of 1 percent slower growth in this quarter is if Asia automakers, such as Toyota Motor (Charts) or Honda Motor pick up any sales that GM loses, and even that would be mitigated by the number of U.S. plants those Japanese rivals now operate.
"What Michigan will lose will be picked up in Tennessee or Alabama," he said.
And Yamarone said that if any sales that GM loses are captured by Ford or Chrysler, the overall economic impact is even more limited.
David Wyss, chief economist for Standard & Poor's agreed that the impact on the overall economy will be somewhat limited, especially for a strike of only a week or two.
"It's not like the 1950's, when a strike at one of the automakers would put a real crimp in the economy," he said. "The auto sector as a whole is smaller compared to the overall economy. The long-term damage, I'm less worried about. This is more of a short term issue."
But he said that the pain that would be felt by the employees of GM and its supplier base would lead those people to cut back on spending, and that will have an effect on overall economic activity, even if other automakers see sales gains at GM's expense.
Wyss estimated that a month long strike at GM could cost the overall U.S. economy about a quarter percentage point of growth off of gross domestic product, the broadest measure of the nation's economic activity. He said a second month could cost more than twice that, as the impact would worsen the longer the strike continued. But he and other economists aren't expecting a long-term strike.
The closely watched September employment report also won't be affected by the strike because the data used in that report is for the week that has the 12th day of the month in it. However, if the strike stretches three weeks to Oct. 12, then it could cause a serious hit to the October employment report.
"It has the potential to be an ugly situation for the jobs report. I just don't think it has the likelihood to be an ugly situation," Yamarone said.
Craig Fitzgerald, a partner and auto analyst at Southfield, Mich.-based Plante & Moran PLLC, told the Associated Press that the major suppliers would be able to weather a 10-day strike "very well," but it would have a negative impact on sales and earnings.
"Big Tier 1 [suppliers] have been very mindful that a strike could happen and they've been preparing for this for six to nine months," Fitzgerald said.
Is the GM strike for real?
Several top parts suppliers saw their shares fall more sharply than GM shares once again Tuesday. Dow component GM saw its shares only nominally lower in late-morning trading, while shares of Lear Corp. (Charts, Fortune 500) lost 1.3 percent, following their 2.7 percent drop Monday. American Axle & Manufacturing (Charts) saw shares sink 4.4 percent in Tuesday trading.
Shares of several major suppliers, including former GM parts unit Delphi (Charts, Fortune 500), are still not listed on major exchanges as they attempt to emerge from bankruptcy.
Meanwhile, shares of GM rival Ford Motor saw its shares fall 1.3 percent in trading Tuesday, following a gain Monday. Investors are concerned that the UAW will try to use whatever deal is reached at GM as a pattern for a labor pact at Ford and Chrysler, even though those automakers are facing more severe ongoing losses than GM, and may not be able to afford whatever package is reached.
UAW members at those two automakers remain on the job working under contract extensions.
(Published by CNN, September 25, 2007)
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