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Monday, September 24, 2007 12:31 PM

Playing Hardball With The UAW

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The deadline passed and UAW workers strike GM plants. "We're on strike. It's too late to call us back now," UAW Local President Chris "Tiny" Sherwood told Reuters as a union-imposed strike deadline passed at 11 a.m. EDT.

The UAW is shocked by GM's failure to recognize worker contributions.

“We’re shocked and disappointed that General Motors has failed to recognize and appreciate what our membership has contributed during the past four years,” said UAW President Ron Gettelfinger. “Since 2003 our members have made extraordinary efforts every time the company came to us with a problem: the corporate restructuring, the attrition plan, the Delphi bankruptcy, the 2005 health care agreement. In every case, our members went the extra mile to find reasonable solutions.

“This is our reward: a complete failure by GM to address the reasonable needs and concerns of our members,” said UAW Vice President Cal Rapson, director of the union's GM Department. “Instead, in 2007 company executives continued to award themselves bonuses while demanding that our members accept a reduced standard of living.
Negotiation Fact Sheet

Facts about GM-UAW labor talks
  • GM and the UAW have been discussing a historic deal that would shift the automaker's obligation for more than $50 billion of retiree health care to a trust fund aligned with the union. The UAW has also asked for assurances that GM will not shift more production outside the United States to lower-cost economies such as Mexico.
  • GM, which has posted a combined loss of $12.3 billion over the past two years, already cut its factory payroll by more than 34,000 and plans to shutter 12 plants by 2008. GM's U.S. market share, which reached 46 percent in 1978, had plunged to 24 percent by 2006.
  • The average GM worker made $39.68 per hour in 2006 with benefits including health insurance representing another $33.58 per hour. U.S. automakers argue escalating health care costs amount to a labor cost disadvantage of almost $30 per hour on average against Japanese rivals led by Toyota Motor Corp.
Job Security and Health Care are Top Issues

Reuters is reporting job security and health care as issues.
GM and UAW negotiators had agreed during the weekend to the broad terms of a deal that would reduce GM's nearly $5 billion annual health-care bill, people briefed on the talks said.

Under that plan, widely considered the central issue in the complex talks, GM would shift responsibility for retiree health care to a new UAW-aligned trust fund.

Wall Street analysts have said such a step could cut GM's annual costs by $3 billion in exchange for a one-off payment expected to top $30 billion. Other key issues in the talks include GM's desire to hire new workers at a lower wage rate and the union's request that the automaker commit to maintaining production in the United States over the duration of the coming contract.
An agreement between management and the UAW was essentially worked out over health care but failed on job security and other issues. The UAW struck GM in response. Who has the better hand?

GM Daily Chart

(click on chart for a crisper image)

The share price of GM rose earlier this month on news of possible agreement on a health care package. Shares of GM are still holding their own in face of the strike.

Overcapacity Issues

Headed into a recession there is still an overcapacity issue. The Car Connection is asking Will Auto Sales Slow in 2008?
Most major forecasts for new car sales have been reduced. J.D. Power & Associates said it now expects sales of only 16.2 million vehicles this year. Doubt also is beginning to creep in about the forecasts for 2008 and some observers are beginning to speculate car sales won't recover until 2009.
All or Nothing Hardball?

The outlook for cars sales in the US is simply not very good. GM management seems to understand that. And GM's cost structure is still high compared to Toyota and others. So management simply will not accept any contract clauses that prevent moving still more operations to places like Mexico.

What this all boils down to is GM management seems determined to break the UAW in a game of all or nothing hardball. For now anyway the market seems to like it. Who can hold out longer?

Mike Shedlock / Mish

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