GM, UAW Resumption of Talks May Signal Short Strike (Update1)

By Jeff Green and John Lippert

Sept. 25 (Bloomberg) -- The United Auto Workers' return to bargaining with General Motors Corp. within hours of calling the first national strike against the automaker in 37 years may signal the union's desire for a quick end to the walkout.

``It shows that the union leadership does in fact want to reach an agreement,'' said Jules Crystal, a labor lawyer at Bryan Cave LLP in Chicago, who has negotiated more than 260 contracts with the UAW and other unions for auto-parts suppliers. ``In many cases, the union would walk out in a huff and say, `Call us when you're ready to talk.'''

Yesterday's 11 a.m. strike followed almost 25 hours of continuous bargaining in Detroit. By early afternoon, bargainers returned to the table for a session that lasted until about 8 p.m. Talks are scheduled to resume this morning.

The showdown between GM and the UAW, while pivotal to the automaker's future profit and the union's dwindling membership, may not match the battles the two sides waged during the union's infancy in the 1930s. Neither side can afford a long strike that cuts GM profit or gives Toyota Motor Corp. a chance to win more U.S. buyers and force the closing of even more UAW plants.

The strike idled GM workers at more than 80 GM auto- assembly and parts operations in the U.S. and may cause shutdowns throughout Canada and Mexico. A prolonged walkout threatens supplies of such vehicles as the Buick Enclave, the automaker's hopes for ending seven straight years of U.S. sales declines.

`Waiting to Pounce'

``Toyota is probably just waiting to pounce, to take more market share,'' said Crystal, referring to Toyota's claim to 16.2 percent of the U.S. market so far this year, from 9.3 percent in 2000. GM's share in that span fell to 23.6 percent from 28.1.

The dispute highlighted the conflicting goals of GM's Rick Wagoner, 54, in his eighth year as chief executive officer, and the UAW's Ron Gettelfinger, 63, in his second term as president.

Wagoner is using the negotiations to cut labor and health- care costs that contributed to $12.4 billion in losses in 2005 and 2006. Gettelfinger seeks to preserve pay, benefits and jobs, while U.S. automakers GM, Ford Motor Co. and Chrysler LLC shed sales and market share to Toyota and other Japanese rivals.

The expectations that the union established in the 1950s under President Walter Reuther -- such as pensions, health care and regular wage increases -- may need to be satisfied in different ways, said Paul Gerhart, a professor at Case Western Reserve University in Cleveland.

Reuther's Legacy

``It's not really Reuther's underlying goals that are on the table; what's on the table is, `How do you achieve them?''' Gerhart said. ``Reuther himself said a contract is not a dead piece of paper; it's a living document.''

Gettelfinger yesterday said the union supports the central idea of the talks, a plan to transfer an estimated $50 billion in future UAW retiree health-care costs to the union in exchange for a one-time payment from GM to set up a trust fund. Future health-care payments would come from income earned off the investments.

The strike was about job security and other traditional issues, not the health-care plan, he told reporters. Gettelfinger accused GM of being ``one way'' and not serious about reaching an agreement during his midday press conference before saying the UAW negotiating team planned to return to the table after the media briefing.

GM, in a statement yesterday, said it sought an agreement ``as soon as possible.''

An Informed Union

``There is the possibility that the union will fight to the death because no offer is acceptable, but I don't think it operates that way,'' said John Casesa, managing partner of New York-based consulting firm Casesa Strategic Advisors LLC. ``The UAW is well informed, and they will work something out.''

GM was unchanged at $34.74 at 7:10 a.m. before the start of regular trading on the New York Stock Exchange. The shares rose 13 percent this year before today.

The automaker's 8.375 percent bond due July 2033 climbed 1.75 cents to 89 cents on the dollar, the highest since July 19, according to Trace, the bond-price reporting system of the NASD. The yield fell to 9.53 percent.

Credit-default swaps tied to GM's bonds rose 10 basis points to 560 basis points, according to Credit Suisse Group, signaling deterioration in investor confidence. The price means it costs $560,000 a year for five years to protect $10 million of GM's bonds.

Rising Stakes

The stakes rise as the strike drags on. GM will lose output of about 12,200 cars a day for the first 36 hours, and the toll will rise to 18,100 cars daily after 72 hours as plants in Mexico and Canada run out of U.S.-made parts, CSM Worldwide Inc. analyst Michael Robinet said yesterday. GM could withstand a strike of two or three weeks before dealers face any shortages, he said.

``As long as they're talking there's hope,'' said Sean McAlinden, an analyst at the Center for Automotive Research in Ann Arbor, Michigan. ``If they stop negotiating, things could slip out of control.''

Ahrens has seven years at the plant, where she works nights installing speakers in sport utility vehicles. She waited outside the building today for her husband, Ron Ahrens, who has worked there for 21 years.

The couple has three children, including a college freshman, and Ahrens worried about how they would pay their bills.

"This is horrible, but we're die-hard union, so we have to," Ahrens said. "We got a mortgage, two car payments and tonnes of freaking bills."

CAW chief fears as many as 80,000 to 100,000 employed in the auto industry could soon be out of work

Chris Sorensen

Business Reporter

Sep 25, 2007

Officials at GM Canada have decided to close a second car assembly plant in Oshawa because of a strike by General Motors Corp.’s U.S. workforce that has stopped the flow of auto parts to the sprawling complex just east of Toronto.
Plant employees scheduled to work the evening shift, which begins mid-afternoon, are being told stay home, according to Stew Low, a GM Canada spokesperson. The plant, which makes the Buick Lacrosse and Allure models, employs about 2,500 workers.

“By the end of the day shift today the plant will be totally shut down,” Low said.

The Canadian arm of the giant automaker already shut down one of its car assembly plants early this morning, affecting about 3,000 workers. That plant produces the Chevrolet Impala.

Union officials say GM’s Oshawa truck plant, with about 4,000 employees, has enough parts to keep running until later in the week. The GM Canada transmission plant in Windsor, Ont., closed yesterday within an hour of the U.S. strike beginning yesterday, affecting about 1,300 workers. An engine and transmission plant in St. Catharines is expected to close by the end of the week putting another 3,000 out of work.

GM’s American workforce walked off the job yesterday morning, idling some 80 plants in the U.S. and creating the prospect of more shutdowns in both Canada and Mexico. It is the first national strike at GM in the U.S. in 37 years.

GM assembly plants in Canada rely on components that the auto giant produces in the U.S., while domestic parts makers supply the company’s vehicle operations south of the border. The assembly plants rely on just-in-time deliveries and hold little inventory so a strike would quickly eliminate any demand.

Buzz Hargrove, the head of the Canadian Auto Workers, has estimated that the strike could result in as many as 80,000 to 100,000 unemployed in Canada, mostly in Ontario.

Talks between the United Auto Workers and GM are continuing today, leading some observers to believe the strike may not last long.

“It shows that the union leadership does in fact want to reach an agreement,” said Jules Crystal, a labour lawyer at Bryan Cave LLP in Chicago, who has negotiated more than 260 contracts with the UAW and other unions for auto-parts suppliers. “In many cases, the union would walk out in a huff and say, ‘Call us when you’re ready to talk.’”

The showdown between GM and the UAW, while pivotal to the automaker’s future profit and the union’s dwindling membership, may not match their battles of the 1930s. Neither side can afford a long strike that cuts GM profit or gives Toyota Motor Corp. a chance to win more U.S. buyers and force the closing of even more UAW plants.

TOM KRISHER and DEE-ANN DURBIN

Associated Press

Sep 28, 2007

DETROIT – If 74,000 United Auto Workers ratify a groundbreaking new contract with General Motors Corp., its provisions likely will save the company about $3 billion (U.S.) per year which it can pump into the development of new products, according to several industry analysts.

The savings estimates, made largely on news reports since the contract provisions haven't been released, show that the biggest savings would come from shifting the cost of retiree health care from GM to a union-run trust called a Voluntary Employees Beneficiary Association, or VEBA.

GM says it now pays about $3.3 billion per year for retiree health care, most of it for retired hourly employees and their spouses. That cost will be erased with the new contract, but those savings will be offset by other terms in the deal, such as a provision to hire temporary workers and pay them at the full-time rate.

Shelly Lombard, senior high-yield credit analyst at New York-based bond research firm GimmeCredit, estimated the VEBA alone would save GM $3 billion per year. But she said the savings could be larger because the contract will in some way modify the jobs bank, under which the company pays laid-off workers most of their salaries.

The contract also includes lower wages for some new hires and offers early retirement and buyout packages to entice higher-paid workers out of those positions, according to a person who was briefed on the contract but requested anonymity because the details haven't been released.

Those changes would further increase GM's savings. It has spent millions on the jobs bank alone, Lombard said.

JPMorgan analyst Himanshu Patel, in a note to investors yesterday, estimated the annual savings at $2 billion, with the VEBA making up 60 to 70 percent. Today, he increased the estimate to $3 billion after finding out more details including a two-tier wage scale that may apply to more workers than expected.

Under the deal, GM would pay the union about 70 percent of its total retiree health care obligation over the life of all current and potential retirees, another person briefed on the talks said. That person also didn't want to be identified because the details have not been released.

GM says its unfunded obligation is about $51 billion for all retirees, and analysts estimate that the company would pay the UAW around $35 billion.

"The funding is expected to come mostly from cash and in staggered payments over two years," Patel wrote.

GM was seeking to cut or eliminate what it says is a roughly $25-per-hour labour cost disparity with Japanese automakers that have U.S. plants. GM wouldn't say how much the gap was closed, deferring comment on the contract until after UAW members vote on the contract. But GM Chairman and Chief Executive Rick Wagoner said in a statement that the pact helps GM "close the fundamental competitive gaps that exist in our business.''

Kevin Tynan, senior automotive analyst for Argus Research Corp., estimated that the deal will cut $12.50 to $15 from that gap, probably not enough to make GM completely competitive with its chief rival, Toyota Motor Corp.

Still, the contract would help close the gap and allows GM to invest more in car and truck development, which should help the company return to at least a small profit in North America, Tynan said.

"It's not necessarily the silver bullet, but the feeling is that it gives them a little bit of financial flexibility," he said.

GM, he said, has no choice but to reinvest any savings it realizes into products so it can stem its market share decline. Over the last 30 years, GM's market share has fallen by nearly half to 24 percent.

"That's what should be your focus, being the best automaker. Product drives everything," said Tynan, who believes GM has been out of touch with what consumers want.

GM has raised its capital spending, which primarily goes for new products and manufacturing, from $6.6 billion in 2003 to a projected $8.5 billion to $9 billion this year, Lombard said.

In past years the company didn't generate enough cash to cover those and other costs, so the money had to come from asset sales or borrowing, she said.

"Typically, you would certainly hope that the vast, vast majority of those savings drive to the bottom line, but of course if they invest more in product, that would drive stronger performance to the bottom line," said Michael Robinet, vice president of global forecast services for CSM Worldwide, an auto industry consulting company based in Northville.

Local union presidents, who are due to assemble in Detroit on Friday to be briefed on the deal, said their members will vote on the contract next week.

UAW President Ron Gettelfinger said he expects it to pass despite some members' concerns about its terms.

Gregg Shotwell, a GM worker and frequent critic of the UAW, was urging fellow workers to vote against it. Shotwell said the agreement to pay lower wages to some workers is discriminatory and destructive to the union.

"If sacrifices are necessary, they should be shared equally by all classes and all generations starting with the captains of industry," Shotwell said in a memo posted on the Web site of the dissident union group Soldiers of Solidarity.

GM shares were down a penny to $36.45 in premarket electronic trading today.

Date posted: 10-09-2007


DETROIT — The United Auto Workers union has set a strike deadline of 11 a.m. Wednesday for Chrysler. Marathon negotiating sessions are continuing as word also leaks out of Chrysler that more layoffs — white- and blue-collar — are in the offing and top Chrysler executives meet with dealers and the press in Las Vegas.

A strike is possible and even probable as Chrysler has high inventories of unsold vehicles. Already, it has idled a number of U.S. assembly plants this week and next as well as eliminating overtime at other plants to cut production. A strike likely would be short; the UAW's strike against General Motors lasted only 41 hours.

While the union wants an agreement patterned after the one it negotiated with GM, now being voted on by union members, Chrysler's situation is different. Cerberus Capital Management, Chrysler's new owner and already in debt for its purchase of the automaker, is reluctant to put cash into a union-run health care fund and to make product commitments to plants, since it will be pruning models from its portfolio.

Meantime, word is leaking out of Chrysler — or deliberately being leaked to strengthen the automaker's negotiating hand — that Cerberus is planning even deeper job cuts than those announced earlier this year.

The original recovery plan called for cutting 13,000 jobs, including 2,000 salaried ones by 2009. Now Chrysler plans to cut 5 percent more — or about 500 white-collar jobs as well as eliminate a third of its contract workers, or about 1,100 jobs, according to the Detroit Free Press Tuesday edition.

Chrysler's top executives, including CEO Bob Nardelli, formerly of Home Depot, and vice chairman for sales and marketing Jim Press, formerly of Toyota, face dealers at their national convention in Las Vegas and meet with the media there this week.

What it means to you: Apprehension abounds at Chrysler.

Chrysler's top executives, including CEO Bob Nardelli, formerly of Home Depot, and vice chairman for sales and marketing Jim Press, formerly of Toyota, face dealers at their national convention in Las Vegas and meet with the media there this week.

TOM KRISHER

Canadian Press

Oct 10, 2007

DETROIT – Chrysler's Canadian car-assembly factories could be affected within a day or two unless a strike by American workers against the automaker is settled quickly.

A lack of U.S.-sourced parts would hit the minivan plant in Windsor within about 24 hours and the sedan plant in Brampton within 48 hours if the United Auto Workers strike was sustained, Chrysler Canada spokesman Ed Saenz said today.

"We take axles, engines, transmissions from the U.S., and when those stop coming because the employees at those plants are not building them, it'll force us to stop production on the vehicles here," Saenz said.

He added that the U.S. job action would not affect Chrysler's Etobicoke casting plant in Toronto "in the near future."

Thousands of Chrysler autoworkers in the U.S. started to walk out today after the automaker and the United Auto Workers union failed to reach a tentative contract agreement before a union-imposed deadline.

It would be the first UAW strike against Chrysler since 1997, when one plant was shut down for a month, and the first strike against Chrysler during contract talks since 1985. There was no immediate official word from the union or Chrysler following the 11 a.m. deadline whether it was a nationwide strike.

The UAW, which must reach new four-year agreements with all three Detroit automakers, struck General Motors Corp. for two days before reaching a tentative agreement with the automaker on Set. 26. The union hasn't yet reached a deal with Ford Motor Co.

Chrysler has 24 U.S. manufacturing facilities, including 10 assembly plants, but not all would be affected by a strike. The automaker had already planned to idle five assembly plants and some parts making factories for short stretches during the next two weeks in an effort to adjust its inventory to a slowing U.S. automotive market.

A short strike would likely have little effect on the automaker, which had a 71-day supply of cars and trucks on dealer lots at the end of August, according to according to Ward's AutoInfoBank. A walkout that lasts longer than a month would start to cut into sales, according to Paul Taylor said, chief economist with the National Automobile Dealers Association.

Talks between the UAW and Chrysler began in July but accelerated last weekend. The union set the 11 a.m. deadline to reach a tentative agreement or go on strike. The UAW represents about 45,000 workers at Chrysler's U.S. manufacturing facilities, making it the smallest of the Detroit automakers.

Chrysler was a wild card in this year's negotiations because it was bought by the private equity firm Cerberus Capital Management LP shortly after the talks began. DaimlerChrysler AG, which is now called Daimler AG, sold a controlling stake in the 82-year-old Chrysler to Cerberus in August. The firm has since hired Bob Nardelli, formerly head of The Home Depot Inc., to be Chrysler's chairman and chief executive. Chrysler Vice Chairman and President Tom LaSorda, who led Chrysler before Nardelli was hired, is representing the company in the talks.

Many industry analysts believe Cerberus will fix the money-losing Chrysler quickly, return it to profitability and sell it for a huge profit, perhaps to a foreign auto company that wants a stronger U.S. presence. It was unclear how Cerberus's plans for the company would factor in the talks.

The bargaining appeared to center on the UAW granting the same health care cost concessions to Chrysler as it did to GM and Ford in 2005, as well as how much Chrysler would pay into a company-funded, UAW-run trust that would take on its roughly $18 billion worth of retiree health care costs. GM has already agreed to form such a trust.

Also at issue was the union's desire for job security pledges at U.S. factories and Chrysler's wish to contract out parts transportation now done by higher-wage union members, according to a person briefed on the talks. The person requested anonymity because the talks are private.

The union normally settles with one U.S. automaker and then uses that deal as a pattern for an agreement with the other two. But several industry analysts have said that Chrysler and Ford have different needs and therefore need different contracts.

Agreements must be ratified by UAW members to go into effect. GM's 74,000 UAW members have been voting on their agreement for the last week and totals were expected today.

Date posted: 09-30-2007


For years, executives running General Motors, Ford and Chrysler have complained that they couldn't compete with Honda, Nissan and Toyota because of higher labor costs, especially the legacy costs of suffocating health care and pension payments to ballooning ranks of retirees.

Going into negotiations for a new four-year contract with the United Auto Workers (UAW) early this summer, Detroit automakers put the gap with their Asian rivals at $25-$30 per hour, a number for wages and benefits that had been validated by outside sources.

Indeed, the annual price tag for retiree health care was put at about $5 billion per year for GM alone, with its future liabilities estimated in the ballpark of an eye-popping $50 billion.

Now that GM has negotiated an extremely favorable contract with the UAW, both Ford and Chrysler likely will copy it fairly quickly. So now there can be no more excuses for cars that don't measure up to the competition.

Solving the Detroit Health Care Crisis
Being hailed by observers as a historic concession by the UAW that will transform future labor relations, the accord gives GM (and subsequently Ford and Chrysler) nearly everything they asked for: 1) a union-run trust fund that gets the huge retiree health care liability off the automaker's books; 2) wages frozen for the four years of the contract; 3) and a two-tier wage structure that will pay non-core employees such as groundskeepers less than union workers who build cars.

In a statement issued upon the completed negotiation of the automaker's contract with the union, GM Chairman and CEO Rick Wagoner said: "This agreement helps us close the fundamental competitive gaps that exist in our business."

Analysts agree. They see the contract as lifting the prospects of a successful turnaround for GM and eventually Ford and Chrysler.

Bulletin to the Big Three: No More Excuses
But this labor settlement also gives GM and its Detroit counterparts no more excuses as to why they can't compete with the Japanese. No more whining about the lack of a "level playing field." How many times did we hear that phrase? And no more complaining about "legacy costs."

Sure currency issues exist, but all global automakers play on the same field and currencies are a matter of gain here, lose there. And yes, regulatory issues are formidable, but everyone has to meet them.

And let's not forget, Detroit automakers already have squeezed the bejeezus out of their suppliers on costs — sometimes to the detriment of quality, as they now realize.

Now the Detroit automakers — and their management — have no one but themselves to blame if they don't succeed in turning around their corporate ships.

Who's in Charge?
All along, the union has argued (and rightly so) that not all of the Big Three's woes should fall on the shoulders of those who build the cars.

They don't decide what vehicles will be built. They don't design them. They don't engineer them. Marketers and product planners figure out what supposedly will sell; they, in turn, sell their ideas to management. Designers style them, and engineers architect them.

Yet if the product planners miss the mark or designers select the wrong fashion or the engineers goof, it has been the union members who have paid with job losses.

So with a favorable contract settled for the next four years, the Detroit automakers have to step up and take some responsibility for the process.

Here's Your List
Here's our to-do list for Detroit automakers:



Use the money you are saving from concessions from the union and suppliers to deliver top-quality, highly compelling, well-priced vehicles that customers want to buy. Among them should be a host of fuel-efficient models and a range of small cars to challenge the Asians.

One analyst interviewed by a Detroit television station says the true test of this contract will be the ability of American automakers to build a B-segment car like the Honda Fit and Nissan Versa in the U.S., and do so at a profit. Until now, they haven't even been able to build a C-segment car like a Chevy Cobalt or Ford Focus at a profit.


Invest in vehicles and technologies that will leapfrog your Asian rivals, just as Toyota did with the Prius hybrid. In GM's case, it must deliver on the Chevy Volt and other models that use its E-Flex electric propulsion system, especially after all the public relations hype. Not delivering on this promise would be unforgivable.


Get clever on becoming more efficient in everything you do, from the operations on the factory floor to management meeting rooms. (For example, add up the hourly wage and benefit rate of folks in the room to figure out if a meeting is worth the price.)


Stir up those creative juices to figure out how to convince consumers that Detroit automakers build vehicles that are as compelling, affordable, desirable and durable as those made by Asian rivals. Forget the excuse that this is the media's fault. That one doesn't wash either.


Force dealers onboard. They are the face of automakers, and sometimes they are a very ugly face. Maybe automakers should get as tough with dealers about caring for their customers as they have with the UAW about labor concessions.
What Detroit automakers absolutely can't do is blow this opportunity. No more business as usual. No complacency. No big fat bonuses for management while workers' wages are frozen.

This is an opening — an opportunity — unlikely to come around again.

Union tries to organize 4,000 Cambridge workers after Canadian Auto Workers suspends campaign
Tony Van Alphen

Business Reporter

Nov 23, 2007

Another union is trying to organize Toyota's assembly operations in Cambridge after the pullout of the Canadian Auto Workers.

The International Association of Machinists confirmed yesterday it has started campaigning to gain bargaining representation for 4,000 workers at the Toyota Motor Manufacturing Canada plant.

Organizers have distributed pamphlets at plant gates and set up a website for workers to find out more information, ask questions and fill out a survey.

"In the coming weeks, we will be circulating more information to these workers on how we can address their particular concerns in all sectors of the Cambridge plant," said Ian Morland, a top organizer for the machinists.

The move follows a decision by the CAW to suspend its organizing efforts at the plant after four separate attempts in the past 15 years that cost several million dollars.

"After much discussion and deliberation, we have concluded that the best course of action, if we want to ultimately succeed, is to suspend our organizing campaign for the time being," John Aman, the CAW's director of organizing, stated in a note to supporters at the plant.

"This was a hard decision to make but we think it will help us succeed down the road. Only when the workers of Toyota start to see the true colours of management, understand the reason why workers join unions and believe that it is in their best interest, will we be able to succeed."

Aman said in his note that the CAW could not gain enough support to continue.

"Is all lost? No, but it appears that at this time, the desire simply isn't there and continuing only has us spinning our wheels," he added.

Toyota spokesperson Adrian Korstanje said outside groups may have an interest in the plant's workers but they have their own "agenda."

"Our focus is to try to create prosperity and security for our team members," he said.

The CAW revealed in 2005 it was close to applying to the Ontario Labour Relations Board for a vote to represent Toyota workers after they complained about too much overtime and other company actions.

The company responded favourably to their concerns and the union's momentum fizzled.

At the time, the company's president also said in a letter to employees that they didn't need a union and it would cost them in monthly dues and work flexibility if a drive succeeded.

Meanwhile, CAW president Buzz Hargrove said he isn't objecting to the decision by the machinists' union for a serious drive at Toyota.

"The important thing is for workers to have a union," he said.

The CAW represents more than 35,000 workers at GM, Ford and Chrysler in Canada. It also has more than 2,000 members at CAMI Automotive in Ingersoll, Ont., a joint venture between GM and Suzuki of Japan. However, the CAW has been unable to crack the Toyota and Honda assembly plants since their arrival in Ontario more than two decades ago.

The United Auto Workers in the United States represents employees at Nummi Inc., a joint venture between Toyota and General Motors in California. But none of Toyota's five other assembly operations in North America has a union.