Detroit: not the city of patience

From today’s Financial Times (and I’m late to this one – but I have revisions and mid-terms holding me down, if not under, for at least another week).

The United Auto Workers union called a strike against General Motors’ US operations on Monday, putting the struggling carmaker’s turnround plans in jeopardy.

The strike call, involving about 80,000 workers at 70 plants, came after a breakdown in talks in Detroit on a new four-year labour contract.

A “breakdown in talks”? Their contract expired how long ago, now, a fortnight? That would be the slowest breakdown in history (speaking of automobiles…). Of the competition:

Talks between the UAW and Ford and Chrysler are on hold pending the outcome of negotiations with GM. The union is likely to use a settlement at GM to extract similar concessions from the other two, who face similar challenges as they seek to cut costs in the face of mounting competition from foreign carmakers.

The union had better bloody hope they extract a settlement, rather than have one extracted from them instead. Meanwhile, optimism for GM remains, apparently, high – much like optimism over a deal has remained high since the September 14 deadline. I’m not sure:

GM MSN money

But who am I to argue? The price is still up, relative to earlier in the week. I think people expected some good news today – not a strike.

The interpretation that I would go with is that this is sort of a last-minute push by the unions to get GM over the hump on a couple of benefits,” auto analyst David Healy of Burnham Securities, told Reuters.

The two sides were negotiating again this afternoon.

Still, the strike marked an unexpected twist after the negotiations seemed to have brought the two sides close to an historic deal that would allow GM to cut its $5 billion annual health-care bill.

And if the strike lingers, it could prove costly. CNBC’s Phil LeBeau said the strike could cost the company $100 million a day in lost revenue as its daily production of 12,200 cars is halted. Because power trains for all GM vehicles in the Americas are made in the United States, he added, a strike would start to hit production in Canada by Thursday and Saturday for production in Mexico and South America.

Wall Street analysts have said establishing a VEBA could cut GM’s annual costs by $3 billion in exchange for a one-off payment expected to top $30 billion.

“A token strike is possible, but we suspect the primary motivation of the strike announcement, coming nine days after contract expiration, may be to pressure GM to finalize lingering issues,” JPMorganChase analyst Himanshu Patel wrote in a note to clients.

Optimism is probably safe enough: the unions face bringing Detroit down more or less entirely with either prolonged action (which, one assumes, its workers cannot afford) or very high demands.


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