Auto analyst: "this has been a lose-lose all the way around..."
Wednesday July 29, 3:03 am Eastern Time
GM wins labor peace in UAW strike deal -analysts
By David Lawder
DETROIT, July 28 (Reuters) - The deals to end paralyzing strikes
against General Motors Corp. (GM - news) do not solve the
automaker's cost problems at a stroke but they do offer GM labor
peace for the next 14 months, analysts said Tuesday.
Terms of the accords -- at least those outlined by the United
Auto Workers union on Tuesday -- were not worth the costs of the
54-day dispute, according to several industry experts.
''I think this has been a lose-lose all the way around,''
Canadian independent auto analyst Dennis Des Rosiers told Reuters
Financial Television.
''There have been no winners. I don't care how they try to put a
fresh face on this and try to come out looking good, this was a
loss on both sides,'' he added.
The strikes cost GM an estimated $2.5 billion in lost profits and
at one point idled more than 200,000 workers, who lost thousands
of dollars in wages.
GM lost production of about 592,000 vehicles to the strike, about
half of which it may be able to recover the next four months,
according to CSM Forecasting. But GM's U.S. market share for the
year is expected to sink below 30 percent, with much of the
losses going to rivals Ford Motor Co. (F - news) and Chrysler
Corp. (C - news).
Comerica Inc. (CMA - news) chief economist David Littman
estimated that the strikes, which left 25 of 29 GM North American
assembly plants idled on Tuesday, shaved one fourth of a
percentage point off U.S. economic growth during the second and
third quarters. GM and supplier employees in Michigan alone lost
some $200 million in income.
At the Flint Metal Center, site of the most difficult dispute, GM
agreed to complete a previously announced investment of $300
million in new stamping equipment, in exchange for a 15 percent
productivity gain in the engine-cradle production area.
''Couldn't GM have signed what they signed today two months ago
without all the lost wages and income?'' asked Burnham Securities
analyst David Healy. ''It seems like GM was more interested in
getting back to work rather than solving their problems.''
However, Healy said pro-union details are normally disclosed
first, to persuade workers to ratify the pacts. Details that aid
GM will trickle out later, he said.
But a significant development that has been lacking in previous
strike settlements is the prospect of labor peace until the next
set of national negotiations in September 1999.
For several years, GM ended strikes by adding jobs and gaining a
few productivity improvements, only to face strike threats at
other plants. The accords announced Tuesday clear up all
significant near-term grievances between the UAW and GM.
In the case of two brake plants in Dayton, Ohio, GM won a UAW
pledge not to strike before January 2000. The automaker agreed
not to sell or close the troubled plant before then.
A 1996 strike in Dayton wrought damage similar to the Flint
walkouts, shutting down 26 GM assembly plants at a cost of $900
million in just 17 days.
Comerica's Littmann said the U.S. economy will absorb the impact
of the Flint strikes with no difficulty, but he added that GM
will have a harder time recovering.
The company, which is launching a new full-size pickup truck, has
lost crucial truck market share to Ford and Chrysler, which both
have lower costs than GM. And as GM dealer inventories have
dwindled, its rivals have been able to reduce incentives, making
them even more profitable.
GM also burned up $4.5 billion in cash reserves in the second
quarter, leaving it less to spend on crucial new product programs
and new capital investments, such as overseas production.
''One quarter of the year has essentially been given to
competitors,'' Littmann said.
GM must face off with the UAW again in 1999, when its national
labor contract expires, and it will have to tackle many of the
same competitiveness issues.
Analysts expect the union to seek permanent no-close or no-sale
clauses for plants such as Dayton and the Delphi East spark plug
and instrument cluster plant.
Failure to resolve differences in those talks could lead to a
national strike against the automaker. The last such national
strike took place in 1970 and lasted 67 days -- a strike rivaled
in scope by the Flint walkouts. |
