UAW, GM dig in for long haul

DETROIT — The UAW's last national strike against General Motors was over so fast that workers barely had time to ponder the consequences of missed pay, and minimal production losses were quickly made up.

But this time, with no quick resolution, both sides spent last week digging in for what could become a battle of attrition between union members whose pay and insurance have been cut and an automaker whose dealer body and supplier network already have begun feeling squeezed.

Most forecasters and Wall Street analysts agree it would take weeks, if not months, to truly dent GM's bottom line, even as the company loses an estimated $50 million to $100 million each day production is idled. Inventory levels, well above the industry average, can keep dealership lots full for the foreseeable future, but some dealers have voiced concern that parts shortages could soon cripple their service departments.

Meanwhile, some GM suppliers, including Nexteer Automotive, warned temporary layoffs were expected soon.

The UAW faces a tougher challenge so long as a deal remains elusive. Its strike fund is flush with more than $700 million, but the cost of the walkout rose unexpectedly as GM abruptly shifted responsibility for workers' health care to the union and will increase further once the union starts doling out $250 a week in strike pay.

GM's tactical decision to abruptly kick roughly 46,000 hourly workers off their normal health coverage, though it generated negative headlines, added pressure on the union. And while the work stoppage has given employees a release valve to air long-festering grievances on wages, health care and job security, many voiced apprehension as the realities of living on a fraction of their normal pay settled in.

"I wanted to do it to say I was able to strike and we made history," Domanique Henry, who works at GM's Detroit-Hamtramck Assembly plant, said Friday, Sept. 20, the fifth day of the strike. "But now it's getting serious. I have a child that I have to take care of and bills that have to be paid."

Even rank and file quoted in the UAW's advocacy materials have expressed mixed emotions.

"Hopefully this doesn't last long," Darrell Kennedy, a member of Local 22 at the Detroit-Hamtramck plant, said in a video posted late last week on the union's social media pages. "It's a hardship for most people, but I think it's a hardship everybody's willing to take, willing to accept, to prosper in the long run."

To begin the strike, the union rejected an eleventh-hour offer from GM that included $7 billion in U.S. investment, the creation or retention of 5,400 jobs, an $8,000 ratification bonus and carryover health benefits. The deal, however, failed to address the use of temporary workers or shorten the eight years it takes for new hires to earn top wages, two priorities union leaders have vowed to address.

"I don't think they're looking to get a quick deal," Art Wheaton, a labor expert at Cornell University, said in an interview. "I think they're drawing a line in the sand and trying to see who can starve each other out."

A short-term strike is unlikely to hurt GM, according to Fitch Ratings, but "as the shutdown continues, obviously there is going to be higher cash burn," Stephen Brown, senior director of U.S. corporates at Fitch, told Automotive News.

Fitch estimated that a strike lasting several weeks could result in a loss of a few billion dollars.

Still, GM has enough liquidity — $34 billion as of June 30 — to get through the strike relatively unscathed, according to Fitch.

"They don't want to have to dip into any of that," Brown said. "But nonetheless, they do have quite a bit of liquidity to help them weather a prolonged stoppage if that's what it amounts to be."

If the strike extended to a few weeks, GM could become more vulnerable, but there are actions the company could take to slow the pace of the cash burn, he said. By canceling health insurance for union members, GM has already pulled one of those levers.

Workers were continuing to get most benefits, though not vision or dental coverage, through insurance paid for by the union's strike fund, at a cost believed to be tens of millions per week.

Once plants are running again, GM likely would make up lost production with extra shifts, Brown said. "The unwinding that happens when the plants are shut down can rewind when you get back up to speed," he said.

For suppliers, a protracted GM strike could damage the bottom line as demand for their product plummets.

"There can be ripple effects through the supplier base," Brown said. "I don't think it's a crisis at this point, certainly, but it's something we'll be watching."

Small suppliers that rely on GM for a substantial chunk of their business are most vulnerable, he said. And if a halt in GM business forces them to shut down, manufacturers that also rely on those suppliers could be at risk, he said.

The strike would have a minimal impact on larger, more diversified suppliers.

Nexteer Automotive warned that it would begin temporary layoffs unless the strike was resolved quickly.

Nexteer, of Auburn Hills, Mich., ranks No. 60 on the Automotive News list of the top 100 global suppliers, with global parts sales to automakers of $3.91 billion in 2018.

GM's operations in Canada also were feeling strain from the strike. GM paused vehicle production at an assembly plant in Oshawa, Ontario, on Friday, according to union officials in Canada. An official told Automotive News Canada last week that nearly all of the plant's 2,600 workers would be temporarily laid off by the end of last week.

In a note to workers last week, UAW Region 1A Director Chuck Browning acknowledged that the strike was a "heavy burden" but stressed the importance of what GM workers were fighting for. He promised: "We will last one day longer than the company."

That sentiment was echoed by workers picketing outside GM's Flint Assembly plant in Michigan, which builds highly profitable heavy-duty pickups. Ken Roy, a member of Local 598 with 40 years at GM, said it was his third strike, following the two-day nationwide stoppage in 2007 and the 54-day walkout by Flint workers in 1998. He was encouraged by the support workers received from the community, including food and drinks donated by local businesses, but concerned about what could happen if the strike stretched into colder weather.

"Right now, it's pretty good. We're in the honeymoon period," Roy said. "Give us a few weeks, and see what happens. Things change when you start to get the barrels with the wood out."

Tim Duplanty, a Local 598 member with 25 years at GM, said he and his family were prepared to cut back.

"We won't be going to the movies or taking any trips, and that's fine," he said. "This is more important."

Deborah Raita, picketing late last week outside Detroit-Hamtramck, said living on $250 a week puts pressure on "everybody that doesn't live at home with Mom and Dad." Still, she said, it's important to fight.

"It's worth getting what we want," Raita said. "We're going to struggle, but what's life without a struggle?"