GM strike impact felt across borders, talks resume

DETROIT Tue Sep 25, 2007 7:39pm EDT

1 of 12. United Auto Workers (UAW) union members picket outside the General Motors Flint Metal plant in Flint, Michigan September 25, 2007.

Credit: Reuters/Rebecca Cook

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DETROIT (Reuters) - The 2-day-old nationwide strike against General Motors Corp by the United Auto Workers union was already being felt across borders on Tuesday, threatening production in Mexico and shutting down Canadian plants, as both sides resumed bargaining.

More than 73,000 UAW-represented factory workers walked picket lines in the first national strike against the top U.S. automaker since 1970.

The strike began on Monday after 10 weeks of contract talks seen as crucial to GM's survival as it restructures money-losing U.S. operations and tries to free itself from a health-care obligation of more than $50 billion.

The impact from the UAW-ordered shutdown of more than 80 GM facilities in the United States hit GM's plants in Canada and Mexico, which are closely aligned to the U.S. operations and depend on them for some auto parts.

Two GM plants in Ontario, Canada, shut down due to the strike, with the company reviewing the status of another plant, a GM spokesman for Canada said.

GM employs some 17,000 workers in Canada who could face layoffs because of the walkout. Canadian Auto Workers union President Buzz Hargrove said on Monday up to 100,000 Canadian workers could be out of a job if the U.S. strike drags on.

GM's production at three Mexican plants could be hit because of a pledge by the Teamsters union to stop hauling the company's vehicles across the border into the U.S. market.

PICKET SIGNS

Workers at GM facilities continued to picket on Tuesday with signs that read "UAW on Strike."

"No one wants to see GM hurt, no one wants to see them go down the tubes," said Jim Brown, 58, a 38-year veteran of GM, who was picketing in Flint, Michigan. "But we have to keep our standard of living and GM is going to have to cooperate."

UAW President Ron Gettelfinger told WJR radio in Detroit on Tuesday that the strike may bring a quicker end to the impasse between GM and the union.

"Obviously, we did not want to strike, but that's what was required and in many ways it may be a good thing because it'll bring an end to this thing quicker, we hope," Gettelfinger told the radio station.

The UAW has said the automaker pushed the union into striking by not showing a willingness to meet it half way on crucial issues such as job security.

Gettelfinger had cautioned on Monday that the UAW had no intention of suspending the strike before an agreement was reached.

Many analysts predicted that a protracted strike against the largest U.S. automaker was unlikely and the two sides could still settle on a wage and benefit deal that delivers many of the sweeping concessions GM has sought.

"The action is designed to allow UAW leaders to look vigilant in fighting to preserve benefits, members to feel concessions are not being given gratuitously, and GM management to appear to be maximizing shareholder value," Goldman Sachs analyst Robert Barry said on Tuesday.

He added that a short strike could help GM trim bloated inventories.

Barclays Capital Research analysts said the strike was unlikely to go beyond two weeks.

"Both the UAW and GM are aware of the fact that the longer the strike goes on, the more significant the cash burn -- cash that could have been used for pre-funding (retiree benefits) for hourly workers and for signing bonuses," Barclays analysts Chester Luy, Patrick Look and Julie Schultz said in a note.

GM, Ford and Chrysler are seeking concessions from the UAW to close a labor cost gap with Toyota Motor Corp and other automakers operating in the United States.

Negotiations between GM and the UAW included a GM proposal to cut health-care costs by establishing a trust fund for retiree-related costs.

Under that plan, GM would shift responsibility for retiree health care to a new UAW-aligned trust fund known as a voluntary employee beneficiary association, or VEBA. 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.

The outcome of this round of talks is seen as crucial to efforts by the Big Three Detroit-based automakers to recover from combined losses of $15 billion last year and sales difficulties that have driven their share of the U.S. market below 50 percent.

(Additional reporting by David Bailey in Detroit, Jason Lange in Mexico City and John McCrank in Toronto)

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