UAW strikes GM as talks fail to produce a deal

DETROIT (Reuters) - More than 73,000 General Motors Corp workers walked off the job on Monday after marathon contract talks between the United Auto Workers union and GM stalled and the union called the first national strike since 1970 against the top U.S. automaker.

The strike marked an unexpected twist to the 10-week round of contract talks seen as crucial to GM’s survival as it restructures its loss-making U.S. operations and seeks to cut itself free from a health care obligation of over $50 billion.

Analysts said the automaker could ride out a short work stoppage with many predicting the two sides would still settle on a deal on wages and benefits that delivers many of the sweeping concessions GM has sought.

But the economic and political impact from the UAW-ordered shutdown of over 80 GM facilities across the United States was immediate.

The White House urged both sides to stay at the bargaining table. The Teamsters union said it would honor the strike by not hauling GM vehicles for the duration of the walkout.

By Monday afternoon, the strike had already cost GM roughly 4,000 vehicles in lost production, according an estimate by CSM Worldwide, auto industry tracking company.

A protracted strike could force GM to burn through $8 billion a month, Lehman Brothers analyst Brian Johnson said.

UAW President Ron Gettelfinger, regarded as a pragmatist willing to break with the union’s past practices, said GM had pushed the union into striking by not showing a willingness to meet it halfway on crucial issues such as job security.

“You can be pushed off a cliff and that’s what happened here,” Gettelfinger said, speaking to reporters at a news conference at the union’s Detroit headquarters.

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The UAW and GM resumed negotiations on Monday afternoon, marking 21 days of unbroken contract talks between the two sides.

GM said it was “disappointed” in the UAW’s decision to strike and wanted to reach a deal.

“The bargaining involves complex, difficult issues that affect the job security of our U.S. work force and the long-term viability of the company,” GM said in a statement.


GM stock, which had traded sharply higher before the UAW strike, closed down 20 cents to $34.74 on the New York Stock Exchange on Monday. The shares have traded in a 52-week range of $38.66 to $28.49.

Many analysts said both GM and its major union had been weakened by the U.S. auto industry’s long-running decline -- making it doubtful either side has the stomach for a protracted strike.

“This could be a short-term impasse, or it could go on for a really long time and really be a serious blow, particularly to the union,” said David Cole, chairman for the Ann Arbor, Michigan-based Center for Automotive Research.

GM, Ford and Chrysler are seeking concessions from the UAW to close a labor cost gap with Toyota Motor Corp and other Japanese automakers operating in the United States they say amounts to more than $30 per hour for the average worker.

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Unless GM gets substantial concessions from the UAW, it could be forced to shut more of its U.S. plants and accelerate a restructuring that has already cut 34,000 UAW workers from its payroll in the past year, Cole said.

“If there is no contract, there is no obligation. It’s an extremely dangerous gamble,” he said.

KeyBanc Capital Markets analyst Brett Hoselton said a short strike and the accompanying lost wages could soften up the UAW rank and file “to accept more concessions, not fewer.”

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

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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.

Gettelfinger said the UAW was “more than willing” to reach a VEBA deal with GM. The problem, he said, was that GM had not closed the gap with the union on other issues such as wages, benefits and profit-sharing.

“We are ready to go in and wrap up these negotiations,” he told reporters, adding that the union would not call off its strike until it had a labor deal.

Expectations for a cost-cutting labor deal drove GM shares up almost 14 percent this month before Monday’s trading.

The outcome of this round of talks is seen as crucial to efforts by the three Detroit-based automakers -- GM, Ford Motor Co and Chrysler LLC -- 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.

By Monday afternoon, workers at GM factories across the United States were picketing with signs reading “UAW on Strike” and “Hands Off My Pension.”

A majority of GM’s 73,000 UAW-represented workers would have to ratify any deal.

The last UAW strike against GM was in 1998. That walkout at two GM parts plants in Flint, Michigan, shut down GM production and caused sales to plummet.

The UAW has not called a national strike during contract negotiations since 1976. The last national strike against GM was in 1970 when the union won a pension guarantee for workers with 30 years of seniority.

Additional reporting by Nick Carey