By on September 24, 2007

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After more than a week of overtime negotiations, the United Auto Workers (UAW) is on strike at General Motors. For those who think this action signals the beginning of the end for The General: yes and no. On the yes side, the strike will highlight the original sins that led both sides to this point. The executive greed and mismanagement. The union intransigence and denial. The strike will alert the dim-witted media that the Emperor hasn’t been wearing any clothes for decades, ding GM's rep, and make it even more difficult for the carmaker to sell cars. On the no side, GM will settle. A compromise will be reached. The same players will resume the game, poorer but no wiser.

The strike stems from one simple fact: the UAW is unwilling to take a hit for the team. As I’ve stated many times, trade unions are not in the business of surrendering wages, benefits or working conditions. It’s not in their nature. All the previous UAW “givebacks”– which supposedly signaled the union’s willingness to sacrifice for the good of the company– were nothing of the sort. They were payoffs. You want us to give up jobs? Create an attrition program. You want to increase our health care co-pays? Stick $2b in the bank. The UAW puts the “pro” in quid pro quo.

Can you really blame the UAW for holding fast to this "you'll get what you pay for" philosophy? Sure, analysts and media pundits have been bleating on about the need for GM to trim its labor costs to keep pace with their non-union competition. But how can a union member be expected to make a sacrifice when the company’s top players are paying themselves tens of millions of dollars in salary and bonuses? Do as I say, not as I do? I don’t think so.

GM went into these negotiations determined to create a $51b union-administered VEBA health care superfund. As always, the UAW was listening to WIIFM (What’s In It For Me?). You want to dump your health care liabilities on us? Show me the money. Not 65 cents on a dollar. Not 50 percent stock, 50 percent cash. A $51b health care VEBA will cost you… $51b. And while we’re at it, let’s have some job guarantees and a nice fat signing bonus.

The fact that GM didn’t give the union what it wanted has nothing to do with testicular fortitude. If GM had the money to cut the deal, they would have cut the deal. But they don’t, so they didn’t. Ten or twenty years ago, GM could have written a check or, at the least, rung-up a few bankers and arranged favorable financing. No more. Cash-wise, Forbes says they're sitting on $32b. Take off a $10b float, add up their ongoing liabilities, consider the cost of borrowing $51b and it's no wonder the VEBA was a stock-heavy deal. Or that the union walked. 

Which leaves us here: either GM will borrow the “extra” money at usurious rates to establish their beloved VEBA and settle the strike, or they’ll dump the VEBA and settle the strike with a new wage structure and working conditions. That's provided GM has the money to pay off the union for these “givebacks.” If GM can't pay the freight for ANY changes in the UAW's wages, benefits or working rules, they’ve either got to keep on paying the current rate plus a little bit ‘mo (‘cause there’s always a little bit ‘mo) or go nuclear: sit it out, file chapter 11 and hit reset.

Again, in all likelihood, GM will cave. Just as the UAW never surrenders, GM never stares them down. Meanwhile, the UAW strike is pouring gas on GM's cash conflagration. The UAW's 53-day, 9200 worker strike against GM in 1998 cost the automaker an estimated $2b or roughly $37m a day. This time 'round, 73k UAW members are on strike. This industrial action could cost GM as much as $300m per day. At that rate, GM's entire cash pile would be gone in 106 days. What's more, if GM is too cash-strapped to buy off the union now, what hope will there be in a month or more?

At the same time, the more GM publicly justifies its negotiating position– we can't keep up with the Toyotas of the world with our sky-high UAW labor costs– the more people will hear "GM can't compete." And that story renders GM's PR narrative– our house is now in order and we're on the cusp of a major product-led renaissance– meaningless. In fact, with each passing day of this strike, GM will look more and more like what it is: an old-fashioned, incompetent, easily-distracted automaker caught flat-footed by its modern, focused, streamlined, non-union competition. 

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101 Comments on “General Motors Death Watch 146: The UAW Strikes Again...”


  • avatar
    KatiePuckrik

    So GM is still like the Titanic:

    A love story no-one cares about (Bob Putz and his ego)
    The masses trying to break down the class wall (UAW Vs GM management)
    and a lead character who everyone wants to kill (I shouldn’t have to explain that parallel)

    The only difference is that GM KNEW about the iceberg miles in advance. I do wonder if there’s a mitigating circumstance that we’re not aware of, which is why GM are backed into a corner? The decisions just reek of desperation whilst still trying to save face. It reminds me of the last 2 years of Conservative rule in the UK (1995 – 1997) when the whole country was going into a deeper and deeper crisis and yet the Prime Minister (an idiot named John Major) kept coming out of his car at Downing Street waving and saying “Everything is fine! You don’t want to worry about anything!”. Makes you wonder, if they’re remotely aware about the problems around them.

    Anyway, back to point. Now, I don’t know, but I believe GM may have put an ace up their sleeve with the VEBA contributions. If GM can make the UAW accept more GM stock and less cash, then GM has, inadvertedly or otherwise, created an insurance policy against the UAW. Because now, if the UAW decide to strike or want more benefits, GM can say “If we give you those benefits, our profitability will go down and, hence, stock price!”. Thus, neutering the UAW. Maybe I’m missing a major point here, but that would be a masterstroke.

    Now to address the problem of GM retirees. Like Mr Farago says, GM can’t afford to wait them out, so I’d like to propose something else.

    According to the NYtimes GM has about 500,000 retirees on their books. Now what if, GM were to take out “hits” on these retirees and, let’s say, speed up a natural process? A contract would be about $10,000 (don’t ask me how I know this!) so $10,000 x 500,000 = $5 billion one off cost! Far cheaper! How knows, if GM’s purchasing department can negiotate the contracts they might get a discount for bulk buying! But can you imagine the fall out?

    GM will have these hitmen classed as employees, which means they’ll get healthcare benefits, too. Which will be become unsustainable in a few years, GM will then ask for concessions from them, the hitmen will refuse and go on strike! Back to square one…..

  • avatar

    11 A.M. strike deadline? Maybe the boat’ll be pulled down by this giant squid before it can sink on it’s own…

  • avatar
    mikey

    I think that when the details of the UAW/ GM contract emerge,there will be no clear winner, or loser.The tables were a little more balanced this time.It was GM.s turn to hold the gun to the UAWs head.GM was threatening 5$ an hour cuts,moving production offshore and other nastys.The UAW without thier nuke[strike option]had to take a second look at VEBA.
    As Frank W. pointed out the signing bonus is basicaly a bribe.It will ratify at about 70% with a
    good sell job from the UAW.
    With that out of the way GM can pullout all the plugs to build and market the cars/trucks that people want.
    The big crossover has been a hit,the Impala is holding its own.The Silverado IS the best full size truck on the market.
    There is some great product coming down the pipe.
    The UAW/CAW are going to see more production cut backs as GM brings production in line with sales.
    G.M. may not be #1 in five years,but they won’t be dead either

  • avatar
    starlightmica

    Gotta love Gettlefinger’s posturing, saying he was “shocked and disappointed” in the wee hours of the night.
    http://www.detnews.com/apps/pbcs.dll/article?AID=/20070924/UPDATE/709240401/1148/AUTO01

    Will things be patched over at 11AM? 55 minutes to go…

  • avatar

    “Five years from now, there will be one technology leader in the world,” Lutz told the LA Times, “and it will be GM.”

    It’s apparent he has been cracking under the pressure of being the “car czar” and coming up only trucks, but only now is it revealed that he’s been peppering halucinogens into his morning All-Bran. Go fly your P51, Bob – no one believes these announcements any longer. And this one ranks with Roger Smith’s “Import Killer” appellation on the ho-hum Saturn.

    GM has had the engineering muscle to be the technology leader for the last 20 years, but it has all been “accounted” out of the product. Evidently the direct injection motor in the CTS is a pretty decent lump, but where is this “technology” in the rest of the lineup?

    By the way, this comment is by no means “anti-American”, but simply anti-fat-cat-executive who has no idea what kind of crap they put on the street. Go drive a Cobalt, or G6, or Bonneville, Bob and then tell us about “technology”.

  • avatar
    d996

    This is Dog Day Afternoon with the UAW playing Al Pacino, instead of yelling “Attica Attica Attica” they are saying “strike strike strike”. In the end though Pacino sells out his accomplice, maybe the union will do the same in order to save themselves.

  • avatar

    “”We’ve solved one problem: the one in which the media says that GM makes cars and trucks that people don’t want to buy,” Lutz told The Atlanta Journal-Constitution’s Rob Douthit. “There’s been a continual onslaught of great new products that everybody loves. Every one of those products inevitably helps change the perception.””

    bwahahah

    that’s Hilarious

    even Alan Greenspan in his 60 minutes interview suggested the American automakers need to worry less about rate cuts and more about making cars people want to buy.

  • avatar
    jolo

    The only way the uaw will get their people to vote for the VEBA is the have a short strike that will give them a few extra signing bonus dollars. Otherwise, they will vote it down.

    If it comes to being voted down, the uaw leadership will negotiate the lower pay, higher health care co-pays and deductibles, different work rules, end of job banks, no more classifications, etc, which they will also vote down.

    Then it will be a case where the leadership will tell their people that those are the only two choices they will have, a VEBA or everything else that GM wants. With the VEBA, everything else stays the same. Guess which one they will want?

  • avatar
    NickR

    11am strike deadline, huh?

    Proving once again that the UAW inhabits the same world where Jennifer Connelly and Kate Beckinsale are fighting over me.

  • avatar
    GS650G

    Toyota is relentless. So is Honda and the rest. Sell all the Silverados and Impalas you want, it does not make up for the 50 other names that are not selling well enough. The redesigned Accord hits the street this fall and Hyundai is bringing out a V-8. Next thing you know Toyota will offer Hybrid versions of every vehicle they make. Consumers have real choices and they are not afraid to make them.

  • avatar

    NickR:

    We should all inhabit that world. Fortunately we don’t all bring down international corporations when we go out our happy place…

  • avatar
    Luther

    ““If we give you those benefits, our profitability will go down and, hence, stock price!”. Thus, neutering the UAW.”

    Yup. Gettelfinger is aware of this and is the major reason he wants a cash deal.

    3 more minutes! How exciting!

  • avatar
    vladylama

    Are the people still working? Or is there a walkout?

  • avatar
    John

    Any chance this bargaining up, to and possibly, past the deadline is theatre? Showing the rank and file that UAW leaders are earning their money. Like your car salesman going to bat for you with the sales manager?

  • avatar
    glenn126

    Well, the ship is listing badly about now, and it is about time to hit the life boats. But the UAW leadership is essentially telling the people down in the “last class” section “don’t worry, just because we’re still trying to hijack the ship, doesn’t mean there’s a problem – all is fine – you just stay down there and we’ll handle this”.

    Of course, in my estimation, the iceburg was hit in September 2005, when GM was so desperate (after losing over $4000 per car sold worldwide over the prior year) that they had to put “employee pricing” on everything – just to move the metal. I knew right then, the iceburg was hit.

    So perhaps the tilting deck, the moaning of metal, the electricity flashing on and off before going off entirely – isn’t evident to the imbiciles who run the UAW or GM itself?

    All of this will be pointed to in the future as a culmination of a disasterous 7 plus decades in which owners of industry were held, by law, in straight jackets while unions ruled the roost. Much of which comes from the greed of companies and how they treated their workforce before the sit-down strikes in ’36.

    Unions are pretty much millstones around the neck of industry in this country, now, since Federal Laws have come in protecting workers – and the unions have ended up to be worse taskmasters than the pre-1936 corporate employers.

    Of course, the Titanic literally snapped in half and sink fast. It is now 11:07, so if the UAW have walked, I have to wonder – was that a huge snapping noise I just heard?

  • avatar
    starlightmica

    Yes, Glenn, they’ve done it! Strike On!

    http://www.detnews.com/apps/pbcs.dll/article?AID=/20070924/UPDATE/709240402/1148/AUTO01

  • avatar
    Gardiner Westbound

    The UAW rank and file should be very concerned about a union administered health and welfare fund. Many union bosses and their shady associates have a long and inglorious history of mismanaging and skimming member contributions.

    Google “Union Pension Frauds”.

  • avatar
    KatiePuckrik

    Does anyone know what money on fire smells like? Well, we’re about to find out!

    The cash burn is on!

  • avatar
    jaje

    Now the real Death Watch starts.

    Katie – I love your GM option of taking care of the retirees with only $5b by doing the hits. It’s not often I inexplicably laugh out loud at work and have my tea shoot out of my nose.

  • avatar
    BostonTeaParty

    Katie, you’re right and wrong, cash burn wont take effect just yet, GMs cash flow will actually increase to a point as they wont have to pay wages to these muppets. In theory, factories idled down will save and also help remove inventory from the overstocked lines, if people buy it….
    This wont be a long strike, someone worked out the union could only pay its guys a few thousand each before they were dry. Thats no time.
    Interesting Times.

  • avatar
    guyincognito

    Just a quick calculation. Assuming workers strike at all 24 of the not soon to be shuttered North American plants and the costs to GM will be the same as the 1998 strike (2 plants 54 days $2.2billion) I calculate this is gonna cost ~$500 million/day. Is that approximately correct?

  • avatar
    dean

    Like RF wrote in his DW article, GM will blink first. It may take a few weeks, however, and it will be interesting to see how this plays out.

    Personally, I don’t expect anything major to come out of this. I think they’ll settle for a mediocre deal and GM will continue limping toward the inevitable.

    I will watch the share price, though, and may jump in and see if I can cash in on some misplaced optimism when the deal is made.

  • avatar
    RyanK02

    If they do sink, maybe Chysler can rescue some of their engineers. Then maybe they can build an attractive and efficient (for a truck) truck.

  • avatar
    Landcrusher

    Bah, it’s all so much Kuboki (sp?).

    Both sides need to have the strikes so that their constituents (workers/stockholders) will believe the final deal is the best they can get. Without the strike, you can’t keep up the unending blame game they seem to love so much.

    More interestingly, could GM legally pull the plug and say, “See ya”? I know they won’t and likely can’t for reasons outside the law, but I am still fascinated with the legal side of this union scheme. If GM were to say, “Thanks for playing, we are going to hire new workers,” would the national guard be called. What would the NG do? Lock the plant, or keep the roads open for the new workers and materials?

    At what point can a company tell a union to leave?

  • avatar
    mikey

    Update Folks : Oshawa #1 and #2 and Truck are running till we ruin out of parts Wed.or Thurs. max.
    Personally I believe we should show solidarity with our brothers and sisters in the USA.However the CAW is contractualy obligated for another year.
    I and my coworkers fully support the strike action in the USA.
    If it makes one, or all of the overpaid, underworked,bloated,incompetant
    senior management sweat.So be it!
    This action will no doubt cause a lot of heated discussion
    here at TTAC.
    This will be my last comment untill we have a settlement.
    Good luck to TTAC,good luck to the UAW.
    Michael

  • avatar
    jolo

    Oshawa #1 and #2 and Truck are running till we ruin out of parts Wed.or Thurs. max.

    …ruin out of parts…? Mikey, your Feudian slip is showing…

  • avatar
    glenn126

    Mikey, I feel for you and the rest of the workers, but you’ve kind of gone along and gone along and gone along, and so has GM. So now you’re both boxed into a corner, so to speak, on a sinking ship.

    How about this for a play-book, GM management? You could try “doing an airline” and going to a Bankruptcy judge for Chapter 11 – and ousting the union forthwith on a permanent basis – but be warned. If you show the judge your “real” financial books?

    He’ll say “Chapter 7 – NOW” and you lot will be out of a job, too.

    Wonder if GM worldwide operations all close on Chapter 7 bankruptcy in the United States?

    Well, then, I have to wonder if the UAW cancer would simply shift hosts and strike Ford.

    Interesting times is an understatement!

    Not forgetting I live in Michigan, already in a recession. Put GM out of business, and see what my now (truly) bankrupt state would look like – put Ford out as well, and watch us sink into Lakes Michigan, Huron and Superior….

  • avatar
    hltguy

    Mikey’s comments say so much, the extreme hostile attitude from non management to management and vice-versa, what company can survice such toxicity, even without the plethora of other problems GM has? The union running health care? How long before that would go bankrupt, can you imagine the union telling any of items hundreds of thousands of retirees they can’t have a certain medical procedure or prescription? The UAW retirees have such an easy ride of the cost of their health benefits they have no idea of the value of what they are receiving, thus overuse it. When the value is taken out of a product or service, it will be abused.
    The band is warming up their instruments on deck.

  • avatar
    EEGeek

    NickR – Nice description with Kate & Jennifer. I’ll take the loser.

  • avatar
    yankinwaoz

    Dumb question….

    The VEBA is supposed to be funded with a combination of GM stock and cash. The mix is being debated. Where is GM supposed to get the shares to fund the VEBA?

    GM could buy shares with cash from reserves. But why not use that cash instead?

    GM could float some shares. But that would dilute the value of the existing shares.

    GM could borrow money. But in today’s climate, that would be very expensive for GM.

    Is GM’s objective to tie the fate of the VEBA to the fate of GM? Would that not be opposite of what th VEBA is there for?

  • avatar
    nonce

    from http://money.cnn.com/2007/09/24/news/companies/gm_uaw_strikedeadline/?postversion=2007092412

    David Healy, analyst with Burnham Securities, said he believes GM could take a strike of up to a month without a significant problem.

    “It’s sort of an odd thing, the first thing that happens with an automaker in case of a strike is their cash increases, as their payroll stops, and they still keep collecting cash for the cars that have been shipped,” said Healy.

    This sounds like a super-effective way for GM to reduce their production! :)

  • avatar
    Sajeev Mehta

    How about this for a play-book, GM management? You could try “doing an airline” and going to a Bankruptcy judge for Chapter 11 – and ousting the union forthwith on a permanent basis – but be warned. If you show the judge your “real” financial books?

    glenn126: well said. This isn’t 1998 anymore, the strike opens up several possibilities we’d never even think of before.

    No matter, the workers and management will survive. GM’s upper class may unfurl the golden parachute and the unions may dissolve, but I believe (and hope and pray) that at the end of the day business will carry on.

    Maybe we’ll see stronger HR departments when all is said and done.

  • avatar
    glenn126

    If Mikey were still at his computer keyboard, maybe we could get an answer to this one.

    Didn’t GM Canada figure out how to get Chinese “GM” (SAIC) parts to continue production of the cars, at least, at Oshawa 1 & 2?

    GM SAIC manufacture 3.4 (ohv) and 3.6 (ohc) V6 engines, and transmissions. They used to be put into every Buick Rendezvous built (in Mexico).

    Mikey, you might be called back to work sooner than you think IF the GM brainiacs planned ahead for a strike “just a little bit” and have crated engines coming over on boats/via trains from Vancouver.

    Plus Holden in Australia – don’t they build Chevy V8 engines in 6.0 litres size, that could go into a few thousand Canadian built trucks? The Aussies would love overtime I’m sure of it…

    I’m just askin’…. ‘coz you guys up in Canada aren’t presumably going to get any CAW strike money, you won’t be on strike – you’ll be on a layoff due to UAW strikes.

    Or does GM get stiffed with paying you while you sit at hope rooting for your brothers in the UAW?

  • avatar
    Kevin

    What an awesome few days. First there’s Don’t-tase-me-bro guy, then Dan Rathergate files his lawsuit, and now GM’s on strike.

    All of this simply proves that there is a just God, and he cares deeply about my entertainment.

  • avatar
    sitting@home

    Wouldn’t a month long strike for GM kill two birds with one stone; immediate 1/12th reduction in payroll and 30 day reduction in vehicle backlog (without paying workers not to make cars) ?

    Obviously Wall St. see it this way, the stock is up 1% today. If the UAW had had their $50b worth of GM stock VEBA in place they could have manufactured themselves a $500 million profit in just one morning !

  • avatar
    MgoBLUE

    So workers still get paid…

    GM’s cash grows…

    Inventory levels will be reduced by deliveries to customers (they still have twenty-something percent marketshare)…

    VEBA, two-tier wages, token retention bonus, all get voted in by members…

    Doesn’t sound like the ‘jobs bank’ is going away…

    Since Maximum Bob is saying “we’ll be the technology leader in five years”, that tells me that GM isn’t working on anything technology related, so just more of the same…

    So the more things change, the more they stay the same.

    What would it cost GM to pull Chris Bangle (love him or hate him) away from BMW and a hundred engineers from Honda? Fifty million dollars? (forty-nine million Canadian dollars) Which is a drop in the bucket relative to this fifty BILLION dollar VEBA negotiation. And might actually get them some product people want to buy!

  • avatar
    NickR

    Update Folks : Oshawa #1 and #2 and Truck are running till we run out of parts Wed.or Thurs. max.

    How about the plant that makes the Impala? They had better churn as many out as they can to keep some money coming in while the strike is on…assuming they make money on them.

  • avatar
    tentacles

    I don’t know if they still make Impalas (and the other W-Bodies) anywhere, but the Oshawa W-Body plant was suppose to be the one already tooling up to make the Zetas(Camaro and G8).

  • avatar
    greenb1ood

    Not that I’m saying there is collusion to strike, but if there was it would make sense:

    A) GM idles unprofitable plants.
    B) GM sells down inventory of profitable and unprofitable vehicles.
    B) GM saves money on payroll AND healthcare.
    C) GM builds lower volumes without paying suppliers for not meeting their commitments.
    D) UAW gets to put on a tough act for rank & file.
    E) UAW gets to show Ford & Chrysler that they still have power for the upcoming negotiations.
    F) GM & UAW agree to the contract they’ve already agreed to 5 days later and both sides posture about a ‘hard fought’ contract.

    …just a thought…

  • avatar
    James2

    Hey NickR,

    Kate is mine! :-)

    As for GM, I like Kate Winslet too, so, I’ll wait to see the boat break in half.

  • avatar

    Good news everyone! Overstocks at the dealerships will be down this month!

  • avatar
    motownr

    GM was supposed to be the easy sell: it’s Chrysler and Ford…and their ‘outsider’ management…that are supposed to be the tough deals.

    Wonder how the UAW’s actions are sitting in Auburn Hills and Dearborn right now?

    I expect that the GM walkout will be short-lived: the VEBA was GM’s overwhelming objective, and by all reports they’ve negotiated one in some form or another.

    Ford and Chrysler, meanwhile, have an entirely different priority: meaningful cuts in current costs. They don’t have the legions of retirees that are strangling GM (per active worker), but they do have lopsided costs disadvantages vis a vis the imports. They have no real choice but to shrink the workforce AND cut the costs of those that remain.

    Getting THAT sold to the brotherhood could be ugly.

  • avatar
    Luther

    “Proving once again that the UAW inhabits the same world where Jennifer Connelly and Kate Beckinsale are fighting over me.”

    Seems like nobody needs Viagra in that world….

  • avatar
    seanx37

    As a person who actually lives in Metro Detroit(Warren actually. I can see the tech center from here….), I have friends/relatives who are affected. I have talked to them, and they all don’t seem to get that GM has no money. They dont seem to understand that a strike might not be so bad for GM in the long run. In a few weeks GM could just file Chap 11. GM could just do what they want then. Dump brands(bye Pontiac/Saab/Hummer/GMC), dump dealers,dump pension plans on government, move jobs to China. Of course, that would kill Southeast MIchigan. And Warren would be a ghost town.

  • avatar
    Kevin

    Funny, my colleague was just telling me how his parents went on strike in the 1980s against Eastern Airlines.

    THAT went well.

  • avatar
    indi500fan

    The strike is strictly for effect.
    So Ronny G can show the membership how tough a negotiator he is, and GM can work off some inventory.
    The VEBA is a done deal (Ron basically said that at the noon presser) – I’m hearing @ 71% of face value.
    Since I’m not allowed to “flame” the site, let me just say that I expect this Titanic to sail on many more miles.

  • avatar
    whitenose

    seanx37: I think it’s hard for people to see that GM has no money when the execs clearly have so much of it. If the top executives temporarily cut their salaries to the bone, like Iaccoca did when negotiating with the union, they’d be setting the proper example. But that would require actual leadership skills.

  • avatar

    indi500fan:

    I expect this Titanic to sail on many more miles.

    So do I.

    RF

  • avatar
    AGR

    A strike of short duration is a win/win event for both GM and the Union, it works out quite well for all concerned.

    It reinforces positions, shows resolve, lowers bad blood, frustrations, inventories, and a bunch of other issues, the strike cleanses the air. The strike is the ideal “lever” to make concessions and save face in the process. Additionally it puts Ford and Chrysler on notice that the union means business.

    In the meantime GM launched a program from today till Oct 1 to ensure that it has a strong month of September, and a positive end to the 3rd quarter.

  • avatar

    AGR:

    It reinforces positions, shows resolve, lowers bad blood, frustrations, inventories, and a bunch of other issues, the strike cleanses the air.

    Kinda like Ye Olde leech therapy. Only that didn’t really work, did it?

  • avatar
    greenb1ood

    AGR:
    Fine, write the exact same thing I did without the ‘Outline’ format!!!
    (j/k – great minds think alike!)

  • avatar
    Orian

    I was reading an article from a news site here in Ohio, and it was stating that the workers will get $200 a week while on strike.

    I don’t know about the rest, but there’s no way in hell I could live off $200/week. If I were these workers I think I’d be inclined to find out what is going on (from both sides) before taking a cut like that, but they really don’t have the option being union members do they?

  • avatar
    guyincognito

    I fail to see how a short strike is good for all sides, especially considering one of the publicized sticking points is manufacturing in Mexico and China. There’s no way that is going to stop. Wether or not they build the cars now, they are still going to have to use up all the material they had on hand to build them so I don’t see this reducing inventories. Plus, there already has been alot of bad blood building since the Delphi bankruptcy which spawned the Soldiers of Solidarity, etc. Now that they went nuclear they are going to just accept a deal where they are making less and paying more for health care? It seems to me the strike panders to the extreme elements on both sides and thus could drive them farther apart. If my calculations are remotely close, a few weeks of this could send GM to chaper 11, which may not be the worst thing from an executive perspective.

  • avatar
    glenn126

    I have to say that I think Robert may be wrong on this one, and very soon the Death Watch may be over for GM in TTAC.

    GM simply hasn’t the cash flow to go more than a few weeks on strike.

    If I were a bankruptcy judge, and GM attorneys walked in asking for Chapter 11, and showed me their books, I’d say – yep, I’ll give you bankruptcy – here are the signed papers – oh by the way, it’s Chapter 7.

    Go close the doors. You haven’t enough money to reorganize successfully.

    That scenario “might” blow the wind up Gettlefinger’s kilt, and could potentially save Ford and Chrysler.

    ‘Coz we have (most of us) been able to see the handwriting on the wall for some time with GM – it ain’t gonna last – it’s all over but the fat lady singing.

  • avatar
    KatiePuckrik

    As much as I want to believe that this strike is for real (for no other reason than I’m bored and want something interesting to happen!) it all seems too convenient for my liking.

    GM will work off some inventory (provided they can find the customers to buy that rubbish) and Mr Gettlefinger gets kudos for flexing his muscles.

    I think Mr Farago will be writing more deathwatches to come.

    P.S. My idea for the $5 billion hit contract is open if Rabid Rick wants to discuss it further! ;O)

  • avatar
    AGR

    RF, lets see how far and how effective this leech therapy will go, and how long it will last.

    greenb1ood, not just you and I here is an article from Fortune http://money.cnn.com/2007/09/24/magazines/fortune/gmwalkout.fortune/index.htm?source=yahoo_quote

  • avatar
    50merc

    Isn’t the VEBA deal like a jobless guy borrowing money to make mortgage payments on a house that’s worth less than is owed on it?

    GM has negative net worth, negative cash flow and a market capitalization that’s less than the VEBA will cost. Whatever cash goes into the VEBA fund exacerbates GM’s cash flow problem, whether it’s immediate funding demands or future higher debt burden. GM can’t afford to buy its own stock from current shareholders, so whatever shares are newly issued for VEBA will dilute share value. If the UAW decides (wisely) to reduce risk by selling VEBA shares, there’ll be additional downward pressure on price per share. If the UAW doesn’t sell (or if that’s barred by the new contract), it will be dependent on dividend income from a company in a downward spiral.

    But hey, not to worry. Professor Shaiken says the solution is for GM to build “cars that people are excited about buying and are willing to pay full sticker price for.” Those two things are bound to happen one of these millenia.

  • avatar
    Johnson

    To all those that proclaimed GM was on a turnaround and that there would be no strike, hate to say it but: we told you so.

    The staff at TTAC knew this was coming, and many people familiar with the industry knew this was likely.

    I myself am personally surprised this happened, just because I optimistically thought talks were actually getting somewhere.

    For those that believe this strike is “for show”, you are misinformed.

    Ron has said the strike has NOTHING to do with the VEBA. In other words, the UAW is striking for reasons other than the VEBA.

    Anyone following the bargaining knows the VEBA superfund was the MAIN idea that GM had put on the table. The UAW is striking because of other issues which are tougher for GM and the UAW to settle on.

    Also FYI in 1998 there were roughly 9200 UAW members on strike, and GM lost 37 mil a day. With this strike 73,000 people are on strike and over 50 GM plants are idle right now. Factor in inflation, and GM will lose (per day) MUCH more than they did in 1998. With this strike, GM will be losing AT LEAST 300 million PER DAY.

    As for anyone thinking a short-term strike is a win-win situation, this is just unreal.

    Will the Titanic keep sailing? Doubtful. How is GM going to come up with the “extra” money needed for the VEBA fund? They can’t just get money out of thin air or from a money tree.

    RF, you did not address as to exactly HOW GM would attain the extra money needed for the VEBA. GM has sold just about everything it could, and GM won’t be able to get credit as nobody wants to give it to them. The government won’t help either.

    Will GM pull a Ford and put up the entire company as collateral for a loan? Would GM be able to even get such a loan as Ford did?

    One thing is for sure, this strike WILL hurt GM, in more ways than one.

    Things are not so rosy in China either, as GM’s growth is slowing down there.

    The GM ship is still sailing, but without any clear direction and with a lot of damage to it’s hull. The GM ship is taking in water and people are jumping off the ship. It’s inevitable and only a matter of time before this ship sinks.

  • avatar
    Hippo

    Burn some union money for a change, 4 or 5 weeks should do it.

  • avatar
    AGR

    Its great PR for GM, it shows the economic effects of a strike in North America. The Toronto papers are already quoting Buzz Hargove of the CAW that Oshawa 1 will shut down later today for lack of engines, Oshawa 2 will shut down tomorrow for lack of engines (the engines come from Tonawanda)with the truck plant lasting an additional 2-3 days before it shut down.

    For all the folks that do not remember, or were too young to see what a strike at GM does to the automotive industry in North America, the strike raises a different perspective of domestic auto production.

    The article from the Globe and Mail
    http://www.theglobeandmail.com/servlet/story/RTGAM.20070924.wcawgmstrike0924/BNStory/Front

  • avatar
    nonce

    A total strike can be better than a partial one.

    In a partial strike, if half your work-force doesn’t show up, you don’t pay them, but you still have to pay the other half. And maybe that half can’t do anything because they depend on the first half.

    Now, GM has a lot of fixed expenses that happen regardless of whether anyone is in the factory or not. What are those?

    And what happens to employees’ health care while they are on strike?

  • avatar
    hltguy

    According to Forbes this morning, GM has $32.8 billion in cash, inlcuding the funds received from the transmission deal. The UAW has approximately $1 billion in cash. As the question has been pondered here today, how does GM come up with sufficient cash to fund a VEBA, if they are looking at a $51 billion health liability? Someone on this site today mentioned a 71% amount to go into the VEBA, that would be around $36 billion. Obviously GM does not have enough cash for that, do they pay several billion in for a few years? Is it financed for 0% interest for 72 months?

    Does GM borrow the cash? How much stock is included? How much cash does GM have to have in reserves to maintain a functioning company?

    Also according to Forbes, GM has 950,000 vehicles in inventory.

  • avatar
    Bunter1

    What about a UAW Suicide/Death Watch?

  • avatar
    hltguy

    Forbes also mentioned the 1998 strike cost GM 2 percentage points in the market place, that they never got back, how much did that cost GM over several years?

  • avatar
    nonce

    GM is much more prepared for this strike. As long as they are burning inventory, this is a roundabout way of them getting what they wanted all along — a smaller workforce.

    Forbes says GM will “burn $4 billion the first month,” but I don’t know if that will be their raw expenses, or revenue minus expenses.

  • avatar
    50merc

    Just how bad does a short strike hurt UAW members? A $200 per week cash payment is equivalent to quite a bit more in gross wages that are subject to all sorts of deductions. And don’t they get unemployment benefits as well? If there’s a spouse who’s still working (nowadays most families have two wage earners), that other paycheck is still coming in. Finally, UAW members enjoy excellent wages; shouldn’t they have ample savings for such contingencies? Could it be that a strike at this time of year is a nice opportunity for UAW members to enjoy time off? Haven’t many of them been working overtime in recent months?

  • avatar
    Hippo

    hltguy:

    The way it was reported in continental Europe Thursday or Friday is that the UAW rejected VEBA.
    Sure it may have been a translation issue, but considering the credibility of US media maybe not.
    I guess we will find out.

  • avatar
    Lumbergh21

    What would it cost GM to pull Chris Bangle (love him or hate him) away from BMW and a hundred engineers from Honda? Fifty million dollars? (forty-nine million Canadian dollars) Which is a drop in the bucket relative to this fifty BILLION dollar VEBA negotiation. And might actually get them some product people want to buy!

    GM’s problems aren’t from a lack of qualified engineers, they’re from a lack of qualified management and bean counters that don’t know the first thing about designing a car nor do they car to know. My brother-in-law is an engineer with Delphi. He could tell you about the ridiculous garbage he has to put up with from management and the inability to change.

  • avatar
    nonce

    And don’t they get unemployment benefits as well?

    While it’s quite possible that UI has been corrupted beyond its intentions, in general you don’t get UI if you are refusing to work.

  • avatar
    greenb1ood

    nonce:
    According to the Detroit News, workers get $200 per week and continued Healthcare coverage from the Union Strike Fund.

    Depending on the amount of that healthcare liability, the Union coffers can’t last long for a 73,000 person strike.

  • avatar
    nonce

    That seems about right. Forbes says that the UAW has about $1 billion in their strike fund, and at $200 in cash and $73 in health-care premiums, that’ll last for 52 weeks for 73,000 people.

    Are the UAW cash payments taxable? Does the UAW owe payroll taxes on it?

  • avatar
    Orian

    They also have to pay for the health benefits, so that is going to cut into that fund too – depending on how much they are paying for benefits out of that 800 million dollar fund will depend on how far it can stretch out, but I’d bet money it’s no where near 52 weeks with health care factored in.

  • avatar
    greenb1ood

    It doesn’t matter if it’s coming from GM or the UAW; if it’s income, it’s taxed.

    An interesting tail to this is the $1.5 Billion dollar budget deficit that the State of Michigan is trying to agree upon. The Dems want to raise taxes and the GOP wants to cut spending…Govt shut down in 7 days if they can’t comprimise.

    My bet is that this strike just caused massive confusion about how much revenue the State can expect to collect, and we’re headed for a State Govt shutdown.

    Michigan Legislature Deathwatch?

  • avatar
    EJ

    I don’t get the big deal about this giant health care VEBA. The health care liabilities disappear off GM’s books at a cost of many billions of dollars, so that’s not exactly for free. Then again, if in the future the money of the VEBA runs out, the UAW can simply ask for a top-up. So, overall, this VEBA looks like a big win for the UAW and only a cosmetic win for GM. Or am I missing something here? Where are all those billions coming from, anyway? Does GM have ~$35B of pocket change?

  • avatar
    nonce

    It doesn’t matter if it’s coming from GM or the UAW; if it’s income, it’s taxed.

    Hopefully this doesn’t seem like I’m picking nits, but it could well be that the strike fund isn’t income.

    If workers don’t deduct their union dues from their taxes, then this could just be their money that’s held, and it’s like a distribution from a subchapter-S corporation; you pay no taxes for receiving that.

    If dues are tax-deductible, though, it’s almost assured that they cannot get this money tax-free.

  • avatar
    nonce

    In the case of bankruptcy, the workers’ pensions are likely covered by the Federal agency that would pick up the pieces (at a significant fraction).

    I don’t think their health-care benefits have any such government guarantee, which is why the union is working to get that stuff protected by a market guarantee.

  • avatar
    Luther

    Katie: You are startng to scare me now :)

    Some excellent speculation people!

    This one looks tough from GM standpoint. The bigger issues are probably job security, offshoring production, unionizing suppliers. GM will be hosed if they cave…Nothing new…..

    GM will probably fund VEBA in installments…As for funding via stock, I don’t think they will dilute shares but they are really desperate.

    THat $32B cash-on-hand seems high. Why would GM sell Allison if they had that kind of money on hand(?)

  • avatar
    ex-dtw

    RF, you have hit it on the head. It is entirely QPQ in Detroit.

    OK, so we are now on strike. Good.

    I really do hope it goes nuclear, for once and for all the dopes at GM will be finally able to purge the UAW virus.

    Of course, they won’t and they won’t. Too many unknowns, bad PR, etc. We will just be left to watch GM struggle valiantly to bail water faster than they take it on.

    And for everone who holds some romanctic notion that unions are the great equalizer; that is just not true. They are an anachronism. They are a government sponsored monopoly that extorts members to flex political muscle in order to preserve their monopoly status.

    Name me a single industry that is healthy AND highly unionized, (and is not isolated from outside competitive pressure, think SEIU). Autos? Nope. Education? Nope. Healthcare? Nope. Airlines? Big nope. Case rested.

  • avatar
    d996

    The UAW is going to lose public sympathy,with myriad laws protecting workers in the USA at the state and federal level not to mention trial lawyers who will sue at the drop of a hat,word or pants, there isn’t much of a reason to have any empathy for them. Most workers don’t belong to a union so unless the UAW can spin this as a greater battle this is going to remain as a family spat with the stronger side winning. Let’s see what the Presidential candidates have to say, I’ll bet most of them try to avoid picking sides.

  • avatar
    ex-dtw

    What an awesome few days. First there’s Don’t-tase-me-bro guy, then Dan Rathergate files his lawsuit, and now GM’s on strike.

    All of this simply proves that there is a just God, and he cares deeply about my entertainment.

    Dan Rathergate – toooo funny.

  • avatar
    Dynamic88

    RF,

    A well worded and balanced editorial. I suspect your assessment will be spot on.

  • avatar
    ihatetrees

    Re 50merc:
    Just how bad does a short strike hurt UAW members? A $200 per week cash payment is equivalent to quite a bit more in gross wages that are subject to all sorts of deductions. And don’t they get unemployment benefits as well?

    I’m almost certain that even here in the State of New York, you cannot get UI payments while on strike.

    Also, I agree with RF; this will be resolved quickly – with GM caving on important issues like the requirement-to-build-crappy-rental-cars job’s bank and a Toyota/Honda competitive two-tier wage structure.

    Rick and Ron will apply lipstick to a pig of an agreement with a trowel. Then, they’ll ram it past the rank and file, and hope that Hillary and her congressional pals will take our money to bail them out when the Chapter 11 demon raises its head in 18-24 months…

  • avatar
    hltguy

    Luther: The $32 billion includes the money they received from the Allison Transmission deal, at least according to Forbes. That is a lot of money but does not seem so much considering the HUGE liabilities GM has. Kind of puts in perspective the $1.5 billion deficit the entire state of Michigan has, doesn’t it.
    Will the last non government worker in Michigan turn out the lights as they leave.

  • avatar
    seanx37

    The $200 payment is per day, not week ,according to a union rep I just heard on the radio. Sounds like a sweet deal to me. Throw me a picket sign. More than i make

  • avatar

    Well worded, balanced and objective. I guess you took that housekeeping post to heart.

  • avatar
    Lumbergh21

    greenb1ood :
    September 24th, 2007 at 5:00 pm

    It doesn’t matter if it’s coming from GM or the UAW; if it’s income, it’s taxed.

    An interesting tail to this is the $1.5 Billion dollar budget deficit that the State of Michigan is trying to agree upon. The Dems want to raise taxes and the GOP wants to cut spending…Govt shut down in 7 days if they can’t comprimise.

    My bet is that this strike just caused massive confusion about how much revenue the State can expect to collect, and we’re headed for a State Govt shutdown.

    Michigan Legislature Deathwatch?

    I live in California where most people can’t remember the last time that a state budget was passed on time. What happens here is that the state keeps on plugging along; they just don’t pay their bills. That works for a few months, but once, about 11 years ago, the budget stalemate went on for several months, and banks quit honoring the state warrants (basically a promise to pay, not quite the same as a check). You think government employees have a bad attitude in general, try dealing with one who can’t make his mortgage payment because the state isn’t paying him.

  • avatar
    carlos.negros

    Who says GM has to pay $51B at once?

    Give the union an endowment to build a series of hospitals and clinics in cities with large numbers of GM employees or past employees. Then fund a medial school and offer free tuition to doctors, nurses and other health care workers who will work for one of the union hospitals or clinics for a minimum of ten years. Pay all the staff a salary, to control and know costs.

    51B is a whole lot of money and GM and the union could provide very decent care for a whole lot less. Or, they could give the entire $51B to Halliburton who could hire medical mercenaries to spend it all in six months.

    Also, as has been discussed, GM wants to eliminate U.S. jobs and build more cars in places like China. If they do this, no one will care what happens to them. The last reason to ever buy a GM car will have vanished, along with the jobs.

    Who said, “As goes GM, so goes the nation?”

  • avatar
    naif

    if they, GM had tried to keep up with Toyota 25/30 years ago and been even somewhat successful they would not be in the position they are. that folks is as they say the bottom line.

  • avatar
    Steve Biro

    Did any one hear Ron Gettelfinger mention – two or three times – during the news conference that the GM negotiators acted as if they didn’t care if the UAW went on strike? Assuming that’s true, three scenarios come to mind:

    1) GM’s negotiators are playing a dangerous game of poker.

    2) GM really could use a short walk-out to reduce inventory and save some money on salaries.

    3) Collusion of some sort between GM and UAW suits really is possible (not that I am accusing them of this).

    I am sure Gettelfinger is aware of the stakes – both for GM and his union. And the court of public opinion isn’t going to help the UAW. Unlike 20 years ago (or 36 years ago when the last nationwide UAW strike against GM occured), most Americans no longer enjoy generous salaries, benefits and pensions.

    While I am longer active in the IBEW and Writers Guild, my bias remains pro-labor. But most working Americans I talk to these days say “I don’t make that kind of money. I don’t have that kind of health insurance. I don’t have any pension at all. It’s hard for me to feel sorry for those who do.”

    On the other hand, just about everyone I know who makes less than $200,000 a year also says GM’s upper-level management should pull a Bill Ford and accept no compensation until the company is making money in North America once again.

    The time to work out the fundamental problems is now.

  • avatar
    jthorner

    The strategic plan for GM, Ford and Chrysler almost surely is to move as much production offshore as rapidly as possible. I think that the publicly declared Top Priority VEBA business is really a secondary priority and that making sure nothing stops GM’s trend of heavy investment overseas while downsizing at home is the real priority.

    It is almost never the announced top priority in a negotiation of this size for that to actually be the top priority.

    Every large organization leader loves power, and putting the retiree health care funds into the control of the unions gives the union bosses a whole lot more money-power than they have without it. The only question about the VEBA is what the terms and conditions will be. GM would be a damn fool to guarantee to backstop the VEBA because GM will not be in control of how it is managed. GM shot themselves in the foot with the Delphi spin off by agreeing to take back any excess workers from Delphi in the future. Hopefully GM didn’t agree to any boomerangs on the VEBA.

    But still, the VEBA is a big but not the biggest issue. Continued pressure to move work out of the US and thus out of the UAW orbit is the real issue and it is one where the UAW can’t cave. Remember that it is all about power and ego for the bosses on both sides of the table. They wrap themselves in false flags about defending the shareholders and the workers, but it is really much more personal than that.

    If the strike is really over this issue than it is likely to go on a long time. GM can’t afford to keep the jobs bank or to slow the trend of moving production elsewhere. The UAW can’t agree to further erode it’s own existence by sending the source of it’s power, US automotive jobs, away. Thus the two positions don’t have a place to easily compromise at. With no readily accessible middle ground conflict tends to continue until one side wins.

    If, on the other hand, the strike does end fairly quickly then it will look like it was just window dressing.

    I still remember the 1970 strike when GM was shut down for a 67 days. Things were pretty quiet at GM dealers by the end of that run. The UAW won that one when GM basically caved in to their demands. Caving became the pattern for GM and the entire US auto industry after that. Here we are 37 years later and this time the stakes for GM are much, much higher. Both sides are playing All-In, even if they don’t know it.

  • avatar
    Mud

    Wow – pissed off mgmt, pissed off union.

    Now they’ll REALLY build some great cars!

  • avatar
    cheezeweggie

    Both management and unions in the US auto industry have been whoring the public for decades and are getting their just due. Goodbye Bowtie…

  • avatar
    glenn126

    I was able to find this interesting tid-bit.

    Right to left, columns relate to 2004, 2005 and 2006 financials for General Motors.

    Notice the “final”, literally, bottom line figure on the 2006 column. It’s negative.

    GM – it’s been unfun knowin’ ya.

    http://finance.yahoo.com/q/bs?s=gm&annual

    I’ll never forget the “lovely” commuter car 1997 Cavalier I bought new, all the trouble it gave me (I shoulda known not to buy a car built in the plant which started out making VEGAS). It was my first and last new Chevrolet and my last ever GM. I’ll also never forget the “sterling” (NOT) service that Williams Chevrolet in Traverse City didn’t bother giving me with warrantee work and billing me for what should have been warrantee work and never ever stepping up to the plate and doing right by the car, or a potential long-term customer.

    See ya, GM.

  • avatar

    Strike pay of $200.00 a week with No Tax the workers should be able to survive on that, when I was on strike I only got $50.00 per week and I was on strike for three months! but then I was not in a Union with a big War chest like the UAW/CAW one

  • avatar
    KatiePuckrik

    I’ll never forget my first (and last) GM car. It was a 10 year old Vauxhall Corsa. Now I appreciate that a 10 year old car will have a few squeaks and rattles, but this was like driving a pair of maracas! Then the cooling system failed and blew the engine up!

    GM brought this all on themselves and we the consumer are to blame. The moment a more reliable product came on the market, we should have gone for it and GM should have gone under a long time ago. Chrysler is the only Detroiter I want to survive.

    To be honest, if this strike doesn’t get GM then, the customers leaving them, will. Gm can make as many cuts as they see fit, but customers don’t buy their cars, then there’s no point.

    In years to come, the new expression will be “Dead as a Detroit car maker”!

  • avatar
    Orian

    Ah yes, the quotes from the local news stations start coming in:

    “Actually, the strike puts us in the best position for a new product,” Strickland said on a picket line shortly after workers streamed out of the plant. “The international (UAW) has given us total support to help us ensure our future here at Lordstown.”

    “It’s time for the union to slap GM for a little bit,” said Larry Allen, who works in the paint shop in Janesville. “We’re prepared to do whatever it takes.”

    “Workers said the weekly strike pay, about $200 if the strike lasts more than eight days, won’t go far.”

    These were taken from this article:
    http://hosted.ap.org/dynamic/stories/A/AUTO_TALKS_WORKERS_OHOL-?SITE=WBNSTV&SECTION=HOME&TEMPLATE=DEFAULT

  • avatar

    I note that when Buzz H the head of the CAW is interviewed on Radio programs, he blames Trade with both Japan and Korea for all the troubles the Big 2.8 have! He says that these countries wont allow the US makers to ship and sell Vehicles in there respective countries, I would say to him that if we in North America are not buying these vehicles here, why would citizens of other countries want the “junk” that the Big 2.8 produce?
    On another point I think that VEBA is a bad decision for both the Union and the Company, Medical costs in both our countries are going through the “roof” its a no win situation.

  • avatar
    pls

    I would be curious to know how many days of inventory GM has on the lots. I guess that would vary from model to model, but I’m not sure I see why management should feel too much urgency until they start running out of things to sell. Will some of their foreign made models be able to stay in production without these US parts?

  • avatar
    LenS

    Two thoughts.

    First, regarding the savings of the UAW workers, if they’re like the workers of a decade ago whose tax returns I used to do, they’ll have no real savings. Despite salaries of $70 to $90 thousand, they managed to spend it all. I’d never seen a group of people that put no thought to the future. They relied totally on the pension plans for that. They would have zero interest and/or dividend income. It made their tax returns rather easy to do.

    Second, regarding Presidential candidates. While the Republicans will tend to keep quiet, the Democrats will have no choice but to vigorously support the union. Unions are the biggest source of funding for the Democrats as well as their biggest supplier of election day labor. The UAW even gets election day off as a paid holiday which provides a big pool of campaign workers.

  • avatar
    AGR

    RF,
    Who blinked first GM, the UAW or was it both together? To reach a tentative agreement early this morning.

  • avatar

    It(tentative agreement) that the “glory” of Lump sum payments will help the UAW brothers and sisters to accept the new contract with GM, it also looks like the Union did not get assurances that GM would not our source more jobs overseas


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