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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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 = $5 billion one off cost! Far cheaper! How knows, if GM’s purchasing department can negiotate the contracts they might get a discount for bulk buying! But can you imagine the fall out?
GM will have these hitmen classed as employees, which means they’ll get healthcare benefits, too. Which will be become unsustainable in a few years, GM will then ask for concessions from them, the hitmen will refuse and go on strike! Back to square one…..
11 A.M. strike deadline? Maybe the boat’ll be pulled down by this giant squid before it can sink on it’s own…
I think that when the details of the UAW/ GM contract emerge,there will be no clear winner, or loser.The tables were a little more balanced this time.It was GM.s turn to hold the gun to the UAWs head.GM was threatening 5$ 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
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…
“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”.
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.
“”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.
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?
11am strike deadline, huh?
Proving once again that the UAW inhabits the same world where Jennifer Connelly and Kate Beckinsale are fighting over me.
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.
NickR:
We should all inhabit that world. Fortunately we don’t all bring down international corporations when we go out our happy place…
““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!
Are the people still working? Or is there a walkout?
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?
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?
Yes, Glenn, they’ve done it! Strike On!
http://www.detnews.com/apps/pbcs.dll/article?AID=/20070924/UPDATE/709240402/1148/AUTO01
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”.
Does anyone know what money on fire smells like? Well, we’re about to find out!
The cash burn is on!
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.
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.
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?
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.
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.
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?
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
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…
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….
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.
NickR – Nice description with Kate & Jennifer. I’ll take the loser.
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?
from http://money.cnn.com/2007/09/24/news/companies/gm_uaw_strikedeadline/?postversion=2007092412
This sounds like a super-effective way for GM to reduce their production! :)
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.
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?
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.
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 !
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!
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.
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).
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…
Hey NickR,
Kate is mine! :-)
As for GM, I like Kate Winslet too, so, I’ll wait to see the boat break in half.
Good news everyone! Overstocks at the dealerships will be down this month!
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.
“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….
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.
Funny, my colleague was just telling me how his parents went on strike in the 1980s against Eastern Airlines.
THAT went well.
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.
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.
indi500fan:
I expect this Titanic to sail on many more miles.
So do I.
RF
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.
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?