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GM, UAW Said to Be Approaching Accord

Labor: Wall Street boosts auto maker's share price on news that talks have intensified and strikes could end soon.

July 09, 1998|DONALD W. NAUSS | TIMES STAFF WRITER

DETROIT — Expectations increased Wednesday that General Motors Corp. and the United Auto Workers union would reach an accord within days to end two strikes crippling the auto maker's production.

GM shares soared $3.38 to close at $73.19 in heavy trading on the New York Stock Exchange as investors anticipated a settlement soon between the nation's No. 1 auto maker and the union.

Wall Street was heartened by reports that the talks between GM and UAW bargainers had intensified during the last two days.

"The expectations are for a settlement in the next day or two," said Glenn Chin, analyst for Merrill Lynch. "Each side has reached its threshold for pain."

The stepped-up bargaining was accompanied by a notable reduction in the barbed rhetoric GM and the UAW have hurled at each other in recent weeks as the effects of the walkouts spread.

"When they stop insulting one another and talk most of the night, it usually means that some progress is being made," said David Healy, analyst with Burnham Securities.

GM spokeswoman Mary Irby declined to characterize the status of the talks but said negotiators were discussing "substantive issues." The dispute centers on job security and plant efficiency.

UAW officials in Flint, Mich., where the first strike began June 5, indicated that progress is being made, but they cautioned that tough contract issues remain unresolved.

Pressure is strong for a settlement this week because GM's factories are scheduled to resume production Monday after an annual two-week vacation shutdown. If workers return next week, GM could salvage production of new models and avoid additional losses in output that would be difficult to make up later.

The strikes at two Flint parts plants have forced GM to close 26 of 29 North American assembly plants, shutter scores of parts facilities and lay off nearly 162,000 workers. The dispute, now in its 35th day, is the longest to hit a U.S. auto maker since a 67-day nationwide strike against GM in 1970.

The strikes are expected to reduce GM's second-quarter profit by $1.2 billion, and analysts estimate that beginning next week losses will mount at a rate of $80 million a day.

GM lost production of 227,000 vehicles in June and could lose another 175,000 this month. With a quick settlement, analysts said, the auto maker could recoup two-thirds of those vehicles in coming months through overtime.

Ronald Zarrella, GM's vice president of marketing, warns that sales could fall 40% this month. Extended strikes could permanently shrink the company's market share below 30% and prompt plant closings and elimination of low-profit cars.

Dealer inventories are dwindling as the strikes continue. GM began the month with about 850,000 vehicles on hand, normally a 45-day supply. But it said its retail supply is closer to 70 days since it will not be making fleet deliveries during the strikes.

Still, there are already spot shortages of some popular vehicles, including a 20-day supply of Chevrolet Tahoe sport-utility vehicles, reports Autodata Inc., a Woodcliff Lake, N.J., consulting firm.

Thomas Hoffman, owner of Hoffman Chevrolet in Industry, said he is down to a 30-day supply of vehicles--one-half to one-third of what he normally carries at this time of year. Worse, his lot is nearly depleted of GM's popular light trucks, such as the Tahoe and Suburban sport-utilities and the S10 pickup.

"If someone comes in looking for a Suburban or Tahoe and can't find just what he wants, his next stop will probably be a Ford store to look at the Expedition," he said. "It's going to hurt us."

Still, Hoffman and most other GM dealers back the manufacturer in its dispute with the UAW.

GM says the two striking plants are money losers that need to trim their work force or adopt more flexible work rules to become competitive. The UAW counters that GM has reneged on promises to invest in new equipment to improve efficiency and intends to move high-paying union jobs to lower-paying suppliers or to Mexico.

Negotiations are occurring on several fronts. Talks at the plants are focused on resolving disputes involving the local contracts. Meanwhile, top UAW and GM officials are discussing broader issues about jobs and competitiveness that have global implications.

The bargaining in Flint is complicated by strike threats at other UAW locals in Dayton, Ohio, and Indianapolis. GM is seeking a "no strike" promise from the UAW as part of the Flint settlement so it doesn't face another massive shutdown in a matter of weeks.

Harley Shaiken, a labor professor at UC Berkeley, said negotiations must not only resolve specific local factory-floor issues, but also produce at least an informal agreement on the larger issues of job security and plant efficiency.

"Whatever comes out of this will likely be fragile," he said. "The underlying issue is trust and what it takes to restore it."

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