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Strikes Close GM's Big-Profit Truck Plants

Autos: With a quick settlement unlikely, UAW walkouts could halt most of the firm's vehicle production within a week.

June 13, 1998|DONALD W. NAUSS | TIMES STAFF WRITER

DETROIT — Strikes against General Motors Corp. hit right at the core of the auto maker's most lucrative operations on Friday, forcing it to shut down assembly plants producing high-profit pickup trucks and sport-utility vehicles as well as other facilities.

The strikes now threaten to halt nearly all of the nation's largest auto maker's North American vehicle output within a week, with a quick settlement seen as unlikely.

GM on Friday halted production at plants in Pontiac, Mich., and Fort Wayne, Ind., where its full-size Chevrolet and GMC pickup trucks are made. These are considered bread-and-butter vehicles for GM--big sellers that provide the auto maker with a profit of at least $5,000 per unit.

The company also shut down a line at its Janesville, Wis., plant that makes sport-utility vehicles, including the Chevy Tahoe and Suburban and the GMC Yukon and Suburban. These popular vehicles yield profit of as much as $10,000 to $15,000 each.

"The heart of GM's big-profit production has now gone down," said Michael Robinet, an analyst for CSM Forecasting. "The rest will be idled early next week and small cars by the middle of next week."

The walkouts by 9,200 United Auto Workers members at two parts plants in Flint, Mich., already have closed 13 assembly plants and part of another. They also caused cutbacks at more than two dozen parts factories in North America.

GM has laid off 50,900 workers in the United States, Canada and Mexico since the first strike began June 5 at a stamping plant where hoods, fenders and engine cradles are made for large cars and trucks.

A second UAW strike began Thursday at a parts plant that makes speedometers, sparkplugs, filters and other components for nearly all GM cars and trucks.

Talks recessed late Friday afternoon and were set to resume this morning.

The disputes center on union concerns about possible job cutbacks and GM's demands for work-rule changes that would allow it to operate its factories more efficiently.

The outlook for a quick settlement is dim. Harley Shaiken, a labor professor at UC Berkeley, said the second strike that began Thursday indicates that the dispute is likely to match the intensity of a 17-day strike by two Dayton, Ohio, parts plants that brought GM operations to a near standstill in 1996.

"What we have now is a real impasse," he said. "There is a pretty deep divide and growing resentment on both sides."

Wall Street has generally been supportive of GM's hard line on the labor front, taking the view that the short-term cost of a strike is worth the potential long-term profit gains from greater efficiency.

Analysts estimate that a total loss of production could cost GM about $300 million a week in lost profit. GM's stock fell 38 cents to close at $69.88 in Friday trading on the New York Stock Exchange.

It should be several weeks before dealers and customers feel any effect from the strikes, since GM's inventories are at healthy levels. However, there could be spot shortages of hot-selling vehicles such as the Yukon and Tahoe.

Ed O'Brien, an economist with Standard & Poor's DRI, said the company would lose production of 72,000 vehicles next week and an additional 106,000 the following week if production is totally halted.

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