general motors strike

NEW YORK (CNNMoney.com) -- The United Auto Workers strike at General Motors, which Monday shut down 80 plants and other GM facilities, could start hitting workers at other companies almost immediately and cause a fresh round of bankruptcies in the already battered auto parts industry, according to experts.

With negotiators from the union and management returning to the bargaining table Tuesday, most observers believe the strike by 73,000 GM workers in 30 states will be a relatively short one. But it won't have to last more than another day or two before the strike's wider impact will be felt.


A GM strike waves to a honking motorist as he and members of United Auto Workers Local 95 strike at the General Motors assembly plant in Janesville, Wisc.
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The UAW union begins a strike at General Motors facilities across the United States. CNN's Ali Velshi reports.
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In fact, the estimated 10,000 members of the Teamsters Union, who drive the trucks that carry completed cars from GM factories, announced Monday hours after the strike began that they would honor the picket lines and not make those deliveries.

For GM, the segment of the trucking industry that delivers new vehicles to dealers has the fewest number of non-union alternatives to the Teamsters. Teamsters who deliver parts and other supplies to GM plants may also decide against working during the strike.

In addition, between 80,000 to 100,000 members of the Canadian Auto Workers (CAW), who staff six GM plants in Canada as well as a number of supplier plants, could also leave the job as soon as Tuesday, according to CAW President Buzz Hargrove. That's because GM's plants in Canada depend on U.S. plants to provide them with critical parts, including power trains and other components.

And the impact on suppliers won't be limited to Canada. Other U.S. parts suppliers could soon start shutting down operations, since they produce parts to be used on a just-in-time basis by the now idled GM plants.

Estimates are that about 7.1 million U.S. supplier jobs depend on GM, Ford Motor (Charts, Fortune 500) and Chrysler all together. Given its market share and size compared to its U.S. rivals, GM by itself is likely responsible for about 3 million of those jobs.

Is the GM strike for real?
David Cole, the chairman of the Center for Automotive Research, says that the supplier base has already been squeezed to the breaking point in recent years, as the automakers pressed them to cut prices of components while they faced increased competition from overseas plants. He said that this is the segment of the economy at most immediate risk from a prolonged GM strike, probably even more so than the automaker itself.

"The supplier business is pretty marginal anyway," he said. "A great number [of them] are on the edge. As this trickles down, it could have a great impact."

Still, he doesn't expect any additional bankruptcies in the supplier sector - if the strike ends within a week. But some companies, particularly the smaller firms known as tier 2 suppliers who sell to the parts companies that sell directly to GM, could face trouble after a week or two.

Kimberly Rodriguez, head of the automotive practice at accounting firm Grant Thornton, said the efficiency with which suppliers send parts to automakers means that there isn't any room to store parts if their lines keep running without the GM plants operating.

"If things don't settle tomorrow, the production lines of the suppliers will start shutting down," she said Tuesday. "There's nothing else you can do."

A large group of suppliers, which Rodriguez estimated employ millions of workers in total, depend on GM for between 30 to 50 percent of their revenue, she said. They have seen their sales volumes and profits cut as GM lost market share and cut back on production. Now many of them could be forced into bankruptcy or even straight to liquidation if the strike goes two weeks or more, she added.

"If it was a healthy supplier, it would take longer, but a supplier on the edge, in two weeks will start to feel a cash flow pinch," Rodriguez said. Compounding the suppliers' problems, she said is the fact that banks will be less inclined to grant them leeway if they're late making payments because of the tight credit markets.

The UAW could not give an estimate as to how many of its members work for the supplier companies, but they did confirm they have more members at suppliers than the 73,000 who work at GM, although many of those union-represented supplier jobs are not dependent on GM, and instead supply other automakers.

"That's another reason the union doesn't want a long strike," said Cole. "This is a fragile situation right now. If this thing got out of hand, it could be a serious issue for some union suppliers."

Craig Fitzgerald, a partner and auto analyst at Southfield, Mich.-based Plante & Moran, told the Associated Press that the major suppliers would be able to weather a 10-day strike "very well," but it would have a negative impact on sales and earnings.

"Big tier 1 [suppliers] have been very mindful that a strike could happen and they've been preparing for this for six to nine months," Fitzgerald said.

73,000 on strike at GM
Several top parts suppliers saw their shares fall more sharply than GM shares on Tuesday. Shares at Dow component GM were down 0.8 percent in early-afternoon trading, while shares of Lear Corp. (Charts, Fortune 500) lost about 1 percent, following their 2.7 percent drop Monday. American Axle & Manufacturing (Charts) saw shares sink about 4 percent in Tuesday trading, while Canadian auto parts maker Magna International (Charts) saw its shares drop off 1.4 percent in New York trading.

Shares of several major suppliers, including former GM parts unit Delphi (Charts, Fortune 500), are still not listed on major exchanges as they attempt to emerge from bankruptcy.

Meanwhile, shares of GM rival Ford Motor saw its shares fall 1.4 percent in trading Tuesday, following a gain Monday. Investors are concerned that the UAW will try to use whatever deal is reached at GM as a pattern for a labor pact at Ford and Chrysler, even though those automakers are facing more severe ongoing losses than GM and may not be able to afford whatever package is reached.

UAW members at those two automakers remain on the job working under contract extensions.

Negotiators from the UAW and General Motors came back to the negotiating table just before 10 a.m. at the UAW-GM Center for Human Resources, an office building in between the GM headquarters in downtown Detroit and the union's main offices. The center has been the site of intensive talks for the last three weeks.

Negotiators had been engaged in an all-night bargaining session Sunday night, which went right up to the start of the strike at 11 a.m. ET Monday. They met for five more hours, into Monday evening, before recessing just before 8 p.m.

GM spokesman Tom Wickham had no comment on what was accomplished during the first post-strike round of bargaining. A UAW spokesman also did not have a comment on the talks.

The UAW members at GM get only a nominal strike benefit of $200 a week, compared to the $27.81 an hour that the UAW-estimated average straight-time pay for a member at GM. The low level of strike benefits, less than one day's pay a week, means that the UAW has more than a year of money available to pay strikers at GM.

The last strike to shut down GM operations nationwide was in 1998 and lasted for 54 days. In that strike, only two local unions were on strike, but the work stoppage disrupted operations at all GM facilities in North America. The last national strike at GM, in 1970, lasted 69 days.

If negotiators can reach an agreement and get workers back on the job quickly, the lasting economic impact could be limited. And it is unlikely that such a strike would have a meaningful impact on the nation's overall economic activity, even if specific companies do end up taking a hit.

Rich Yamarone, director of economic research at Argus Research, said that the only way that the economy would show even a one-tenth of 1 percent slower growth in this quarter is if Asia automakers, such as Toyota Motor (Charts) or Honda Motor pick up any sales that GM loses, and even that would be mitigated by the number of U.S. plants those Japanese rivals now operate.

"What Michigan will lose will be picked up in Tennessee or Alabama," he said.

And Yamarone said that if any sales that GM loses are captured by Ford or Chrysler, the overall economic impact is even more limited.

David Wyss, chief economist for Standard & Poor's, agreed that the impact on the overall economy will be somewhat limited, especially for a strike of only a week or two.

Wyss estimated that a month long strike at GM could whack a quarter percentage point of growth in the gross domestic product, the broadest measure of the nation's economic activity. That cost would double if the strike went into a second month. But he and other economists aren't expecting a long-term strike.

"It's not like the 1950's, when a strike at one of the automakers would put a real crimp in the economy," he said. "The long-term damage, I'm less worried about. This is more of a short term issue."
TORONTO (Reuters) - Another General Motors (GM.N: Quote) plant in Canada has shut its doors amid a strike at GM's U.S. operations, a spokesman for GM Canada said on Tuesday, and one more plant was up for review later in the day.

GM Canada closed its Car Plant 1 in Oshawa, Ontario, at 3 a.m. on Tuesday, the second day of the U.S. strike, said Stew Low, public relations director at GM Canada.

The plant, which employs 3,000 workers, builds the Chevrolet Impala and Monte Carlo, and, like all GM Canada plants, is closely integrated with GM's operations in the United States and depends on them for some parts.

Car Plant 2 in Oshawa is up for review at the end of the Tuesday day shift. The plant builds the Pontiac Grand Prix and the Buick Allure and employs 2,500 workers.

On Monday, the company's transmissions plant in Windsor, Ontario, with 1,400 staff, shut down.

GM Canada also has a truck plant in Oshawa, an engine and components plant in St. Catharines, Ontario, a parts and distribution plant in Woodstock, Ontario, and a joint venture with Suzuki Motor Corp (7269.T: Quote) at Ingersoll, Ontario.

Low said the company would assess each plant separately on a day-to-day basis.

Buzz Hargrove, president of the Canadian Auto Workers union, said on Monday that up to 100,000 Canadian workers could be laid off if the U.S. strike drags on.

General Motors itself employs 17,000 workers in Canada who could face layoffs if the strike is prolonged.

In addition, the Canadian autoparts industry employs about 80,000 people and GM buys about half of all the automotive parts manufactured in Canada, Hargrove said.

As many as 40,000 of those autoparts workers could be laid off by Wednesday, he said
WASHINGTON (AP) ― The United Auto Workers' strike against General Motors Corp. present more challenges for auto parts suppliers, which have struggled with bankruptcies and increased competition in recent years.

The impact will largely depend on the length of the work stoppage and the degree of the individual companies' ties to GM. But analysts said it will quickly ripple through the industry.

"Every car that's not built means there's 10,000 components that don't get sold and don't get put on the car," said Neil De Koker, president of the Original Equipment Suppliers Association, an industry trade group.

De Koker said the timing would be key: "If it's four or five days it won't be nearly as traumatic as four to five weeks."

Several suppliers have strong links to GM, including American Axle & Manufacturing Holdings Inc., Magna International Inc., Lear Corp. and Delphi Corp., which was spun off from GM into a separate company in 1999.

Auto suppliers have separate labor agreements from the GM contracts.

Delphi has been trying to emerge from bankruptcy protection after nearly two years. It is one of several auto suppliers that have been hurt by production cuts by car and truck manufacturers in North America.

Craig Fitzgerald, a partner and auto analyst at Southfield, Mich.-based Plante & Moran PLLC, said the major suppliers would be able to weather a 10-day strike "very well" but it would have a negative impact on sales and earnings.

"Big Tier 1 (suppliers) have been very mindful that a strike could happen and they've been preparing for this for six to nine months," Fitzgerald said.

American Axle & Manufacturing, for example, is the main supplier of driveline components to GM for rear-wheel-drive trucks and sport utility vehicles built in North America. Sales to GM accounted for more than three-fourths of American Axle's total net sales in the first half of 2007.

Renee Rogers, an American Axle & Manufacturing spokeswoman, said the supplier would "support our customers with whatever they need." She declined to elaborate on the company's preparations for a GM strike.

Magna International, which produces pickup truck frames for GM, said in a statement that depending on the length of the strike, the company "may be required to suspend the supply of parts to General Motors." Messages were left with Delphi and Lear officials.

In Canada, a lack of engines and transmissions made by U.S. workers who are now on strike will hurt vehicle production. GM is Canada's largest exporter, producing 794,419 vehicles in 2006, and GM buys about 50 percent of all the auto parts manufactured in Canada.

Canadian Auto Workers President Buzz Hargrove said more than 80,000 people could be laid off by the end of the week if the strike drags on. Hargrove said 17,000 GM employees in Canada, 40,000 workers at independent parts producers and thousands of jobs in related businesses could be affected.

"Our car plants will be impacted almost immediately," Hargrove said.

GM Canada's No. 1 car plant in Oshawa, Ontario, east of Toronto, will stop producing Chevrolet Impala sedans Tuesday, and the No. 2 plant, assembling the Pontiac Grand Prix and Buick Allure, will shut down later that day.

The Oshawa truck plant has enough parts to keep building Silverado and Sierra pickups for about three days, Hargrove said.