'Agreement close' in car workers' strike

Negotiators who bargained into the early hours were close to reaching a contract agreement to end a nationwide strike by 73,000 US car workers, two people who were briefed on the talks said today.

The two sides began work yesterday morning and talked into the night in a bid to halt the strike, which started on Monday at about 80 General Motors facilities across the country.

Both people requested anonymity because the talks are private. One said negotiating teams were working out “small details”, while the other said work was almost complete on an innovative plan for the company to pay the union to form a trust and take over responsibility for retiree healthcare.

Last night pickets remained at the GM factories and other facilities, although several industry analysts said they expected the walk-out to be short.

A 1970 strike against GM went on for 69 days and helped to push the nation into a recession, but industry watchers did not think that would happen this time.

Both sides have something the other desires – the workers want job security, GM wants the union to take on the burden of retiree healthcare.

“The UAW and GM understand that a strike is a lose/lose proposition,” Deutsche Bank analyst Rod Lache said yesterday in a note to investors.

Talks broke off on Monday when the strike began, but resumed in the afternoon and continued into the evening when weary negotiators broke for a rest. Analysts were encouraged that the talks have continued throughout the strike.

The union said it went on strike largely because GM failed to make promises for future products and investment in US plants. GM said it was disappointed and would work with the UAW to address its competitive challenges.

“I’m hoping we get a fair contract. I understand that General Motors has their back against a wall. But I don’t want to give them everything,” said worker Ernie Bruton, who was picketing outside a GM engine plant in the Detroit suburb of Romulus.

In 1970, the UAW’s strike against GM rippled through the economy. Production declined, unemployment rose and retail car sales dried up, according to an analysis by Merrill Lynch. A 54-day strike against two GM plants in 1998 wreaked similar havoc and cost $2.2bn (€1.55bn).

This strike is already having an impact at non-UAW-represented GM plants and at suppliers.

Yesterday, GM stopped two car assembly lines employing about 5,600 people at its plant in Oshawa, Ontario. On Monday, it halted a transmission plant in Windsor, Ontario, which employs 1,300. Workers at both are represented by the Canadian Auto Workers union.

Parts shortages forced GM to cancel one shift yesterday at an assembly plant in Moraine, Ohio, which makes sport utility vehicles. The plant’s 2,300 workers are represented by the International Union of Electronic Workers-Communication Workers.

Delphi Corp, GM’s largest supplier, said yesterday that it was temporarily laying off workers. Spokesman Lindsey Williams would not give numbers because the situation was in flux. Delphi has about 25 US plants that supply parts for GM.

Nevertheless, industry watchers predict the strike’s impact will be minimal.

Goldman Sachs auto analyst Robert Barry said if the UAW had planned a long strike, it would have struck one or two key plants. The UAW is paying striking workers $200 (€141) a week from its $800m (€566m) strike fund.

“In our view, the action is designed to allow UAW leaders to look vigilant in fighting to preserve benefits, members to feel concessions are not being given gratuitously, and GM management to appear to be maximising shareholder value,” Mr Barry said in a note to investors.

The retiree healthcare trust could save GM an estimated $3bn (€2.12bn) per year, Mr Lache said, making it more competitive with Asian car makers who have fewer US retirees and insulating it from healthcare inflation.

UAW President Ron Gettelfinger said on Monday that the union is considering the trust, called a Voluntary Employees Beneficiary Association, or Veba.

GM has $51bn (€36bn) in unfunded retiree healthcare liabilities. Mr Lache said GM did not want to put more than 65% of that total into the Veba but may have agreed to a higher percentage to appease the UAW. If so, the car maker must now hold the line on job security and wages.

Mr Lache predicts the UAW will eventually accept a lower number on the Veba in order to extract other promises from GM.