While the soap opera around the UAW’s negotiations with bankrupt parts maker Delphi play out, investors should not forget that the big union starts talking with GM in about six months.While this rites are always important, GM’s ability to get its cost base down in North America will be on the line. The company has targetted annual reductions of $9 billion. GM may get there, but demands from the UAW about work force size and benefits could still cause problems. And, a strike could cut the flow of new cars within a matter of days.
Pension benefits are one of the few perks that the UAW can still offer its members, but they are extemely expensive for the car companies. The UAW leaderhship cannot afford to go gentle on the matter, not if they want to keep their jobs. Due to a number of these legacy issues, it is estimated that while labor costs at US plants owned by Japanese companies at $35 an hour compared to $80 an hour for the Big Three.
GM may be considering whether a strike could work to the company’s benefit. That tactic would only work if the labor interruption is short. But, with over three months of vehicles in inventory, there is unlikely to be a better time to show the union that GM cannot afford to have the kind of labor agreements it has had in the past.
UAW leaders have to ask for the moon. But, it won’t be a cloudless night.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
Top Gaining Stocks
Top Losing Stocks