2 GM Strikes Inching Toward Settlement
Efforts to settle two crippling strikes against General Motors Corp. inched forward Thursday, but the talks are complicated by GM’s emerging plans to trim car lines, streamline plants and sell parts facilities.
During the dispute with the United Auto Workers, which began June 5, top GM officials have repeatedly said that the company is nearing completion of a wide-ranging restructuring study and have hinted that the strikes could speed plans to discontinue low-profit cars and lead to more plant closings.
“The company is now in the final stages of a detailed rationalization plan for both our products and facilities,” Donald Hackworth, vice president of North American car operations, said earlier this week.
GM is already in the midst of a broad effort to shape up Delphi Automotive Systems, its huge parts operation. The auto maker would like to spin off at least 20% of Delphi to investors in an initial public offering, possibly this year.
Not surprisingly, the UAW opposes much of GM’s effort, since it threatens union jobs. GM employs 223,000 hourly workers, down from 288,000 in 1992, when John F. Smith Jr. took over as chief executive and began a massive reorganization of the auto giant. Analysts say GM needs to cut as many as 50,000 more jobs to match the efficiency levels of its rivals.
Richard Shoemaker, vice president and chief GM negotiator for the UAW, said threats of plant closings and job cuts will simply prolong the current dispute.
“It will go a long way to continuing the current confrontation,” he told reporters in Flint, Mich.
Still, there were hopeful signs Thursday that an agreement could be reached within days. Calvin Rapson, a regional UAW official in Flint, said a framework is in place for a settlement. Gerald Knechtel, GM’s vice president of labor operations, said an agreement could be reached by this weekend.
The strikes by 9,200 workers at two parts plants in Flint have paralyzed GM’s operations, forcing it to close 26 of 29 North American assembly plants and to lay off about 162,000 workers. The dispute centers on the UAW’s concern for job protection and GM’s push for greater factory efficiency.
GM would like to settle the dispute before Monday, when its annual vacation shutdown ends. A deal by then would limit production losses and minimize delays in launches of key models.
The walkouts are expected to slash GM’s second-quarter earnings by $1.2 billion and threaten to reduce sales this month by 40%. If the strikes continue into August, GM’s 31% market share could be permanently damaged, analysts say.
GM today has enough workers and factories to support a market share of nearly 40%, but analysts say there is little prospect that the company will substantially increase its penetration.
“GM needs to shed 40,000 to 45,000 workers and close three assembly plants in North America, given projected market share and volume shifts,” said Nicholas Lobaccaro, analyst with Merrill Lynch.
The strikes may present an unexpected opportunity for GM to cull low-profit or overlapping vehicles from its product portfolio.
For instance, Ronald Zarrella, GM’s marketing chief, noted that the company is making too many cars and not enough trucks.
“One of the outcomes of this may be getting out of those cars faster,” he said.
GM officials will not talk about specific models that may be in danger. But analysts say the most vulnerable cars are two slow-selling sports cars: the Chevrolet Camaro and its twin, the Pontiac Firebird. Other vulnerable models are the Buick Riviera luxury coupe; the Oldsmobile Cutlass mid-size sedan; and the Chevrolet Prism compact and Metro subcompact.
GM has reduced its number of models from 109 to 80 in the last six years. It hopes to maintain its offerings at 75 to 80 models. However, GM will probably retire some cars and replace them with light trucks. It is particularly high on so-called hybrids--sport-utility vehicles based on car frames.
The company is also continuing to streamline Delphi, the world’s largest auto supplier. GM has already sold dozens of noncompetitive Delphi plants, including 15 seat, coil-springs and lighting facilities, in recent months.
GM shares declined $2 to close at $71.19 on the New York Stock Exchange.
