GM Suit Seeks Arbitration to End Walkouts
General Motors Corp. filed a lawsuit Tuesday against the United Auto Workers, alleging that the strikes that have paralyzed its operations and cut earnings by $1.2 billion are illegal and should be subjected to expedited arbitration.
A hearing is scheduled today before U.S. District Judge Paul Gadola on a motion filed by GM to compel the union to arbitrate issues concerning the strikes before an impartial umpire.
“We obviously took this very serious action because of the tremendous impact that these two strikes by locals in Flint are having,” GM general counsel Thomas Gottschalk said, referring to walkouts by 9,200 UAW workers at two Michigan parts plants.
The union dismissed the lawsuit as a public relations stunt that does nothing to move the two sides closer to a resolution of the dispute, which enters its 41st day today. Negotiations recessed late Tuesday and were set to resume today.
The legal action came as GM reported that second-quarter earnings sagged 82% largely because of production losses from the strikes.
GM reported net income of $389 million, or 54 cents a diluted share, down from $2.1 billion, or $2.62 a share, in the year-ago period. Without the strikes, GM said, earnings would have been $1.6 billion, or $2.40 a share.
Revenue fell 12% to $33.46 billion, from $37.88 billion.
The strikes at the two parts plants, which began June 5 and June 11, have forced GM to close 25 of 29 assembly plants, shut down scores of component operations and lay off 175,000 workers.
The lawsuit, filed in federal court in Detroit, also seeks an injunction that would force the strikers to return to work and compel the union to pay financial damages caused by the walkouts, the longest against any U.S. auto maker since 1970.
Labor relations experts expressed doubt that GM would succeed in the courts. Although courts tend to favor arbitration to settle labor disputes, they are reluctant to step into the middle of ongoing strikes.
Ann Wendt, associate professor of management at Wright State University in Dayton, Ohio, said it was unusual that GM would seek court intervention so long after the strikes started.
“If they believed it was an illegal strike, why didn’t they file suit when it began?” she asked. “It raises questions about the credibility of their claims.”
Gottschalk said GM reluctantly turned to the courts after it failed to reach an agreement last weekend at the bargaining table. The company filed a grievance with the UAW on June 23 alleging that the walkouts violated no-strike provisions of the national contract.
But the union rejected GM’s request for expedited arbitration. The UAW says the disputes are over production standards (such as assembly line speedups), health and safety violations and subcontracting--all issues under the national contract that it can use as a basis for strikes.
GM counters that the union filed a flurry of grievances in recent months as a pretext for a walkout on non-strike issues, including capital investment, where products are made, and parts sourcing.
“None of these issues are strike-able under the national agreement,” Gottschalk said.
Richard Shoemaker, UAW vice president and chief negotiator, said the lawsuit itself violated the national agreement, which prohibits either party from going to court to circumvent the contract’s grievance procedure.
“This lawsuit has been filed more for its Wall Street [public relations] value than anything else,” Shoemaker said. “It sends yet another message that the corporation wishes to comply with its contractual agreements only when it suits its purposes to do so.”
John Stamm, a professor of management at Babson College in Wellesley, Mass., said it would be unusual for the court to order an end to the strikes.
“The main criteria is that there would be irreparable harm, which is difficult to prove,” he said. “Odds are GM won’t get an injunction.”
Still, some investment analysts praised GM’s tough stand against the union despite lost production of 227,000 vehicles, or about half its normal production, and profit losses mounting at $80 million a day.
“Investors have more confidence that GM can hold out and that the injunction means that GM’s being more aggressive,” said Nicholas Colas, analyst for Credit Suisse First Boston.
Despite the strikes, GM’s earnings were slightly higher than analysts’ expectations as the company overcame lower production volumes and higher incentives by reducing costs.
The auto maker’s cash reserve fell to $9.1 billion from $13.6 billion at the end of March, but only about half the decrease was related to the strikes. Analysts said GM has plenty of resources to withstand prolonged strikes.
“The rate of cash burn will slow in the third quarter,” said Maryann Keller, analyst with Furman Selz, who noted that GM spent more than $2 billion on stock buybacks and pension reserves in the second quarter, activities it has since suspended.
GM said its North American operations lost $196 million, largely because of the strikes. Excluding effects of the walkout, the unit would have made $694 million, compared with $474 million in the year-ago period.
The auto maker’s parts subsidiary, Delphi Automotive Systems, earned $84 million in the quarter despite a strike-related loss of $290 million. It earned $310 million a year ago.
GM shares rose 75 cents to close at $69.63 on the New York Stock Exchange.
