gm strike

TORONTO - General Motors (NYSE:GM) closed its two Canadian sedan-assembly lines Tuesday as the impact of the strike against the automaker in the United States reverberated north of the border.

GM Canada idled the No. 1 car assembly plant at its complex in Oshawa, east of Toronto, at 3 a.m. EDT. The lack of key major components from the United States halted work at the No. 2 line with the end of the day shift at 2:30 p.m.

"The car plant will be down until the strike is resolved," said GM Canada spokesman Stew Low.

About 5,600 people work on those two lines, making the Chevrolet Impala and Monte Carlo, Pontiac Grand Prix and Buick Allure.

The Oshawa pickup-truck plant, with 3,900 employees, remains at work on three shifts and is believed to have enough parts to keep operating until at least Thursday, though Low declined to be specific.

GM's transmission factory in Windsor, Ont., employing 1,300, closed shortly after the U.S. strike began Monday, and a 2,500-employee power-train-component plant in St. Catharines, Ont., looked set to be idle by the weekend.

The CAMI plant, a 2,700-worker GM-Suzuki joint venture in Ingersoll, Ont., which makes Pontiac Torrent and Chevrolet Equinox crossovers, "just happens to be down on a one-week inventory adjustment, so there's no impact on them this week," Low said.

Laid-off GM Canada unionized workers face a week without income before qualifying for Employment Insurance benefits and a supplementary payout, totalling 65 per cent of their usual pay. Many others in the sector stand to be more harshly affected.

Canadian Auto Workers president Buzz Hargrove estimates 80,000 to 100,000 Canadians, mostly in Ontario, could be laid off by the end of the week at GM Canada, its parts suppliers and other companies dependent on the industry.

Carlos Gomes, auto-sector economist at the Bank of Nova Scotia, said that "certainly somewhere around the 80,000 range might be a reasonable number."

The effect on the parts industry depends on how long the strike lasts, observed Ed Frackowiak, CEO of Wescast Industries Inc. (TSX:WCS.A).

"If it continues beyond a week or two, then of course it's going to have an impact," said Frackowiak, whose Brantford-based company does more than one-quarter of its business with GM.

"If they get things resolved, then I think we're going to be OK."

At Linamar Corp. (TSX:LNR) in Guelph, Ont., it's too soon to determine the impact, said spokeswoman Crystal Roberts. "We do supply General Motors and recognize a UAW strike will affect us," she added, but no customer provides more than 15 per cent of Linamar's sales.

Scotiabank's Gomes noted that there are hopes the strike by 73,000 United Auto Workers members will be brief, but the UAW will still have to settle with the other two big North American carmakers, "so even if they do resolve the case with GM in the next, hopefully, few days or so, then there's still a risk that lies with the impact from the negotiations coming with both Ford and Chrysler."

A long GM strike, he said, could tip Ontario into recession, although the impact on third-quarter data will be minimal because the stoppage comes late in the July-September period. "If it does go on for a while, it would certainly have a big impact going into the fourth quarter."

All three automakers ramped up production during the summer "as a precautionary measure, just in case some strike did develop," Gomes said.

"They do have some vehicles on hand . . . but production of 2008 models only started around July and August, so a lot of the supply is still 2007."

For GM, he said, "the new models are really important to them, so I think they're not interested in having a long strike."

GM's Low provided no inventory numbers but confirmed that "we're in really good shape, with no reason for concern. If somebody wants to buy a GM vehicle there's tons of selection out there."
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.
Video
More video
The UAW union begins a strike at General Motors facilities across the United States. CNN's Ali Velshi reports.
Play video

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 suppliers known as tier 2 suppliers who sell to the parts companies that sell directly to GM, could face trouble after only a week or two.

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 cost the overall U.S. economy about a quarter percentage point of growth off of gross domestic product, the broadest measure of the nation's economic activity. He said a second month could cost more than twice that, as the impact would worsen the longer the strike continued. 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."