September 16, 2019 / 2:28 PM / a month ago

UPDATE 4-Workers picket GM plants as UAW contract talks resume

* UAW strike is first one against GM since 2007

* Lost production could cost GM up to $50 million a day

* President Trump urges both sides to ‘make a deal’

* (Adds new Trump comment, talks still continuing, Moody’s note)

By Nick Carey and Ben Klayman

DETROIT, Sept 16 (Reuters) - Negotiators for General Motors Co and the United Auto Workers were continuing talks Monday afternoon to resolve a strike that shut down the automaker’s highly profitable U.S. operations.

The UAW on Sunday launched the first company-wide strike at GM in 12 years, saying negotiations toward a new national agreement covering about 48,000 hourly workers had hit an impasse.

Workers took to picket lines outside GM factories, waving signs declaring “UAW On Strike.” During the walkout, UAW members will get $250 a week from the union’s strike fund.

The UAW confirmed Monday morning that talks had resumed and GM said the talks were continuing more than five hours later. Lost production could cost GM up to $50 million a day in pretax profit, RBC Capital Markets estimated in a note Monday. GM could make up the lost production with overtime work after a settlement.

Moody’s Investors Service said in a note Monday the critical issue is whether GM will “secure the operating flexibility necessary” to address challenges including higher hourly costs than foreign automakers, a potential severe downturn in U.S. auto sales and the need for automakers “to begin transitioning to the production of more electric vehicles that will likely require fewer workers to assemble.”

Company and union officials say there are a number of issues to be resolved and that no immediate resolution on Monday is expected.

Contract talks with GM have been overshadowed by a mushrooming U.S. federal corruption probe into top union officials. The investigation has raised questions about UAW president Gary Jones, who a source said was an unnamed official cited in a searing federal complaint last week detailing alleged embezzlement by union leaders.

The strike quickly became a political issue, as both U.S. President Donald Trump and Democrats who want to unseat him in 2020 weighed in. Trump and Democrats see the votes of UAW members in the Midwest as critical to victory.

Trump on Monday told reporters he hoped the strike was a short one after taking to Twitter to urge the UAW and GM to “get together and make a deal!” GM spokesman Tony Cervone said the automaker “couldn’t agree more” with Trump’s call.

GM Chief Executive Mary Barra met with Trump ahead of the strike deadline. Trump has attacked GM for Barra’s decision to stop building small cars at an assembly plant in Lordstown, Ohio. The state is pivotal to Trump’s re-election.

The union wants to stop GM from closing Lordstown and an assembly plant in Detroit. The UAW has said workers deserve higher pay after years of record profits for GM in North America.

GM argues the plant shutdowns are necessary responses to market shifts, and that UAW wages and benefits are expensive compared with competing non-union auto plants in southern U.S. states.

GM initially insisted the UAW dramatically boost its share of healthcare costs but largely dropped that demand, union and company officials said.

In a statement Sunday, GM outlined its offer to the union, saying the package included solutions for the Michigan and Ohio assembly plants currently lacking products, $7 billion in U.S. investment and a signing bonus of $8,000 per worker.

A person familiar with GM’s offer said the company could produce a future electric pickup truck at the Detroit-Hamtramck plant that now has no future assignment.

GM could also build an electric vehicle battery plant in Lordstown, and go through with the proposed sale of the plant to a group affiliated with electric vehicle start-up Workhorse Group Inc.

A new battery plant could give some UAW workers at Lordstown the chance to remain with GM.

The UAW’s top negotiator at GM said the company’s proposal came just two hours before the strike deadline, and laid blame for the strike on the automaker.

“Had we received this proposal earlier in the process, it may have been possible to reach a tentative agreement and avoid a strike,” UAW Vice President Terry Dittes wrote in a letter to GM on Sunday, according to a copy viewed by Reuters.

GM shares closed down 4.3% on Monday.

ECONOMY COULD FEEL IMPACT

A strike will very quickly shut down GM’s operations across North America and could hurt the broader U.S. economy. Prolonged industrial action would also cause hardship for GM hourly workers on greatly reduced strike pay. Suppliers of parts and services to GM’s U.S. operations could also suffer from a long shutdown, as could dealers and consumers.

GM’s workers last went out on a brief two-day strike in 2007 during contract talks. A more painful strike occurred in Flint, Michigan, in 1998, lasting 54 days and costing the No. 1 U.S. automaker more than $2 billion.

The UAW has framed the plant closures as a betrayal of workers who made concessions in 2009 to help GM through its government-led bankruptcy.

Some of those concessions are now matters of disagreement. The union wants to limit GM’s use of temporary workers in its plants, and narrow the pay gap between new hires and veteran workers.

The strike will test both the union and GM at a time when the U.S. auto industry is facing slowing sales and rising costs associated with launching electric vehicles and curbing emissions.

The impact of the strike on dealers and car shoppers will be delayed. GM started off the strike with healthy levels of inventory of some its key, high-margin vehicles.

A prolonged strike could delay the planned introduction next spring of GM’s redesigned full-size SUVs in Arlington, Texas. Among the company’s most profitable vehicles, they include the Cadillac Escalade, the GMC Yukon and the Chevrolet Tahoe and Suburban. (Reporting by Nick Carey, David Shepardson, Ben Klayman and Joseph White; Writing by Nick Carey and Joseph White; Editing by Andrea Ricci)

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