Posted on: Saturday, June 11, 2005
GM, labor rhetoric just tip of iceberg
By Rick Popely
Chicago Tribune
CHICAGO — On the heels of a week of tough rhetoric, General Motors and the United Auto Workers will have to work together on healthcare costs and other issues because they need each other to survive.
So say analysts who view strongly worded statements from both sides this week as posturing for 2007 contract negotiations, when bigger issues such as plant closings and job cuts will be on the table.
"They're stuck with each other, so they have to accommodate each other without appearing to be accommodating," said Walter McManus, director of the Office for the Study of Automotive Transportation at the University of Michigan. "They're like a dysfunctional family that can't live together, but they can't afford to live apart."
Chairman and CEO Rick Wagoner announced on Tuesday that GM will cut 25,000 jobs and close an unspecified number of plants by 2008. Speaking at GM's annual meeting, he threatened to unilaterally cut healthcare benefits if the union doesn't agree.
Union leaders met in Detroit on Thursday and repeated that they will not reopen the contract, which runs to September 2007. UAW President Ron Gettelfinger had said in April that the union said it would continue to talk with GM about shifting more healthcare costs to workers as allowed in the contract.
Thursday's statement, however, saw GM's stock shoot up 8.5 percent, or $2.70, to $34.51 per share yesterday in New York Stock Exchange trading.
JP Morgan analyst Himanshu Patel said in a research report that even minor healthcare concessions could "pave the way for more substantial concessions when the current contract is renegotiated."
Patel thinks GM shares could rise if SUVs and pickups coming out early next year have strong sales. In addition, Patel wrote, GM may sell part of GMAC, its profitable finance arm, and the cuts in GM's money-losing North American operations should be positive news.
Billionaire investor Kirk Kerkorian also may have given GM a boost when he announced on Wednesday that he would increase his GM stake to 7.2 percent, up from 3.2 percent, by buying an additional 19 million shares at $31 per share.
"Investors may be thinking that if it's good enough for Kirk Kerkorian, it's good enough for me," said Harley Shaiken, a professor and labor expert at the University of CaliforniaiBerkeley.
At the UAW meeting Thursday, Vice President Richard Shoemaker told local leaders that the UAW could stonewall GM on healthcare, but the better course was to keep talking.
UAW spokesman Paul Krell said union leaders supported that idea but did not vote on specifics.
"That was more a gesture of solidarity and support than a vote to take action," Krell said. "There is a sense that communication is a good thing."
