Company said to have lost US$2 billion over duration of strike, while workers gave up as much as US$4,000
Emily Jackson, Financial Post
October 16, 2019
Thousands of Canadian auto workers could return to work as early as next week after a breakthrough in negotiations between General Motors Co. and the United Auto Workers union – but only if the ratification process goes smoothly.
America’s largest automaker and the union representing 48,000 workers reached a tentative agreement Wednesday, one month after the strike began over health care benefits, temporary workers and the future of manufacturing in the United States. The strike, which analysts estimate cost GM about US$2 billion, brought production to a halt across North America given the continent’s intertwined, just-in-time supply chain.
But workers won’t immediately be back on the job in Canada, where nearly 5,000 employees were temporarily laid off from GM and parts suppliers.
First, the UAW national council will decide Thursday whether to recommend the agreement for a ratification vote. But the strike doesn’t automatically end if the council recommends the deal. It must also vote on whether to stop the strike or continue until the collective agreement is ratified.
It’s unclear whether Canadian GM plants will resume activity upon the UAW’s recommendation – that could technically put employees back at work as early as Friday – or if they’ll wait until the deal is ratified by the 48,000 members, a process that will take time depending how the vote is conducted.
“We will look to resume Canadian operations as quickly as possible, when an agreement is reached, but will confirm those details at an appropriate time,” GM Canada spokeswoman Jennifer Wright said in an email.
Unifor president Jerry Dias, whose union represents GM’s Canadian auto workers, expects it will take at least a couple of days to resume operations even if the UAW votes to end the strike tomorrow.
“They’re not going to hit a switch and go to full production overnight,” Dias said.
Canadian workers will have to wait at home longer if their U.S. counterparts stay on the picket line until ratification, which could take a couple of weeks given the size of the membership, said Dias. Ontario plants rely on parts from the U.S.
For Dias, the length of the strike shows how upset workers were at GM, which announced plans to shut down four plants in the U.S. and one in Canada in November 2018. The UAW railed against the cuts in the U.S. and the shift to production by low-wage workers in Mexico at a time of record profit for GM.
“This is people responding to the frustration of what’s happened to the auto industry,” Dias said.
Still, ratification is not a sure thing. In 2015, UAW workers voted against a proposed agreement with Fiat Chrysler Automobiles, the third-largest auto manufacturer in the U.S. Based on that recent history, Automotive Parts Manufacturers’ Association president Flavio Volpe said he’ll wait for the vote to celebrate. But he was pleased to see a tentative deal after a strike that cost the Canadian sector millions.
“Finally,” Volpe said.
Stock prices of Canada’s two largest autoparts makers rose on the news of the agreement. Magna International Inc. and Linamar Corp. closed up 1.4 per cent and 2.4 per cent, respectively. Linamar said the strike was costing it $1 million per day.
The accord between GM and the UAW may bring an end to the union’s first national walkout against the carmaker in a dozen years.
“The No. 1 priority of the national negotiation team has been to secure a strong and fair contract that our members deserve,” UAW Vice President Terry Dittes said in a statement. He said the union’s bargaining committee voted to recommend that the GM National Council — comprised of presidents and chairmen of locals around the country — vote in favour of putting the deal up for a ratification vote.
Getting the new four-year agreement approved by the rank-and-file could be a challenge. GM outraged union workers last year by threatening four U.S. plants with possible closure, though it’s offered to keep at least one of those factories open.
UAW leaders also have credibility issues: President Gary Jones was implicated last month by federal prosecutors in an indictment of a former confidant who conspired to embezzle member dues and spend the money on stays at luxury villas, golf gear and cigars.
A resolution would come none too soon for GM, which analysts at Bank of America Merrill Lynch estimate has lost about US$2 billion, and its striking workers, who have been getting by on US$250 per week and who could be forgoing about US$2,000 of profit sharing. The strike has also become a political issue, arising in Tuesday night’s Democratic presidential debate in Ohio, which has lost thousands of auto-industry jobs.
The two sides moved closer to a deal over the weekend after a tense week of publicly exchanging barbs and blame for the strike dragging on. With most of the major issues settled, Barra and GM President Mark Reuss joined the talks Tuesday to try to get a final agreement over the line, according to people familiar with the situation who asked not to be identified.
With plants across the U.S. idled and shutdowns spilling over into Mexico and Canada, the automaker is losing about US$100 million a day in earnings before interest and taxes, John Murphy, a BofA analyst who recommends buying GM shares, wrote in a research report Tuesday. And in addition to the profit-sharing they’ll miss, Murphy estimates UAW members have probably forgone as much as US$4,000 in net take-home pay.
“A prolonged strike could burn significant cash and bring GM to its knees,” Murphy wrote. “But investors likely will also react negatively if management is perceived to have caved into labour’s demands and GM’s long-term competitiveness is threatened.”
A GM spokesman declined to comment on the BofA report.