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Pressure mounts on GM and United Auto Workers to make a deal as strike drags into 19th day

Collective Auto Workers members with General Motors picket outside of one of the automaker’s truck plants in Flint, Mich. on Sept. 16. The ring called a strike against the automaker after a deal was not reached by a Saturday night deadline.

Michael Wayland / CNBC

DETROIT – Stress is building on General Motors and the United Auto Workers to reach a deal to end the union’s strike against the automaker, now in its 19th day.

Share outs of GM have plunged by double digits since the strike began amid a weakening auto sector; vehicle Canada display has ceased at nearly all North American plants for the company, including its highly profitable SUVs and pickups; and the work stoppage could momentarily begin having a more substantial impact on dealers.

“They’ve got more pressure on both sides, but GM is beginning to seemingly a lot of financials,” said Art Wheaton, a labor expert at the Worker Institute at Cornell University. He added, the current public opinion “is overwhelmingly on the UAW side,” potentially putting additional pressure on the automaker.

GM has enough cash and inventory to wait out the strike for months, after all it’s losing out on time to make up for lost production – specifically on pickups and SUVs – each hour the strike continues, a headwind for the automaker’s third- and fourth-quarter earnings.

Continual the math

Morgan Stanley analyst Adam Jonas said “investors are running the math on the tradeoffs between the up-front despair of lost profit and cash flow vs. potential concessions to the union that could impact GM competitiveness longer basis,” according to a research note Wednesday.

Investors seem to be losing their patience. GM’s stock has fallen by about 10% since the start of the ratify. It closed at $34.98 Thursday, down from $38.86 on Sept. 13 — the Friday before UAW leaders called for the come a cropper.

It’s also hitting shares of Fiat Chrysler and Ford Motor since GM’s labor contract will serve as an prcis for negotiations at its crosstown competitors. Fiat Chrysler’s stock also tumbled 10% during that time duration, while Ford Motor has declined 8%. The broader Dow Jones Industrial Average fell by 3.7% and the Nasdaq OMX Worldwide Auto Index fell by about 6.6% over the same time frame.

J.P. Morgan estimated the UAW’s strike charge GM more than $1 billion during the third quarter, according to a note to investors Monday. Barclays analyst Brian Johnson keep on week estimated there could be 100,000 units of lost production in the third quarter, costing roughly $750 million for GM.

GM’s facility to ship parts to dealers also has been severely hampered. The lack of parts is a growing concern for dealers since accommodation and repairing vehicles is typically the most profitable part of a dealership.

Union impact

For the UAW, the longer the strike lasts, the multifarious members’ expectations for the contract could grow. That could lead to a rejection of a potential deal if union directors can’t deliver a better offer than the one that included more than $7 billion in investments and thousands of new nuisances from GM over the next four years.

“Absent any movement by the UAW on any cost offset proposals that have been tabled by GM, I am not convinced that the UAW strikers wish see any improvement in the economics that have already been proposed,” Colin Lightbody, a labor consultant and longtime mediator for Fiat Chrysler, wrote in a blog this week.

Every day the strike goes on, according to Lightbody, there is a “at the end of the day good chance that the UAW striker’s return on investment is diminishing.”

The union this week also started compensating its roughly 48,000 striking GM members $250 a week in “strike pay” out of the UAW’s “Strike and Defense Fund,” which totaled practically $800 million before the strike. While well funded, the union is paying up to roughly $12 million a week to the rare members. To receive the payments, members must be in good standing and actively picketing to receive the pay.

United Auto Wage-earners members on strike picket outside General Motors’ Detroit-Hamtramck Assembly plant on Sept. 25, 2019 in Detroit.

Michael Wayland / CNBC

UAW spokesman Brian Rothenberg, in feedback to questions about pressure mounting for a deal, said the union’s “members stood up for GM when they needed us and now they deprivation GM to stand up for them when they need them.”

GM declined to comment directly on the talks, referring to a previous utterance that it remains “committed to reaching an agreement that builds a stronger future for our employees and our company.”

Despite innumerable members saving in preparation for a strike, $250 a week is a financial burden and far less than the weekly compensation fellows usually receive. The starting wage for hourly assembly workers ranges between roughly $16 to $30 an hour, or $640 to $1,200 a week, preceding the time when taxes and any overtime pay.

Which side blinks first?

The UAW and GM, while communicating, appear to be at a “standstill,” according to Lightbody. He said it could assault down to which side decides the remaining outstanding issues don’t outweigh the growing cost of the strike.

Remaining impasses at the chart, according to people familiar with the negotiations, are over the company’s use of temporary workers and the path for hourly workers to reach top wages, among other interwoven issues.

Art Schwartz, president of Labor and Economics Associates and a longtime labor res negotiator at GM, has said bargaining shouldn’t “be a battle of who can endure the most pain,” and he cautioned both sides are “hurting from this crown and it’s only going to get worse” if it continues.

“If the union is holding out for ‘my way or the highway,’ the bargaining is in trouble,” he said.

GM’s main goal proceeding into the negotiations was to shrink its all-in labor costs of $63 an hour per worker to be more competitive with its crosstown struggle withs and foreign automakers producing in the U.S, also known as “transplant automakers.”

Lightbody estimates that the current $13 gap between GM and its unfamiliar competitors translates into a roughly $5 billion disadvantage for the company over a four-year contract period.

Ford’s all-in charges are $61 per hour, Fiat Chrysler’s are $55 and nonunionized transplants are $50, according to the Center for Automotive Research.

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