A month-long strike at a key General Motors' supplier is hurting the automaker's bottom line and may erode its US market share at the same time an economic slowdown is putting the skids on its restructuring program.
GM has been forced to close seven truck and sport utility assembly plants and 21 other facilities have been affected by the strike at former subsidiary American Axle and Manufacturing Holding Inc. which began February 26.
Hundreds of other workers employed by suppliers such as Lear Corp, Canada's Magna International and Delphi Corp. also have been idled by the strike, which economists at Merrill Lynch have estimated could cut US economic growth by as much 0.2 percentage points.
On Monday, the first passenger car assembly plant was to be idled because of the strike, GM spokesman Dan Flores said.
Flores, however, said he could not confirm reports by United Auto Workers union officials that a second GM car plant, which builds fast-selling small cars such as the Chevrolet Cobalt, also might close in the coming days because of the strike.
Deutsche Bank analyst Rod Lache has estimated that the strike could be costing GM as much as 300 million dollars a week and more than doubled his estimate of GM's losses in the first quarter of 2008.
But Lache said that “neither American Axle nor GM feel a pressing need to end the strike quickly due to high inventories” of many GM vehicles.
However, Alan Baum of the Planning Edge said the strike has clearly threatens GM's fragile turnaround and left the automaker's critical truck business under siege from competitors.
“Yes they are better. But on the retail side they haven't moved the ball very far,” Baum told AFP.
Despite GM's big inventories, Toyota, Ford and Chrysler LLC are clearly in better position to fill orders for specific trucks, Baum said.
Mark LaNeve, GM's vice president of sales, service and marketing, said right now GM has more than enough inventory to maintain its sales.
“At some point that inventory will begin to run out,” he said in recent interview with AFP. “But it's tough to say when that point will be.”
Sean McAlinden, an analyst with the Center for Automotive Research, estimates the strike could easily last 60 days or more.
“This might be the last big strike in the US auto industry and it could go on for a while,” he said.
So far, however, GM executives have declined to get involved in the negotiations at least in part because the large inventories have made the intervention unnecessary.
The 3,650 striking workers appear unified in their opposition to the wage cuts demanded by American Axle's management.
American Axle is pressing the union to accept a new contract that would cut the wage of unionized employees, many of whom were originally hired by GM before American Axle was spun off in 1998, from the current 28 dollars per hour to 11.50 dollars per hour.
Workers have taken offense at the pay package to American Axle's chairman and founder Richard Dauch, who received 10.2 million dollars in total compensation for 2007 and more than 245 million dollars since American Axle went public in 2000.
But American Axle's negotiators have defended their demands for blue-collar wage cuts by noting that other US-based suppliers already pay substantially less.
“In formal and informal discussions that have occurred for more than two years, AAM has presented the UAW with many alternatives to address the company's need to transition to a market competitive labor cost structure in the United States,” the company said in a statement.
