Local leaders with the United Auto Workers union on Thursday began preparing to walk picket lines as soon as Friday if contract talks with General Motorsbreak down after the UAW singled out the No. 1 U.S. automaker as its strike target.
Rival automakers Ford Motorand privately held Chrysler said they had signed contract extensions with the UAW, clearing the way for their union-represented workers to continue working under the terms of their existing contracts even after the industry-wide deal on wages and benefits expires on Friday.
By readying union workers for a possible strike, the UAW underscored the stakes in the negotiations at a time when Wall Street optimism has been building that the automakers would emerge with a deal to slash health-care spending.
The UAW's lead negotiatior with GM, Cal Rapson, said in a e-mailed statement to union members that the UAW had picked GM as its "strike target."
Rapson said GM now faces a deadline of 11:59 p.m. ET on Friday when its current contract with the union expires.
"We are continuing to meet with the corporation and expect to put in long hours between now and the deadline," he said in the e-mail, which was made available to Reuters.
In past contract rounds, the union has typically negotiated an agreement with the lead company first and then applied that deal as the pattern in talks with the two other Detroit automakers.
By singling out GM late in the game, the UAW chose the automaker with the most to gain -- and potentially to lose -- from complex negotiations over cutting health-care expenses by funding a stand-alone trust fund to pay for retiree care, analysts said.
"The union is not looking for a strike but there is nothing like the possibility of a strike for focusing the mind," said University of California Berkeley professor Harley Shaiken, a labor expert. "I think they are giving a signal to GM that a strike is possible and they want to concentrate on resolving these core issues."
Picket Signs At The Ready
Chris "Tiny" Sherwood, president of UAW Local 652 in Lansing, Michigan, said he had received word from the UAW's negotiating team that he should be ready for a possible strike as soon as Friday, when the union's current four-year contract expires.
"Apparently it got worse overnight," Sherwood said of negotiations between the UAW and GM. Sherwood's local represents about 3,000 workers at a GM plant in Lansing. He added: "Nobody wants a strike, but people also feel enough is enough.
Christine Moroski, a spokeswoman for the union, declined to comment.
The ongoing talks had shown signs of progress earlier this week, according to people familiar with the negotiations.
Both sides have been discussing the funding terms for a trust that would take over retiree health-care obligations and remove an unfunded obligation of more than $90 billion for the Detroit-based automakers, sources have said.
The talks have been widely expected to continue past Friday night with about 180,000 active union-represented workers continuing to work under the terms of the existing contract.
Ford and Chrysler confirmed that their contract extensions. "We have agreed with the UAW to continue bargaining past the contract expiration," Ford spokeswoman Marcey Evans said. Said Chrysler representative Michele Tinson: "We can confirm that we have an extension. We're making constructive progress."
GM stock rose over 10% on the New York Stock Exchange on Thursday, the biggest percentage gain since April 2006, reflecting a new "buy" rating from
Citigroup. Citigroup said it saw a 50% chance that the UAW would agree to a profit-boosting trust fund for retiree health care.
Strike Seen As Unlikely
Analysts have seen a strike as unlikely, in part because of the devastating effect it would have on sales and market share for the embattled U.S. automakers.
"We still think a strike is a low-risk outcome," said Standard & Poor's credit analyst Gregg Lemos Stein. "Both sides seem to understand the issues and it's certain that a strike would hurt both sides."
The last major UAW strike against a U.S. automaker was a 59-day walkout at two GM parts plants in the summer of 1998.
The dispute over outsourcing shut down GM production and caused the automaker's sales to plummet. GM never recovered its pre-strike U.S. market share of 31%, losing over 7 percentage points of share since.
GM spent $4.8 billion on worker health care in 2006. Analysts have said a potential deal under which GM would fund a separate trust fund to take over retiree health-care costs has the potential to sharply increase its future earnings.