It is the top story on all the major news and business news stations today, the UAW has decided to launch a strike against General Motors Corporation (NYSE:GM). This marks the first national strike against the U.S. auto industry since 1976. The strike consists of about 73,000 UAW members nationwide. GM and the UAW have been conducting daily bargaining since the UAW's contract with GM exprired on September 14th. Progress has been reported in recent days, but despite this progress, the UAW decided at 11 am this morning to ramp up the pressure on GM negotiators. 
The UAW said that the primary reason for today's strike is continuing concerns about job security for its members. GM responded just minutes later with a statement of their own, saying they are disappointed by the decision to strike, but will continue working hard to reach an agreement.
The strike is bad news for GM suppliers, such as Delphi Corporation (OTC:DPHIQ), which is trying to get out of bankruptcy. The company relies almost solely on GM for its supplying business, so any kind of drawn out strike will impact the company very negatively. American Axle (NYSE:AXL) also relies on GM for about 80% of its total revenue, so it would be impacted greatly as well.
Many on wall street believe that this is largely just a last minute way to put further pressure on GM negotiators and that there is likely to be an agreement reached soon. The reaction of GM shares in the stock market today are a testament to the belief that this strike will not last long, as GM shares currently trade higher by 0.26% despite the strike.
The length of the strike truly is the key question here to everyone involved. If the strike doesn't last long, the effects are likely to be minimal and it will primarily just be a PR move. Should the strike continue for a while, GM could certainly lose market share to competitors and suppliers could be forced to layoff many workers. Burnham Securities analyst David Healy estimates that a strike will cut GM's net income by $335 million for every week that it lasts. Clearly the stakes are high for all involved.
This strike won't last long, simply because it can't. The American auto industry lost the quality contest years ago, now they are just trying to stay in business. Both sides know a prolonged strike will do lasting damage. NewsVisual created an interactive Knowledge Map http://www.newsvisual.com/newsvisual/2007/09/union-and-execu.html of the ties between GM and the UAW that could lead negotiators back to the table.
Posted by: Kang Ho | September 25, 2007 4:28 PM | Permalink to Comment