UAW strikes GM Escalade plant, increasing pressure for higher wages

Oct 24 (Reuters) – The United Auto Workers (UAW) union on Tuesday struck a General Motors (GM.N) assembly plant in Texas that makes the U.S. automaker’s profitable full-size sports cars in another major expansion of the strike.

By striking General Motors’ Arlington assembly plant, home of profitable GM vehicles like the Chevy Tahoe, Chevy Suburban, GMC Yukon, and Cadillac Escalade large SUVs, the UAW has now closed three of the world’s most profitable auto plants. Workers at Ford’s (FN) Kentucky heavy-duty truck plant and Chrysler’s (STLAM.MI) Stellantis pickup plant in Sterling Heights, Michigan, are already on picket lines.

GM said in a statement Tuesday afternoon that Arlington’s withdrawal doubles the weekly cost of the union dispute to $400 million. Previously, the automaker said strikes were costing it $200 million a week.

“We are disappointed by the escalation of this unnecessary and irresponsible strike,” GM said in a statement on Tuesday.

Meanwhile, bargaining continues at all three automakers. The UAW has given Stellantis a new contract offer and is expected to make a counteroffer to GM soon, a person familiar with the process said. Union negotiators are awaiting a new offer from Ford and are holding discussions with the company’s negotiators. Ford said its latest offer was “at the high end” of what it could afford and remain competitive.

The union’s strategy of targeted strikes that unfolded over 40 days cut into the revenues of the Detroit Three automakers by billions, while asking less than half of the UAW’s 150,000 members at the companies to give up wages and march on picket lines. Its effects have also spread, making companies ranging from airlines to auto parts makers begin to feel its severity.

GM earlier Tuesday reported stronger-than-expected third-quarter earnings but withdrew its full-year financial outlook due to uncertainty about the strike.

“Another record quarter, another record year. As we’ve said for months: record profits equal record contracts,” UAW President Sean Fine said. “It is time for GM workers, and the entire working class, to get their fair share.”

Finn indicated on Friday that a settlement may be close but negotiations could become more difficult, describing talks before reaching an agreement as “the most difficult part of the strike.”

It is not clear how far apart the union and automakers are. The Detroit Three agreed to offer a 23% pay raise and made progress on other issues, Fine said Friday.

But Fine told UAW members that “there is more to be gained.” GM and Ford said the additional cost-of-living increases have already raised their total compensation offers to more than 30%.

Fain’s decision to pay the Detroit Three more than the standard wages and benefits packages they offered is a gamble that automakers will dig deeper into future earnings, stock buybacks or capital spending budgets to improve UAW wages and benefits. So far, no automakers have announced an official standoff. But the companies have not ruled this out.

The hit to the Detroit Three’s earnings could also mean smaller profit-sharing checks for UAW workers at the end of the year. In fiscal 2019, GM’s fourth-quarter profit hit $3.6 billion as a result of a 40-day UAW strike that idled all of the U.S. automaker’s plants.

GM CEO Mary Barra told investors on Tuesday that the company “will not agree to a contract that is irresponsible to our employees and shareholders.”

Company executives said they are increasingly concerned about small and medium-sized suppliers who could be in financial distress if the UAW strike cuts their cash flows. Even major suppliers, including Corning and Illinois Tool Works, warn that labor strife in Detroit will hurt their finances.

Thousands of UAW workers are affected in supplier operations within automakers. Stellantis on Tuesday laid off 525 workers at a plant supplying the now-striking Ram truck manufacturer.

After five weeks of strikes, the auto industry’s economic losses have exceeded $9.3 billion, Anderson Economics Group estimated Monday.

Wells Fargo estimates the UAW strike fund will still be $750 million by the end of this week. UAW officials declined to specify the size of the fund.

The UAW and the automakers are also negotiating future wages and union policies for electric vehicle battery plants planned by joint ventures of the automakers and their South Korean battery partners.

These conversations are complicated, because the projects are separate companies and automakers do not have to cover them under their own master UAW contracts under U.S. labor law.

Shares of General Motors, Ford and Stellantis were little changed on Tuesday, reflecting Wall Street’s view that the UAW talks may be entering the final stretch.

“The union is playing its cards with the aim of reaching a settlement sooner rather than later,” said Harley Chaiken, a labor professor at the University of California, Berkeley. “The removal of profitable factories is intended to speed up settlement.”

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