Long Strike Could Cost GM Billions

Mike Heiman, 46, pickets outside the GM plant in Lordstown, Ohio, Tuesday, Sept. 25, 2007. Heiman, a 26-year GM employee, is a pipefitter at the Lordstown plant.
AP Photo/Tony Dejak
If the United Auto Workers strike against General Motors Corp lasts longer than a week or two, it could cost GM billions of dollars and stop the momentum the company was building with some of its new models, according to several industry analysts.

A strike of two weeks or less would not hurt GM's cash position and would actually improve its inventory situation, Lehman Brothers analyst Brian Johnson said Monday in a note to investors. But a longer strike would be harmful, causing GM to burn up $8.1 billion in the first month and $7.2 billion in the second month, assuming the company can't produce vehicles in Mexico or Canada, Johnson wrote.

But Tom Libby, senior director of industry analysis for J.D. Power and Associates, said even a short strike could hurt GM because its new crossover vehicles - the Buick Enclave, GMC Acadia and Saturn Outlook - are selling well and in short supply.

"The momentum they've established for those products would be interrupted if there's a supply interruption," Libby said.

GM had about a 65-day supply of cars and trucks as September began, versus a 71-day supply at the same time last year, said Paul Taylor, chief economist for the National Automobile Dealers Association. The Enclave, he said, is at a tight 24-day supply.

While the strike may look like a test of wills, it is really a portrait of weakness, on both sides, reports CBS News correspondent Dean Reynolds.

GM hasn't had a profit since 2004. It lost $12 billion over the last two years. And while it's making profits this year, they're coming from sales abroad, not here.

For the UAW, it's lost 150,000 jobs at GM over the last 10 years amid repeated rounds of concessions, adds Reynolds.

The strike began at 11 a.m. EDT Monday when 73,000 UAW members at about 80 GM facilities in the U.S. walked off their jobs. It's the first nationwide strike against GM since 1970.

Despite the walkout, both sides were back at the bargaining table only a couple of hours after the picket lines went up. Weary negotiators stopped to rest around 8 p.m., then returned Tuesday morning for their 22nd straight day of bargaining, GM spokesman Dan Flores said.

The main issues remain health care and pensions for retirees - a drain on GM's bottom line. The company wants to hand that responsibility off to the union from now on and the argument is over how much GM will pay to fund the programs. But there are other issues that directly affect active workers, too.

"It's job security. It's work rules. It's wages. It's looking at where a new product is going to be built," GM worker Brian Mosley told Reynolds.