50,000 UAW Workers on Strike and GM is Already Just One Notch Above Junk
The AP reports GM Walkout Brings Factories and Warehouses to a Standstill.
Union spokesman Brian Rothenberg said the two sides have come to terms on only 2% of the contract. “We’ve got 98% to go,” he said Monday.
The strike shut down 33 manufacturing plants in nine states across the U.S., as well as 22 parts-distribution warehouses. It’s the first national strike by the union since a two-day walkout in 2007 that had little impact on the company.
Two Key Points
CNN comments on the GM Strike. Here are the two key points.
1: GM Could be Headed for Junk Bond Status
General Motors' credit rating could topple into junk bond status if the strike lasts more than a week or two, Moody's said. GM's debt rating is currently just one step above junk bond status.
2: Dealerships Aren't Hurting Yet
Although most car companies have a 53-day supply, GM has 59. GM also has an 80-day supply of trucks and SUVs, and an even larger supply of its most profitable trucks, like the Chevrolet Silverado and GMC Sierra.
GM Offers 2% Raises to UAW; Company Ends Strikers' Health Care
The Detroit Free Press reports GM Offers 2% Raises to UAW; Company Ends Strikers' Health Care
General Motors stopped paying for health care coverage for striking workers Tuesday, the company confirmed. That means striking GM union workers are eligible for union-paid COBRA to continue their health care benefits.
Meanwhile, more details emerged about GM's offer to the UAW. Two sources familiar with GM's offer said it called for a 2% wage increase for the first and third year of the four-year contract and 2% lump sum payments the second and fourth years.
“Two percent is nothing," said a local union leader who saw the deal. "We have not gained back anything we gave up during the bankruptcy."
The union had $721 million in its strike fund in 2018 and temporarily increased dues in March this year to boost it to $850 million. That fund also will pay striking workers $250 a week.
$250 a week does not go very far, especially when you have to pay your own healthcare insurance.
Workers are upset.
Perhaps they should be grateful they have a job.
Flirting With Bankruptcy Again
Despite the bailout in which bondholders were ripped off (not that I have any love of them), GM is back flirting with bankruptcy.
Bankruptcy is not at all imminent, but junk bond status implies increased risk.
Moody's downgraded Ford to junk on September 9. GM may be next.
As Yogi Berra famously stated, this is Déjà Vu All Over Again.
Mike "Mish" Shedlock