U.S. Markets closed

GM strike risk is high as UAW deadline approaches

The latest contract talks between the United Auto Workers and General Motors (GM) are coming down to the wire. With the contract set to expire at midnight Saturday, experts say the risk of a strike at GM is rising. It would be the first walkout at the automaker in a dozen years.

“Nobody wins with a strike,” Rebecca Lindland, auto analyst and founder of RebeccaDrives.com, told Yahoo Finance.

“GM is saying we’re facing competitive pressures. They have actually found a lot of jobs for workers in those plants that are scheduled to close. So they feel like they’ve done a lot for the union and the union is saying, but we want more,” Lindland said.

GM has announced plans to close four factories in Ohio, Michigan and Maryland. The union has pledged to fight the closures.

Union workers are also seeking higher wages and new products to be made at three underutilized GM plants in Michigan and Kansas.

According to GM, its average hourly employee earns about $90,000 per year before benefits. That’s higher than the real median U.S. household income of $61,372, according to the U.S. Census Bureau.

Lindland says any union deal with GM will set the pattern for Ford (F) and Fiat Chrysler (FCAU).

Signs of a strike

In a big sign that a strike at GM may be on the horizon, the UAW is considering ordering janitorial workers to walk off the job this weekend. The union’s contract with the janitorial services provider, Aramark (ARMK), expires at the very same time its agreement expires with Detroit’s Big Three automakers.

Aramark World Headquarters, Philadelphia, Pennsylvania, photo

Aramark handles janitorial services for five GM plants. If they strike, GM workers may refuse to cross the picket lines to go to work, and that could pressure GM to make a deal.

Contentious talks

Detroit’s Big Three have seen a torrid sales pace begin to slow down as they contend with rising competition from Silicon Valley and global uncertainties, including the ongoing U.S. trade fight with China.

Lindland said part of the reason why talks are so contentious this time around is because a lot of disruption has happened in the auto industry since the last contract negotiations took place in 2015.

“We have all new players. We have players like Rivian, players like Waymo coming in with autonomous vehicles,” she said. “That’s causing a lot of contention in terms of what GM is looking for.”

UAW scandal

Talks have also been marred by a widening federal investigation implicating the UAW’s top executives, including its president Gary Jones, in a multimillion-dollar bribery scheme. Lindland said the scandal has caused a growing division between union officials and its rank and file.

United Auto Workers President Gary Jones, center, whose home was searched by FBI agents Wednesday as part of a corruption probe, walks with UAW members during the first part of the annual Labor Day parade in downtown Detroit on Monday, Sept. 2, 2019. (Clarence Tabb Jr./Detroit News via AP)

“That’s putting additional pressure for a strike so that the members say, who are you really negotiating for,” said Lindland. “That scandal is actually putting more pressure for better representation, and for the union members, better representation means going on strike and getting a better contract.”

Lindland expects any walkout to be short-lived, with minimal impact to car buyers.

“Right now we have a good amount of inventory at dealer lots, so consumers shouldn’t really feel any impact,” she said. “Where we’ll start to feel impact is if it keeps going and suddenly we aren’t shipping vehicles to dealer lots and we start to see a negative impact on sales.”