Potential GM Strike Jeopardizes Production -- WSJ
September 19 2016 - 3:02AM
Dow Jones News
By Mike Colias
The leader of the union representing auto workers in Canada said
thousands of factory employees will strike at two General Motors
Co. plants if the sides miss a Monday night deadline for a new
contract, threatening to disrupt the supply of engines that go into
the company's sport-utility vehicles.
GM's production of finished vehicles in Canada represents only a
modest slice of the company's sprawling manufacturing footprint in
North America, but a strike would affect an engine and transmission
plant in St. Catharines, Ontario, near Niagara Falls. That factory
cranked out more than a half-million engines last year, delivering
power for 15% of the vehicles GM sold in the U.S. last year, making
the facility a potential choke point if production were suspended
long enough.
Unifor President Jerry Dias said in an interview that several
weeks of formal talks with GM officials haven't resulted in
"anything meaningful" on the union's No. 1 goal: securing
commitments for future production at the two Canadian plants.
Canada's largest private-sector union this month designated GM
as the target company in talks that will set a pattern for
negotiations with Ford Motor Co. and Fiat-Chrysler Automobiles
NV.
Unifor's four-year contract with Detroit's three auto makers
covers about 20,500 employees and expires at 11:59 p.m. on Monday.
Extensions are common in labor negotiations, but Mr. Dias appears
uninterested in dragging out talks that he characterizes as slow
going. "The reality is we've chosen GM as the target, and there's
going to be a strike," Mr. Dias said, saying he won't extend the
contract beyond the Monday deadline. "'At some time or another,
somebody is going to bend. It's not going to be me."
St. Catherines' output includes V8 engines for most of GM's big
SUVs -- the Chevrolet Suburban, Cadillac Escalade and others. Built
in Arlington, Texas, and typically sold near the higher-end of the
market, full-size SUVs are among the company's biggest
moneymakers.
The 1,400-employee St. Catharines plant also makes smaller V6
engines fitted in several models across GM's brands, including the
Chevy Colorado and GMC Canyon midsize pickups that have been hot
sellers since they were introduced two years ago. In addition, the
factory makes a transmission used in the Chevy Equinox crossover,
GM's No. 2 seller in the U.S.
While Mr. Dias is looking for an upfront commitment, GM
executives have said they don't plan to decide on any future
investment in Canada until after a new contract is signed. GM's
shrinking manufacturing presence in Canada underscores the
industry's shift toward investment in the U.S. and Mexico since the
2008 financial crisis.
A GM spokeswoman declined to comment on the strike threat. "We
remain focused on working with Unifor to reach a mutually
beneficial and competitive new agreement," she said in a
statement.
Analysts said GM could scramble to fire up contingency
production at other factories; each engine and transmission made in
St. Catharines is made in at least one other GM plant in North
America. Mr. Dias, however, said he believes United Auto Workers in
the U.S. would "stand in solidarity" with Unifor and potentially
thwart efforts to replace the lost engine production.
UAW President Dennis Williams told the Detroit Free Press last
week that the union would support Unifor in its GM negotiations,
without discussing specifics.
The relatively small volumes coming from the Oshawa plant and
GM's redundant supply of engines and transmissions made in St.
Catharines gives the company some leverage in the negotiations,
said LMC Automotive analyst Jeff Schuster. "It's a risky tone from
the union," he added.
GM can't afford a major kink in production. Its North American
plants are running flat out amid the U.S. market's strong sales
pace, and thin inventory of certain models has caused the auto
maker to miss out on some sales in recent months. Dealers have
complained about tight supplies of the big SUVs for much of the
past two years as low gasoline prices stoke demand.
The second plant covered under the GM contract that expires
Monday is a vehicle-assembly factory in Oshawa, Ontario, which
isn't as strategically important to GM. It makes several
light-selling cars that are expected to fall out of GM's future
production plans within the next few years, such as the Cadillac
XTS sedan.If Unifor and GM can agree to terms, the union would
pivot to Ford and Fiat-Chrysler Automobiles. Union officials want
fresh product commitments at an FCA assembly plant in Brampton,
which makes the Chrysler 300 and other sedans, and two Ford engine
plants in Windsor.
Research firm IHS Automotive estimates a strike would cost GM
about 2,000 vehicles a day from Oshawa. GM made nearly 140,000
light vehicles at that plant in the first eight months of the year,
about 6% of its North American vehicle production, according to
WardsAuto.com.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
September 19, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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