UAW strikes GM’s Escalade factory, shifts pressure for higher wages

Oct 24 (Reuters) – The United Auto Workers (UAW) union on Tuesday announced another significant expansion of a strike at a General Motors ( GM.N ) assembly plant in Texas that makes the U.S. automaker’s lucrative full-size sport utility vehicles.

By striking GM’s Arlington Assembly Plant, home of GM’s lucrative Chevy Tahoe, Chevy Suburban, GMC Yukon and Cadillac Escalade large SUVs, the UAW has now shut down three of the world’s most profitable car factories. Workers are already on strike at Ford’s ( FN ) Kentucky Truck heavy-duty pickup factory and Chrysler-Owner Stellantis’ ( STLAM.MI ) Ram pickup plant in Sterling Heights, Michigan.

The Arlington walkout doubles the weekly cost of the union dispute to $400 million, GM said in a filing Tuesday afternoon. Earlier, the automaker had said the strikes were costing $200 million a week.

“We are disappointed that this unnecessary and reckless strike has escalated,” GM said in a statement on Tuesday.

Meanwhile, negotiations continue with all three automakers. The UAW has presented Stellandis with a new contract proposal and is expected to make a counteroffer to GM soon, a person familiar with the process said. Union negotiators are awaiting Ford’s new offer and are in discussions with company negotiators. Ford says its most recent offering is a “limited range” that will be affordable and competitive.

The union’s strategy of targeted strikes that unfolded over 40 days has blocked billions in revenue for the Detroit Three automakers. It’s rippled through, and businesses from airlines to auto parts makers are starting to feel the heat.

GM earlier on Tuesday reported stronger-than-expected third-quarter profit but withdrew its full-year financial forecast due to strike uncertainty.

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

On Friday, Fein hinted that a settlement may be close but negotiations could be difficult, calling negotiations before an agreement “the hardest part of the strike.”

The union and automakers don’t know how far. Fein said Friday that the Detroit Three have accepted a 23% pay raise offer and have made progress on other issues.

But Fine told UAW members “there’s more to win.” GM and Ford have said additional cost-of-living increases have already taken more than 30% of their total compensation benefits.

Fine’s decision to push the Detroit Three beyond their record pay and benefit packages is a gamble that the automakers will use future dividends, stock buybacks or capital spending budgets to improve UAW wages and benefits. So far, no automaker has announced a formal shutdown. But companies have not ruled it out.

A victory in Detroit Three profits could mean smaller profit-sharing checks for UAW workers at the end of the year. In fiscal 2019, GM’s fourth-quarter profit was hit by a $3.6 billion 40-day UAW strike that shut down all of the automaker’s U.S. factories.

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

Company executives have said they are increasingly concerned about small and medium-sized suppliers who could face financial hardship if the UAW walkouts reduce their cash flow. Major suppliers, including Corning and Illinois Tool Works, are warning that Detroit’s labor conflict will hurt their finances.

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

After five weeks of strikes, economic losses for the automobile industry have exceeded $9.3 billion, Andersen Economic Group LLC estimated Monday.

Wells Fargo estimates that the UAW strike fund will reach $750 million by the end of this week. UAW officials declined to identify the amount of funding.

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

Those talks are complicated because the efforts are separate companies and automakers are not required to cover them under U.S. labor law under their master UAW contracts.

Shares of GM, Ford and Stellantis were little changed on Tuesday, reflecting Wall Street’s view that UAW negotiations could enter the endgame.

“The union is playing catch-up with the goal of a settlement soon,” said Harley Shaigan, a labor professor at the University of California, Berkeley. “Pulling out profitable plants means speeding up the solution.”

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