General Motors Co. is estimated to be hemorrhaging close to $50 million per day as the national strike begins. The United Auto Workers (UAW) officially launched its national strike yesterday, the first call to arms for the group against GM in over 12 years. The strike aims to force GM into a deal that will improve employment conditions and benefits.
Credit Suisse analyst Dan Levy mentioned on Sunday that the national strike could cost GM around $50 million per day in earnings before interest and taxes. The loss will mostly be due to the continued overhead costs and loss of production.
The UAW had previously been rocked by an internal corruption scandal during its negotiations with GM.
The automaker had offered to invest billions of dollars in its various facilities to boost wages and benefits. Negotiations were stalled during the eruption of the scandal, but GM still continued to scale back its workforce in response to the slowdown in the industry and the change in consumer demand.
GM's initial offer to the UAW was a $7 billion investment in eight of its manufacturing facilities in the United States. The company also promised to add up to 5,400 new jobs, most of which will be new employees. The UAW rejected the offer and stated that it fell short of their initial demands. The UAW wanted improved terms in key areas such as health care, pay raises, and tenure requirements.
One of the Union's demands was a pay raise for all entry-level workers. The group demanded that GM reduce the current required period of eight years to three to four years. Entry-level workers typically start at a rate of less than $20 per hour. The rate is then increased to the peak wage of around $30 per hour after the required tenure is met.
UAW Vice President Terry Dittes mentioned at a press conference on Sunday that it has been very clear about the terms it is willing to accept and that they will not be backing down from the fight. Dittes proclaimed that the strike will be the group's way of standing up for fair wages and affordable healthcare. Ted Krumm, the head of the Union's negotiating committee stated that the strike is the group's way of protecting the job security and future of the country's working middle class.
In response to the rejection of its offer, GM mentioned that the offer it gave to the union was more than generous. The company apparently also offered to halt the closure of its Detroit-Hamtramck sedan plant, which it had planned to idle in January.
GM also offered the Union an $8,000 signing bonus per member if they accept the deal. The company also promised to give out wage increases or lump-sum payment for every four years of its employee's contract. However, GM clarified that it will still stick with the same health-care contributions as found on its current contracts.
