Cost of shutdown at GM is put at $936 million Analyst expects profit per share to fall to $1

labor talks resume

June 27, 1998|By BLOOMBERG NEWS

DETROIT -- Two crippling strikes against General Motors Corp. entered their fourth week yesterday with no end in sight as analysts began tallying the mounting costs to the world's largest automaker.

James Irwin, an analyst at Goldman, Sachs & Co., said the strikes have cost the company $936 million in second-quarter profit.

He lowered his GM earnings estimate for the quarter to $1 a diluted share from his previous $2.40 a share. Other analysts were preparing to cut their estimates as well.

Talks resumed yesterday, but there were no reports of progress.

"There's no break in the logjam," said Richard Shoemaker, the UAW's top GM negotiator.

"There's been no progress, and we'd like to get this over as soon as possible," said Janine Fruehan, a GM spokeswoman.

GM heads into a planned two-week shutdown Monday with the strikes by 9,200 workers in Flint, Mich., already having idled 93 percent of its North American vehicle production, including its van assembly plant in Southeast Baltimore.

It's the longest labor dispute at GM since a 67-day walkout in 1970, underscoring an escalation in hostilities between a company determined to cut costs and a union bent on saving jobs.

"GM's labor relations are likely to be problematic for the next few years," said Joseph Phillippi, a Lehman Brothers analyst.

GM has been the target of 17 UAW walkouts since 1994.

GM shares fell $1 yesterday to $66.875. They have fallen 11 percent since the day before the strikes began June 4, while the Standard & Poor's 500 Index has risen 4.7 percent.

The company said yesterday that its layoffs had reached 162,600, or 51 percent of its hourly work force in North America.

It has closed 26 of its North American assembly plants.

Only a truck plant in Canada, a small-car plant in Mexico and a Saturn plant in Tennessee are still producing vehicles.

GM said it is considering cutting off medical coverage for the striking workers at two Flint plants and for other United Auto Workers members laid off because of the walkouts.

The company says the layoffs are the result of illegal strikes by the UAW at two plants in Flint, Mich., and that the company should not be held accountable for costs from the union's action.

The union says the walkout was to protest workplace conditions that violate their contract.

GM has decided to withdraw its company-paid health insurance coverage from the 9,200 striking workers in Flint Tuesday, saying it is required by its contract with the UAW to pay the costs only during the last month the workers were on the job.

GM officials also said they were making a case state-by-state against providing unemployment benefits for its laid-off workers. Wisconsin, Michigan and Maryland have approved the benefits.

"The [national] contract says General Motors will fund health care only through the end of the month in which they last work. We're not required to continue that coverage," said Gerry Holmes, a GM spokesman.

GM will review the strike situation "week to week" before deciding whether to end the benefits, which cost the automaker $4.8 billion a year, Holmes said.

GM has cut off health benefits during past strikes, he said.

One investor said the short-term pain is worth the price and may make the stock a better buy.

"We are owners and buyers" of GM because "our look at the world is much longer term," said Tony Spare of Spare, Kaplan, Bischel and Associates in San Francisco, which manages about $2.5 billion.

Pub Date: 6/27/98

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