UAW Will Retreat As GM Rolls

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Stocks:  (F)(GM)(DCX)(TM)

It’s all big talk at GM and maybe it should be. The largest auto maker says that 40% of US sales will come from new models. It plans to add European cars to its Saturn car line. The company is building higher quality vehicles that retain the resale value better.

The market has two concerns as GM gets more healthy. Steel prices are rising and it is a critical component of car costs. And, GM begins negotiation with the UAW soon over the next contract between the worker’s union and the car company. Some analysts are pessimistic that an improving GM can get concessions. Credit Suisse has gone so far as to say: that it does not expect meaningful concessions from the union.

The UAW may want to have its own way, but union management is not stupid. Chrysler has a huge glut of cars and is offering rebates of up to $7,000. Ford’s market share is down to 14% and even with the $23 billion it is raising, further drops in share could cause the company to flounder. GM is doing much better, but is still losing share to Toyota.

Toyota is not going to replace the jobs bleeding out of the Big Three. It would be reasonable for the union to want to keep much of what it has in jobs and benefits. But, no compromise. The UAW is less likely to bit the hand that feeds it with the recovery of the entire US car industry on the line. The Japanese are still gaining share, and, if US car companies cannot run their operations at a profit and us some of that to produce new models, the union will have done very little for its workers long term.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.