GM: The UAW Has To Settle

GM: The UAW Has To Settle
GM's (GM) sales were off 9.5% in April, but the stock rose 3.6% the next
day. April was a tough month for all of the car companies, so GM's slide was nothing special. Bear Stearns analyst Peter Nesvold said the company did well in a difficult market.
GM reports earnings today. The numbers will probably show that the company's cost cuts of $9 billion a year in North America have improved earnings. Of course, that will not matter over time if GM cannot stabilize its sales.
But, The Wall Street Journal writes that Nesvold has ongoing concerns: "It doesn't bode well for North America ever really getting to a point where it's sustainably profitable without further concessions from the UAW," says Peter Nesvold, an auto analyst with Bear Stearns". He need not be so concerned. The UAW will deal.
The auto workers know that GM is the only one of the Big Three that is even close to having a strong on-going business in the US. If the union will give some on benefits and pensions, GM is a platform for job security and, over time, perhaps some small growth.
The UAW cannot look to Chrysler for any relief. Parent DaimlerChrysler (DCX) appears to be set on dumping the US unit, even if it is to private equity interests. The unions are against the sale, and for good reason. Private equity is likely to break Chrysler up. The chances that such a move will be good for job security is nil.
Ford (F) is still losing sales and market share at an alarming rate in the US. The company has predicted that its piece of the US market could drop to 14% before any recovery. The problem is that there may be no recovery. The demand for Ford product seems to have disappeared, and its big cash cow, the F-series pick-up sells fewer units each month. Toyota (TM) has passed Ford as the No.2 car company in US sales. In Ford (F), the UAW may be dealing with a company that is so wounded the substantial concessions may be needed to keep the doors open.
GM's investors can sleep easy. The UAW wants a deal with the car giant. It may be the only reasonable contract labor can get.

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