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GM stocks fall as strike looms

GM stocks fall as strike looms

Los Angeles Times

The dark hole threatening to engulf General Motors Corp. deepened Wednesday as its largest parts supplier inched closer to a debilitating strike and the automaker's stock and many of its bonds fell.

Investors were responding to worries about a possible strike at parts maker Delphi Corp. and to GM's disclosures late Tuesday of new federal subpoenas for its financial records and the potential loss of an untapped credit line.

Labor problems intensified Wednesday as United Auto Workers union members reacted angrily to a wage-cut offer the day before from bankrupt Delphi, which was spun off from GM in 1999.

Delphi wants to slash hourly wages by 39 percent in two steps over the next 18 months, contingent on GM helping to pay some of the costs. The wage-cut plan would have a devastating impact on workers, said Richard Shoemaker, the UAW vice president in charge of bargaining with Delphi.

Delphi's Chief Executive Steve Miller has said that if the company can't win union agreement Thursday it will go to bankruptcy court as early as today for permission to void its union contracts. That could trigger a Delphi strike later this summer that could shut down GM's U.S. production for lack of critical parts.

— Some analysts, though, believe the probability of a strike remains low.

The UAW always negotiates in the press, said David Healy, auto industry analyst at Burnham Securities. There still is a lot of time to talk, and none of them want a strike.

A lengthy walkout at Delphi would cost GM about &

36;5 billion a month in lost sales and wages paid to idled workers, according to various estimates. If GM was forced to close its factories, the automaker could be pushed closer to a bankruptcy of its own, analysts say.

GM's sales in the U.S. have been sliding for decades in the face of intense competition from foreign carmakers led by Japan's Toyota Motor Corp. After losing &

36;10.6 billion last year, GM is shutting additional plants and laying off workers, but its turnaround plan depends heavily on continued production and sales this year of a redesigned line of large sport utility vehicles and pickup trucks.

UAW spokesman Roger Kerson said Wednesday there was no vote on Delphi's offer but that the sentiments ... from (union) local officials are a good indication of the sour mood.

Delphi wants to pay its union workers a one-time &

36;50,000 cash settlement to accept a wage cut in July to an average of &

36;22 an hour, down from &

36;27.50, with a second cut, to &

36;16.50 an hour, in September 2007.

The proposal also would institute a two-tier pay plan under which newly hired Delphi workers would start at as little as &

36;10.50 an hour.

The idea of reaching an agreement this week on a new agreement is ludicrous, wrote Henry Reichard, a negotiator for Delphi's second-largest union, the International Union of Electronic Workers-Communications Workers of America, in a letter to Delphi.

It would be early April before the bankruptcy court could hear Delphi's motion to void its union contracts, and it may be weeks or months more before the judge issues a ruling.

The unions have threatened to strike if the court approved Delphi's request.

As GM tries to cope with Delphi's problems, the automaker also is busily restating financial reports and digging up paperwork for federal regulators. The Securities and Exchange Commission has been probing GM's accounting practices for everything from its pension plan to its dealings in precious metals used on the assembly line.

GM disclosed the new subpoenas for records of a precious metals deal and its treatment of credits from parts suppliers in its delayed annual financial report filed Tuesday.

In that report, GM ' which has restated its financial results back to 2000 because of accounting errors ' cautioned that the restatements could impair its ability to draw on an untapped &

36;5.6 billion line of credit. That contributed to Wednesday's drop in GM's stock and bonds, although the company said it has no immediate need for the credit line.

GM's shares lost 2.6 percent to close at &

36;22.15 Wednesday, down 60 cents. Many GM bonds also declined: one issue maturing in 2021 fell to &

36;71.85 per &

36;100 face value, down from &

36;75.88 on Tuesday, according to Bloomberg News.