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Here’s what could make UAW strike Saturday

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DETROIT – Contract negotiations between the United Auto Workers and General Motors are expected to run down to the wire as both sides work to get a deal before their current labor agreement expires just before midnight on Saturday.

A lot is at stake with several scenarios that could play out over the weekend: they could reach a tentative deal, extend their current contract by days or weeks if the negotiations are close, or the last option neither side wants: strike. The union, if the talks aren’t progressing, also could decide to move its focus to another automaker.

All parties have been preparing for what are expected to be the most contentious negotiations in at least a decade amid a slowdown in auto sales, a volatile trade environment and a widening federal probe into union corruption that escalated Thursday as UAW Region 5 Director Vance Pearson was arrested and charged as part on the investigation.

Here are some of the sticking issues that could cause factory workers at GM, Ford Motor or Fiat Chrysler to walk the picket line as early as Saturday:

Health care

Despite ballooning health-care costs for many Americans and companies, UAW members with the Detroit automakers have retained a golden parachute when it comes to medical coverage.

With little or no co-pays or deductibles, the auto workers only pay roughly 3% of their costs. That compares with the automakers’ salaried workers, who pay roughly 20% to 30%, and the average U.S. worker at 28%, according to the Henry J. Kaiser Family Foundation.

“Health care stands alone as not only the most costly benefit on a per-hour basis but also the benefit that has the most substantial year-over-year cost increases,” Kristin Dziczek, vice president of industry, labor & economics at the Center for Automotive Research, wrote in a feature Monday on the organization’s website.

Ford’s health insurance costs for its 56,000 hourly workers in the U.S. is expected to top $1 billion for the first time next year, while GM and Fiat Chrysler aren’t expected to be far behind. GM paid roughly $900 million for its hourly workers in 2018.

While the automakers may push to shift some of the costs to their unionized workers, Dziczek believes concessions are “unlikely” in 2019. Instead, the parties may “explore other cost-containment and quality-of-care improvement measures,” she said.

Pay

Many traditional UAW members received their first hourly pay raises in a decade four years ago that many members expect to add onto during these negotiations. Part of that push is shortening, if not eliminating, an eight-year “grow-in period” for new hires.

Under the current contracts, starting pay for hourly production workers ranges from roughly $17 to $30 an hour. It takes production workers eight years to reach the top wage tier, which is contrary to the union long supporting “equal pay for equal work.” The “in-progression” wage structure was added to the contracts four years ago as an alternative to a two-tier system.

Union leaders earlier this year also received 31% annual salary increases. That compares with two 3% wage increases for senior rank-and-file workers in 2015 and 2017.

On the other side of the table, the companies want to narrow their all-in labor costs, which include health care and other benefits, to be more in line with nonunionized workers at foreign automakers producing in the U.S.

GM on average pays $63 an hour for its factory workers, while Ford pays $61 and Fiat Chrysler is at $55. That compares with $50 per hour for nonunionized employees at foreign automakers with factories in the U.S. Narrowing that gap is a main objective for the Detroit Big Three.

Lowering their all-in labor costs also would assist the companies with their per-vehicle labor costs, which have started rising after years of decline. According to the Center for Automotive Research, GM’s labor costs per vehicle last year were $2,700 – about $100 more than Ford and $180 higher than Fiat Chrysler.

“In an era of solidly profitable operations, the automakers are seeking to contain labor cost growth while the UAW is looking to make economic gains and secure its members’ jobs and future income,” Dziczek said.

Profit-sharing

The UAW in 2009 agreed to benefit cuts and more substantial profit-sharing in lieu of annual wage increases as a result of the Great Recession and the government-backed bankruptcies of GM and then Chrysler.

UAW members have greatly benefited from profit-sharing, however amid fears of a recession and slowing U.S. vehicle sales, the union is expected to push for more fixed bonuses in addition to profit-sharing bonuses.

Under the current four-year deals, the automakers have paid more than $4 billion in profit-sharing bonuses to UAW members. The record payments, which are based on each company’s annual earnings in North America, have averaged roughly $20,500 per worker at Fiat Chrysler, $33,400 at Ford and $45,500 for GM since 2015.

The Detroit automakers have been happy with profit-sharing because it allows workers to share in the profits without adding fixed costs to their businesses.

Jobs

One of the UAW’s top priorities during contract negotiations is always creating new jobs to assist in growing its membership. Adding jobs is expected to be a particularly contentious issue between GM and the union.

Fiat Chrysler and Ford have significantly increased their U.S. unionized workforces in recent years, however GM has essentially been stagnant amid increasing production in Mexico and cuts to passenger car production in the U.S.

Fiat Chrysler, which is in the process of adding a new assembly plant in Detroit, nearly doubled its hourly unionized workforce over the last two contracts with the UAW. Since 2011, the Italian-American automaker has almost doubled its U.S. workforce to about 44,300 people.

That compares with Ford at roughly 55,500 workers, a 35% increase since 2011, and GM at an estimated 49,300 workers – a 2% increase over the last eight years.

Temp workers

The use of temporary workers has been a significant point of contention between the UAW and Big Three Detroit automakers for years.

Temporary workers receive fewer benefits and lower wages, despite paying union dues and becoming members of bargaining units for the UAW after 90 days.

While percentages of temporary workers fluctuate based on the time of year, temp workers represent about 6% to 7% of the hourly union workers at the Detroit automakers. That compares with roughly 20% or more at the foreign automakers in the U.S.

Automakers traditionally use temporary workers to assist during product launches and increases in output as well as to fill in for full-time employees during high times of absenteeism for vacation and illnesses.

However, the union has contended automakers have sometimes misused temporary workers, making them into “perma-temps,” a temp worker who has spent years at the company.

This is expected to be another thorny issue particularly for GM, which was sued by the union in January for alleged breach of contract over the use of temporary workers at its Fort Wayne truck plant in Indiana.



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Roku could fall another 30% before finding a bottom, chart suggests

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The streaming wars may have claimed a new victim.

Roku shares plummeted nearly 30% last week, its worst weekly performance stretching to its 2017 IPO.

The streaming platform stock was pummeled Friday after Pivotal Research slapped a sell rating and $60 price target on it, fearing a rush of competition in the space. It was crushed days earlier after CNBC owner Comcast announced it would offer a free streaming box to its internet customers.

It could get even worse, according to Craig Johnson, chief market technician at Piper Jaffray.

Roku has “violated the uptrend support line off those April lows of this year. You’ve got some support that comes in at $113. But purely based upon the charts, your best support comes in all the way back down at the 200-day moving average. So you can see the stock trade back down to $81, maybe even $75,” Johnson said Friday on CNBC’s “Trading Nation.”

A move down to $75 marks 30% downside from current levels. It has not traded at that price since May.

“The risk/reward isn’t favorable. Even though the stock is up, it has sold off quite a bit in here recently. I still think you got about 30% downside and maybe a relief rally of 7% upside, so I’d be selling into this move,” said Johnson.

Quint Tatro, founder of Joule Financial, does not see Pivotal’s note on Roku as the stock’s death knell.

“Obviously, the stock got way overheated, trading 25 times sales, but [Pivotal’s] rationale regarding losing market share I don’t agree with. You have to understand, this is a cord-cutting product so their whole rationale is that the cable companies are going to offer their own device for free in order to compete. I’m a Roku user. I own six of them in our home and office. I have not had cable for years so I would not switch to a cable device,” Tatro said on the show.

Tatro says a pullback in Roku’s share price to 14 to 15 times sales, around $100, would make him a buyer. Roku would need to fall 7% from Friday’s close to get to that level.

Disclosure: Comcast is the owner of NBCUniversal, parent company of CNBC and CNBC.com.

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The market rotation this month may have been driven by a technicality

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A trader works at the New York Stock Exchange in New York.

Wang Ying | Xinhua News Agency | Getty Images

What exactly happened during the “once in a decade” stock market rotation earlier this month that rocked investors? It might’ve just been a one-off technical move and not based on fundamentals.

A huge rotation out of momentum into value names took place suddenly last week. Many read the phenomenon as a warning sign as stocks with superior growth have led the market’s bull run in recent years and said a rebound in interest rates was the catalyst. However, the reversal in momentum, which seemed to abate this week, could be explained by a sudden stop in tax loss harvesting, some on Wall Street said.

The idea is that investors often sell losing stocks to lower their tax bill from the capital increases, a technical move that’s quintessential of a momentum trade — chasing winners and dumping losers. The amount of such activity might have decreased significantly last week due to speculations the Trump administration would pass a bill to reduce capital-gain taxes, therefore reducing the incentive to sell their losers.

“It’s quite possible some of the dominant robo advisors could have assumed that the U.S. administration would indeed follow through with its proposal on Sept. 9, and decided to change their optimization to take this into account,” Barclay’s head of equity derivatives strategy Maneesh Deshpande said in a note on Wednesday.

President Donald Trump earlier this month floated a proposal to tie capital gains taxes to the inflation rate, which could lower the taxes investors pay on profits from selling assets. He eventually ruled out such a plan on Sept. 11. But the discussion around the proposal last week coincided with the change in stock leadership that shocked many investors.

Tax loss harvesters might have stopped selling losers and adding winners on the prospect that capital-gains taxes would go down, which could make tax loss selling less beneficial. Such a change could have caused the downturn in momentum due to less selling of falling stocks and less buying of rising names.

The amount of active tax loss harvesting has ballooned over the years as robo-advisers, which automatically allocate assets in a tax efficient way, gained popularity on Main Street. Robo-advisers now manage about $1 trillion assets, up from $240 billion in 2007, according to Barclays.

“Of course, it is also entirely possible that some other investors would have put on the trade in anticipation of such a proposal,” Deshpande said.

The iShares S&P 500 Value ETF hit its highest level since January 2018 on Sept. 11 as the rotation hit its pinnacle.

Value, cyclical companies with low prices relative to earnings and book values tend to be sensitive to economic growth. However, embracing the group without a material change in the economy doesn’t make a lot of sense, analysts warned.

“Absent an improvement in underlying economics, we believe that the recent shift in leadership is unlikely to persist,” Jonathan Golub, chief U.S. equity strategist at Credit Suisse said in a note Monday.



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‘Game of Thrones’ ends run with best drama award, 59 total Emmy Awards

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D. B. Weiss (C, speaking), David Benioff (3rd L) and cast and crew of ‘Game of Thrones’ accept the Outstanding Drama Series award onstage during the 71st Emmy Awards at Microsoft Theater on September 22, 2019 in Los Angeles, California.

Kevin Winter | Getty Images Entertainment | Getty Images

Despite mixed fan and critic reactions to the final season of “Game of Thrones,” the eight-season epic took home the top prize in the drama category at the Emmy Awards on Sunday.

Closing out the 71st annual television awards ceremony, David Benioff and D.B. Weiss thanked creator George R. R. Martin for entrusting his book series to the young producers more than a decade ago and praised the cast and crew for their work on the program.

Since 2011, HBO’s “Game of Thrones” has garnered 160 Emmy nominations and taken home 59 prizes for everything from acting and editing to special effects and sound mixing.

On Sunday, the program earned two Emmys, one for outstanding supporting actor, which went to Peter Dinklage for his portrayal of Tyrion Lannister, and one for outstanding drama.

Earlier in the month, “Game of Thrones” won 10 additional awards during the Creative Arts Emmy ceremony.

“Game of Thrones” final award tally falls short of the 67 Emmys that “Saturday Night Live” has accrued over its 44 seasons. “SNL” earned two statues on Sunday, one for outstanding variety sketch series and one for outstanding directing.

The final season was widely criticized by fans who felt the pacing and its treatment of previous character developments were not up to par. Still, the show continued to have record-breaking viewership.

Each episode, save for one, topped viewer counts from the season seven finale, which was the series high prior to season eight’s release.

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.



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