Grocery strike a test of finances.

The test of wills has begun.

Heading into its second week, the grocery store work stoppage has left the initial phase of excitement and exhilaration. Now comes the war of attrition, when the reality of missed paychecks begins to set in on striking and locked-out workers--and losses pile up at the major chains.

Like most walkouts, this one won't be determined by who is right or wrong. The impasse is evolving into a test of resolve and bank accounts.

"The reason why you have a strike and lockout is that both parties disagree on how long the other one can go," said Daniel Mitchell, a UCLA professor of management and public policy. "If there was an answer to that question, the strike would already be settled. If you can foresee the future, you might as well settle right now and save the costs."

After negotiations on a new labor contract with the three major chains broke down, United Food and Commercial Workers union members called a strike on Southern California Vons and Pavilions markets, both owned by Safeway Inc., late on Oct. 11. The next morning, Ralphs and Albertsons Inc. locked out their unionized employees.

The chains have demanded that workers begin to share rising health and pension costs that employers have traditionally shouldered. They claim they need to make cuts to employees' health, pension and pay scales in order to stay competitive with non-unionized operations.

The workers, determined to protect the benefits that have always come with their generally low-paying jobs, are refusing to go along.

As of late last week, both sides were calling on the other to return to the bargaining table after a federal mediator failed to bring the sides closer together. But there was little movement.

Wall Street is banking on the chains to extract at least some concessions. As of Oct. 16, Safeway's shares were down 2.1 percent since the strike began, while Kroger Co., owner of Ralphs, was off 2.7 percent and Albertsons down 2.4 percent, adjusted for a 19-cent dividend.

"I'm sure some of the investors will be concerned about the strike's impact on the chains' results and will sell their shares," said Charles Cerankosky, managing director of research department McDonald Investments Inc., a Cleveland-based brokerage and investment bank. "Other investors see this as a temporary situation and will take advantage of (possible) lower stock prices."

The chains bring in an arsenal of resources. Kroger owns more than 100 Food 4 Less stores in the region that have been operating under a separate union contract, and are providing income to the parent company during the strike. In all, Kroger owns 2,519 supermarkets nationwide, including the Fred Meyer chain.

"I see no reason for the supermarkets to blink," said Mark Hugh Sam, an analyst with Morningstar Inc. "The threat of Wal-Mart is real. Strategically, what they have to do is get the lowest labor costs possible."

He estimates Albertson's and Safeway will lose $20 million to $40 million if the job action lasts 30 days. The hit to Kroger will be less.

"On an absolute basis, $20 million to $40 million is a lot of money," said Sam. "But on a relative basis, compared to their overall profitability, it is not significant."

Safeway underscored the chains' position when it reported a 28 percent decline in third quarter profits, blaming higher health care, pension and workers' compensation costs. The company also lowered earnings guidance for the fourth quarter to a range of 66 to 69 cents a share--not counting costs related to the lockout--compared with an average expectation of 71 cents by analysts tracked by Thomson Financial.

Safeway shares fell more than 3 percent on the news.

Most of the seven locals have multi-million dollar strike funds, accumulated from union dues and additional $2 per week charges workers have been paying for more than a year.

Union officials would not say how much money exists in their strike fund or how long it would last. But they said they are prepared to mortgage or sell the buildings they own, plus other assets such as stocks and bonds, to maintain the fund if the existing money runs out.

Later this week, the 70,000 workers affected by the strike/lockout will begin receiving strike relief checks of $200 to $300 per week, in place of weekly paychecks that are often double that amount.

"We're going to last as long as it takes," said Rick Icaza, president of Local 770, which represents 15,000 workers in the dispute. "My belief is that the companies are assessing the extent of the losses at this point. I think they are going to realize that they are going to have to come back to the table soon."

Diane Mendez, a single mother with two children and a 15-year Ralphs employee, said she could remain locked out for a month before having to dig into her savings account, which has about $8,000. "We can't hold out for long but we can't quit either," she said. "We are scared because this is our whole life."

Moses Garcia, a 5-year Ralphs employee, says he could hold out for two and a half months before he has to sell some of the $7,000 worth of stock he has invested in Starbucks Corp., which employs his wife.

"I won't touch my savings unless I get real desperate," said Garcia, who has one child. "But I won't cross the picket line because this contract is not right. If they want to take away a little, that's fine, but they want to take away a lot."

Inside the supermarkets, store managers initially struggled to maintain efficient operations using replacement workers with little or no experience. Hours of operation were slashed at most stores. The chains said they were steadily increasing those hours last week, with many supermarkets expected to be back to regular operations soon.

"Each day this strike goes on, we become more pessimistic that a quick solution will be found," said Terry O'Neil, a spokesman for Ralphs, which has 300 stores in Southern California. "But Ralphs Grocery Co. has made plans and preparations to be able to operate for however long this labor stoppage should go on."

Customers, meanwhile, have been generally supportive of the workers, but that could change as the strike drags on. "Customers will soon prefer convenience and they will cross the picket lines," said Cerankosky. "They want their lives to get back to normal."