A joyless holiday season faces 70,000 unionized Southern and Central California supermarket workers who have been on strike or locked out since October 11. The strikers, with their lively picket lines and remarkable unity, have become a national symbol of labor’s fight back against corporate grabs. But now things are taking a perilous turn.

Thousands of supporters and hundreds of national labor leaders, including AFL-CIO president John Sweeney, staged a solidarity march through Los Angeles during the week before Christmas. But as union support funds start to dry up, notices have gone out from the United Food and Commercial Workers warning striking members that they will soon have to pay their own costly health insurance premiums. Worse, a move in November by 8,000 Teamsters truckdrivers and warehouse workers–who struck against supermarket warehouses in an attempt to force the employers to settle–has failed. With the three corporate grocery giants–Safeway, Albertsons and Kroger–refusing to buckle, the Teamsters say they have no choice but to send their drivers back to work.

Under this mounting pressure, the UFCW went into a December 19 mediation and offered to give back some $350 million in healthcare costs. But the supermarket chains are still reportedly demanding a rollback three times larger, and they abruptly broke off negotiations until at least after New Year’s.

Public support for the strikers remains high, with shoppers leaving the targeted markets nearly empty. But the owners seem willing to absorb significant short-term losses, on the order of $1 billion, in order to cut their long-term costs. They seek to chop the work force into two tiers, paying less to newly hired workers, and to limit owner payments into employee health plans.

Hopes for a settlement were briefly buoyed when Kroger agreed to a favorable contract with the UFCW in three Southern and Eastern states after a two-month strike. The refusal to settle in Southern California reinforces suspicions that it is Safeway, which operates Southern California’s Von’s and Pavilions stores, that is fueling owners’ intransigence–that and the chains’ palpable fear of growing competition from nonunion, price-cutting competitors like Wal-Mart. It’s an open secret that the traditional grocers are trying to tamp down local labor costs in preparation for a West Coast showdown with the big boxes. Wal-Mart has burgeoned into America’s biggest grocer (and the country’s largest employer) by paying its workers less, forcing distributors to lower their prices and charging prices 17 to 39 percent lower than unionized stores.

The Los Angeles area remains one of the few urban centers that Wal-Mart has yet to penetrate. But having gained a foothold in suburbia, the chain is now furiously pummeling the gates of the urban core, whose potential consumer base is disproportionately immigrant and poor–and therefore primed to respond to Wal-Mart’s discount appeal.

The pro-labor Los Angeles City Council is accelerating efforts to enact legislation that would require big-box grocers opening within the city limits to pay union-level wages. But that effort is not without its own divisions and dissent. Former LAPD chief, now councilman Bernard Parks, who represents much of South Central Los Angeles, has already voiced reservations against banning Wal-Mart, arguing that the union-level wage demands stand in the way of much-needed development (this despite manifold studies suggesting that Wal-Marts tend to kill off local businesses rather than encourage their expansion).

The strikers remain popular, and after the new year it’s likely that they’ll be bolstered not only by organized community support but also by enhanced labor solidarity of the sort offered this past month by the Teamsters. Out on the spirited picket lines, the strikers say they are holding the line for middle-class jobs, not only in Southern California but throughout the country. They know that with their employers intransigent and Wal-Mart lurking in the suburbs, they have to hang tough.