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General Motors said the US carworkers’ strike was costing it approximately $200mn a week, an estimate that is set to rise after 5,000 members of the United Auto Workers union walked out of one of its largest and most lucrative plants on Tuesday.
The UAW has been on strike for more than five weeks against GM, Ford and Stellantis, targeting an increasing number of plants and parts depots.
The costs of the stand-off to GM became clearer on Tuesday as the Detroit carmaker reported third quarter financial results. GM said that so far, the strike had cost $800mn in operating profit.
Chief financial officer Paul Jacobson said that GM was withdrawing its guidance because of the uncertainty triggered by the industrial action. GM had in July forecast it would earn an adjusted $12bn-$14bn in operating income for the year.
“We’re not going to speculate on the duration or extent of the strike,” he said.
Hours later, the UAW announced that workers had shut down production at a GM assembly plant in Arlington, Texas that makes the Chevrolet Suburban and Cadillac Escalade. The union called the plant GM’s “largest moneymaker”.
GM said in a statement that it was “disappointed by the escalation of this unnecessary and irresponsible strike”.
More than 45,000 of the union’s 146,000 members at the Detroit three are now on strike pressing for higher wages and greater job security as the US shifts towards electric vehicles.
The UAW has gradually broadened its strike, hitting individual sites to maximise its leverage at the bargaining table. With the strike at GM’s Texas location, it has now shut down highly profitable SUV or truck plants at all three of the Detroit carmakers.
The UAW’s last strike against GM in 2019, which lasted six weeks and affected all the carmaker’s operations, cost $3.6bn in earnings.
Deutsche Bank analyst Emmanuel Rosner estimated that GM had manufactured nearly 62,000 fewer cars and trucks than it would have without a strike. Data group Cox Automotive found that car dealers only have a 20-day supply of GM’s Chevrolet Colorado midsize truck, down from 35 days last month, while the supply of GM’s GMC Canyon midsize truck has shrunk from 33 days to 31.
GM reported on Tuesday that during the third quarter, adjusted earnings reached $3.6bn before interest and taxes. That was down nearly 17 per cent from a year ago but was still ahead of Wall Street’s expectations for $3.3bn.
Revenue rose 5 per cent from the same period a year earlier, to $44bn, with Jacobson citing strong sales and “healthy” pricing.
GM’s adjusted operating profit margin also shrank from 10.2 per cent to 8.1 per cent. Jacobson said the margin decrease partly came from the strike, as well as higher warranty costs, a trend GM has seen all year. While fewer owners were making warranty claims, “the cost for repair has gone up” because of inflation.
“The earnings are strong right now,” Jacobson said. But he added that to be competitive over the long term, “we can’t get into signing a deal that we can’t afford to pay”.
GM also pulled back from ambitious targets to manufacture electric vehicles. The company said on Tuesday that it no longer plans to build 400,000 EVs by the middle of next year, although it still aims to reach 1mn EVs annually by the end of 2025. GM has delayed retooling of a plant in Michigan that had been scheduled next year to build electrified versions of the popular Chevrolet Silverado and GMC Sierra pick-up trucks.
The moves are “to adjust to slowing near-term growth” in EVs, said Mary Barra, chief executive.
“The transition to EVs will have ups and downs,” she said. “We’re making sure that we have a system that will respond to where the market is.”
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