By on October 1, 2019

The strike by UAW-affiliated General Motors workers, now in its third week, is piling up costs for the automaker. It’s also hiking financial pressure on the UAW, which just started paying out $250 a week to roughly 48,000 picketing workers in the United States.

As bargaining teams negotiate behind closed doors to reach a tentative contract agreement, the growing financial consequences of the labor action is hitting GM in another way: it’s now impacting GM’s stock price.

Blame J.P. Morgan, which just estimated the cost to GM now stands at $1 billion.

In a note to investors Monday, J.P. Morgan analyst Ryan Brinkman wrote, “GM likely has some ability to recover a portion of these lost profits by shifting production from 3Q into 4Q, although the automaker will also likely be limited in its ability to add production for vehicles already in high demand or in launch mode.”

That seemed to sour the automaker’s stock, which has until now weathered the strike just fine. In Tuesday trading, GM shares fell from $37.47 to $36.37 at last check — a drop of 3 percent. Hardly a calamity, but unwanted movement, nonetheless. It’s the lowest stock price since trading opened on Day One of the strike (September 16th).

GM’s North American operations provide the overwhelming bulk of the automaker’s global income; last year saw the region account for $10.8 billion of GM’s $11.8 billion in EBIT-adjusted income. An anticipated third-quarter hit of a billion dollars or more would be enough to spook investors.

As the strike grinds on, GM announced the idling of its Mexican workforce in Silao on Tuesday, pushing the number of non-UAW workers on temporary layoff to 10,000, The Detroit News reports. Two Canadian plants in Ontario went offline not long after U.S. workers walked off the job.

The Silao plant handles production of the Chevrolet Silverado and GMC Sierra, leading Jefferies analyst Philippe Houchois to write, “Even assuming a prompt return to production, tight capacity in key segments suggests GM may not recoup all lost production.”

[Image: General Motors]

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27 Comments on “GM’s Strike Tab Now at $1 Billion, J.P. Morgan Claims...”

  • avatar
    formula m

    Trump gave all these big businesses a huge tax break in 2017. They made huge profits that now enable them to wait out workers and move production to Mexico and China. Got to love when a plan comes together…

    GM would not of had any leverage without that huge lump sum of cash Trump handed out to large corporations

    • 0 avatar

      “GM would not of had any leverage without” the 2009 Bailouts, Handouts and Nationalization to keep the UAW employed at taxpayers’ expense.

      Neither side has any incentive today to compromise because both sides know that President Trump will keep GM and the UAW going with more bailouts, handouts and nationalization, if need be.

      Eventually they will strike a deal neither side likes which will increase the cost to the taxpaying buyers of GM products, adding insult to injury.

      The UAW wants to share in the profits? Let them share in the Losses as well.

      Or buy stock in GM.

      Another reason why more real-world buyers are seeking their nirvana with automakers in the right-to-work states.

      Buy a Tundra or Nissan, made in the US of A, instead of Mexico, without the union hassles.

      Who knew President Trump was a union man?

      • 0 avatar

        …Who knew President Trump was a union man?…

        Who knew a Republican would be OK with massive debt and tariffs? I always thought conventional conservatism eschewed such things as bad. A strange world we live in.

        • 0 avatar

          “A strange world we live in.”

          Yes it is. And it will get even more strange if President Trump gets re-elected.

          That would be truly a liberal progressive ‘crat nightmare straight out of Dante’s Inferno and a Comedy of Errors.

          However, prior to the upcoming election, there is still time to get your ducks lined up for the lean and mean austere times when a ‘crat takes up residence in the White House.

          Massive debt and tariffs? Yeah that was pretty well turned upside down by the last guy in the White House who doubled the national debt and outsourced a huge number of jobs to other nations.

          At least President Trump has done something about that.

    • 0 avatar

      >> formula none

      your comment makes no sense at all

      For three years Trump has been jawboning GM to relocate production back into the US – certainly more than BO did, when GM was actively relocating production out of the US and planning to import Chinese production.

      In fact Trump applied tariffs to the one product GM makes in China and imports to the US despite their pleas for a waiver.

      • 0 avatar
        formula m

        Completely understandable that my comment would not make sense to thornmark, he needs big words like jawboning to convey a message. Perhaps one day he will understand that the tariffs are a tax that Americans pay. If the labor and environmental costs are much lower in China why would GM care if people have to pay a tax imposed by Trump.

        • 0 avatar

          Tariffs are a club Trump uses to get deals. He used it on Canada and Mexico to renegotiate NAFTA, and he’s threatening to use it on the EU to bring them into negotiations.

          China is a special case. China was well on the way to drawing the world economy’s supply chain into China where Beijing could control it. Trump’s tariffs are driving low cost manufacturers out of China and distributing the supply chain among other asian nations so China can’t use it as a choke point. Trade is secondary.

          • 0 avatar

            Tariffs haven not been working as a club to make deals.

            The reasons why tariffs a poor tool for this are covered in every entry-level macroeconomics class. If you look at tariffs through a game theory lens game, the only rational course of action for a country that gets hit with Trump-style tariffs is to react in kind, but no more — and to Target their tariffs for maximum political damage to Trump. And that’s exactly what our trading partners have done — China has basically stopped buying American soybeans.

            Basically Trump’s trade war is a situation where hit our own business community over the head with the tax-bludgeon until China says uncle. And every economist told Trump and his supporters this, and the Trump folks’s response has essentially been “shut up, nerd!”. And, yes, the nerds accurately predicted the way this has played out from day-1. The only question is the timing of the negative results of Trump’s policies.

          • 0 avatar

            Threatening and then imposing tariffs is like threatening that you’re going to beat the mean kid up and then smacking yourself in the face repeatedly.

  • avatar
    SCE to AUX

    As I said before, just because GM is now paying for benefits again doesn’t mean the strike is nearing an end.

    This could go a long time, particularly since GM has so much inventory. Think Halloween or even Thanksgiving.

    The union will never win job security. But if GM caves on that, it will be for a very short term contract.

    • 0 avatar

      I wonder how much of this is actually staged. GM gets to eliminate some access inventory, while the UAW management gets to look like they’re doing something to their members.

      • 0 avatar

        That’s expensive staging. $250/week times 48,000 is $12 million every seven days. GM workers’ average pay is just under $20/hour, and after taxes, a working GM worker was living on $500-$600/week.

        The union strike fund is something over $700 million, so theoretically the union can hold out for more than a year. Workers’ families probably can’t hold out half that long on $250/week.

        The last GM offer included a signing bonus of $8,000, but it’ll be eaten up by debt the workers are running up to make ends meet. If the strike lasts more than about 15 weeks, the workers will be hurting long after the strike is over.

    • 0 avatar

      SCE to AUX, I hope this strike goes on for a long, long time. It’s been a long time coming. It’s like a war of attrition. Let them wear each other out. Maybe some good will come out of it.

      Keep in mind that robotics looms just around the corner, with more and more human assembly jobs being replaced with robots.

      I hope to see the day when cars are assembled 90% by robots, with the remaining 10% being humans supervising robot operations. No drama. Just flawless production.

      Then again, I also hope to live long enough to see social security go broke…..

  • avatar

    highdesertcat – “The UAW wants to share in the profits? Let them share in the Losses as well.” They do with no bonus if not profitable!

    “Another reason why more real-world buyers are seeking their nirvana with automakers in the right-to-work states.” Michigan is now a right to work state, don’t ya know?

    • 0 avatar

      redgolf, not getting a bonus is not a loss. You can’t lose something you never had in the first place. A bonus is an ‘extra’, not a given right. You don’t pay a bonus when you lose money or have gone out of business.

      And Michigan may call itself a right-to-work state these days but nothing has changed since the days when unions ruled. The UAW still rules in Michigan. No doubt about that, is there?

      • 0 avatar

        If profit sharing bonuses were negotiated in lieu of pay raises, it’s a loss.

        • 0 avatar

          Lorenzo – Exactly!Also why would a Michigan UAW member want to go non union, just to give up more of what they have or risk being fired on a whim like they are here in Tennessee at the non union Nissan plant that has a very high turn over of employees?

          • 0 avatar

            Do you actually know firsthand of people being fired on a whim, or was there cause?

            If people REALLY get fired on a whim as you claim, ANY Labor Lawyer will take that employer to the cleaners, and then some. Ask any HR person worth their salt.

            I’ve heard and know firsthand of people being fired on the spot, but there was always cause.

            Nowadays, all employers, even non-union ones, MUST have documentation and show cause to fire an employee (because of potential legal recourse against the employer).

            The only other option is when the employer declares bankruptcy and does not file for protection under Ch 11, 13, 7, or whatever applies.

  • avatar

    “As the strike grinds on, GM announced the idling of its Mexican workforce in Silao on Tuesday, pushing the number of non-UAW workers on temporary layoff to 10,000, The Detroit News reports. Two Canadian plants in Ontario went offline not long after U.S. workers walked off the job.”

    So in the middle of a strike they shut down operations in Mexico and Canada? Were those facilities dependent on US equivalents for parts or something?

    • 0 avatar

      Yes. It’s not just assembly plant workers on strike, but UAW members working in plants that make engines, transmissions, brakes, steering, and other components. A car is a collection of over 10,000 parts, and while automakers have private suppliers, they still make several key components themselves. Without those components shipped to non UAW plants and dealers, those plants can’t finish building cars, and dealers can’t provide repairs to their customers.

  • avatar

    – 28…..The Flex line (Impala Caddy) was down day 2 of the U.S. strike ..(no body panels ).. The Sierra/Silverado line depends on Fort Wayne , for pre assembled cabs, boxes and front end sheet metal..

    Flex is scheduled to close Nov 1 , and trucks Dec 1..?? ..My guess, the US strike could have a dramatic impact on those schedules .

    Cami (Equinox ) is off on a scheduled “down week or two)

    On the plus side all Oshawa hourly employees are required to call in once a day.. Due to plant closure laws and agreements all hourly people are on full pay and benefits. For another month anyway ????

  • avatar

    100 days.

    • 0 avatar

      That’s just long enough to wreck at least half the UAW workers’ houshold budgets. Families living on $600/week take home pay can’t hold out that long on $250/week in strike pay without depleting savings and running up credit card debt that will be difficult to replace/repay.

      • 0 avatar

        If they even have savings.

        The vast majority of working people I know have NO “liquid” savings whatsoever, and live from paycheck to paycheck.

        (Liquid savings is defined as cash-money in the bank you can draw on whenever you want, that is not tied to a CD, Market Certificate, 401K, Roth IRA, Bonds, Treasury Notes, etc etc etc.)

  • avatar

    highdesertcat – yes I do actually know of employees fired on a whim, my son along with several others were told to break in some new workers only to be pink slipped after the shift ended,that was several years ago and just as he was to get one year in, fortunately my son went on to become a certified plumber, I also have many friends who have worked there many years who tell me about the very high turn over rate, most all workers hired are temporary workers only, that has been going on for years!

    • 0 avatar

      redgolf, I appreciate you sharing that with us. Since I don’t know the circumstances under which they were hired or let go, I can’t draw any conclusions except to say I hope your son contacted a labor lawyer or referred this matter to the EEOC for review.

      My (former) son-in-law, a licensed CA attorney, was let go by a company in CA, where he worked as a Corporate Lawyer, when they moved their HQ to TX and their plant to a Maquiladora in Old Mexico, just across the border.

      He fought his dismissal and his former employer settled out of court, quite handsomely I might add.

      Regardless, the guy was not a keeper, not as a husband for my daughter, nor as a son-in-law, and not as a Corporate Lawyer either which is why they did not invite him to move to the TX HQ, but fired his @ss instead.

      But he was wrongly terminated, and his former employer knew this but didn’t think he would fight it.

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