General Motors Co. is facing mounting losses as the strike by the United Auto Workers continues to cut into the company’s production of new vehicles throughout North America.
Compounding issues for GM is the fact it was forced to close its assembly plant and a transmission plant in Silao, Mexico, idling temporarily some 6,000 workers and halting production of GM’s valuable pickup trucks, which are the major source of the company’s profits.
GM truck plants in Fort Wayne, Indiana, and Flint, Michigan, already have been closed by the strike by 48,000 UAW members, which began Sept. 16.
“While September sales are being reported today and arriving pretty much as forecast, the real story for the auto industry will be told in the coming weeks as Chevy and GMC dealers run low on pickup trucks to sell, with the UAW strike against General Motors leading the company to idle the plant in Mexico that makes the Silverado and Sierra,” noted Cox Automotive executive analyst Michelle Krebs.
“Dwindling inventory comes at a time of year when pickup truck sales are strong, and at a time when GM is in launch mode with its full array of new, full-size trucks. This will put the Chevrolet Silverado even further behind the popular Ram in sales. Most importantly, fewer pickup truck sales will impact Q3 and now Q4 profits at GM since pickup trucks account for the bulk of the income.”
Analysts are estimating GM has lost between $800 million and $1 billion due to the strike, which appears no closer to a settlement than the day it began.
The two sides continue to exchange proposals despite making relatively headway.
The UAW’s top negotiator rejected the company’s latest proposal in a letter sent to local union presidents and plant chairman that make up the GM Council, which will ultimately have to approve any tentative agreement before it is set to a ratification vote by union members.
Terry Dittes, the UAW’s top negotiator, said as far as was concerned GM was still demanding concessions. In addition, GM and the UAW had yet to come to any kind of agreement on key issues such as health care, wages, temporary workers and job security, according to Dittes’ letter.
GM contends that its workers already the best paid in the auto industry in the U.S. and it has offered and array of bonuses and improvements in profit sharing as well as more than $7 billion in new investments for new products at a time when the industry is undergoing massive changes.
The union has replied that buying power of the wages of GM workers have not kept pace with inflation in the decade since GM’s bankruptcy and with the company making substantial profits workers expect to make up what they lost.
In addition, with labor content accounting for 7% of the cost of a new vehicle, the union’s proposals would only add about $150 to the cost of new vehicle, according to a person familiar with the UAW’s bargaining position.