General Motors Co. revealed Tuesday that the ongoing United Auto Workers (UAW) strike has already cost the company $800 million. As the dispute continues, the financial burden grows by an additional $200 million weekly.
Amid the strike, GM’s third-quarter net income has seen a 7.3% decline, amounting to $3.1 billion. Furthermore, the adjusted earnings before interest and taxes witnessed a 17% dip to $3.6 billion. Notably, $200 million of this loss was directly connected to the strike that started on Sept. 15. The production losses during the fourth quarter thus far have reached $600 million, as shared by CFO Paul Jacobson according to Crains Detroit.
Despite these challenges, GM reported a 5.4% increase in global revenue for the quarter ending Sept. 30, totaling $44.1 billion. However, net profit margins did see a drop from the previous year’s 7.9% to 6.9%.
Regionally, North America earnings before interest and taxes were reported at $3.5 billion, marking a 9.5% decrease. The adjusted margin for this region also fell from the previous year’s 11.2% to 9.8%.
CEO Mary Barra commended the supply chain team and logistics partners in North America for their efforts in improving vehicle delivery to dealers. She highlighted in a letter to shareholders, “Our U.S. dealers helped us outperform the market with strong pricing and essentially flat incentives. We were profitable in every region, including China.”
Given the uncertainties stemming from the strike, GM has withdrawn its guidance for 2023. Previously in July, they had projected a net income ranging from $9.3 billion to $10.7 billion and an adjusted EBIT between $12 billion to $14 billion.
While the strike has caused disruptions, it is not the sole reason for changes in GM’s electric vehicle (EV) production targets. According to Crains Detroit, Jacobson expressed that the company is hesitant to confirm the production of 400,000 EVs in North America by mid-2024, opting for a strategy that aligns production with demand. Nevertheless, GM remains confident in achieving the capacity to manufacture 1 million EVs in North America by the end of 2025.
Last week, GM announced a delay in the production of electric Chevrolet Silverado and GMC Sierra pickups at its Orion Assembly plant in Oakland County until late 2025. This decision, however, is not connected to the ongoing strike. Instead, GM attributes it to a strategy to manage capital investment better and align with the evolving EV demand.
On the brighter side, Jacobson mentioned that GM is making significant strides in alleviating battery module supply constraints and scaling up EV production. It is worth noting that none of GM’s EV plants have been impacted by the UAW strike.
However, the UAW strike has affected several GM facilities. Workers are currently picketing at assembly plants that produce Chevrolet Colorado, Traverse, GMC Canyon, and Buick Enclave, in addition to 18 parts distribution centers. Over 2,300 workers at other GM sites have faced temporary layoffs due to parts shortage.
To maintain flexibility during these trying times, GM secured a $6 billion line of credit earlier in October.
It’s essential to note the UAW’s strike in 2019, which lasted 40 days, cost GM a staggering $3.6 billion. The current strike differs in its scope, targeting specific Detroit 3 plants, leaving some facilities operational. Recent negotiations between General Motors and Stellantis suggest a proposal to increase UAW member wages to over $40 per hour by 2027. GM’s latest offer would also see a 23% wage boost for most employees, amounting to $40.39 per hour by the end of the contract. This also includes a significant increase for temporary employees.
UAW President Shawn Fain emphasized the union’s commitment to securing a favorable deal. “The bottom line is we’ve got cards left to play, and they’ve got money left to spend,” he remarked.
