Auto-industry analysts estimate that the walkout—which began Monday and involves roughly 46,000 full-time workers in more than 30 factories across 10 states—could dent GM’s profit by between $50 million and $100 million daily. Stalled production could slash more than a tenth of GM’s expected third-quarter operating profit of about $3.5 billion by the weekend, although GM could make up some lost production once workers return, analysts say.
The U.S. business is GM’s most profitable, but the strike comes at a delicate time for both the nation’s largest auto maker and the United Auto Workers union. GM is seeking to recover lost market share in the lucrative pickup-truck category, with the continuing roll out of its most extensively redesigned pickups in two decades. The Detroit company is also confronting eroding profits in China, its largest market in terms of sales, and a stalled stock price.
GM also has been cutting costs in the U.S. to try to insulate the company from a potential U.S. sales downturn after a long, healthy run. It is on track to eliminate $4.5 billion in costs by late next year as part of a restructuring announced last November, company officials have said. GM in additionhas shuttered multiple plants, impacting 3,300 jobs. GM has said most of those workers were hired at other company factories.
The economic impact of the strike isn’t expected to be as large as it once was because the car company’s union workforce has shrunk dramatically in recent decades as it built more factories overseas. For example, in 1996, a supplier strike forced GM to temporarily lay off 177,000 union members, nearly four times the size of its union workforce today.
Bargainers for the UAW are pressing GM to keep the idled plants open, increase pay and benefits for workers with less seniority and provide better job protection for temporary workers.
The sides are further apart on a range of key issues than is typical at this point in the negotiations, people close to the talks say. Sticking points include health care and the use of temporary workers.
The job-security issue was stoked by GM’s decision late last year to shutter four U.S. factories, although the company in negotiations has floated saving one, its Detroit-Hamtramck plant, to eventually produce electric pickup trucks, according to people close to the talks.
GM entered talks determined to hold the line on its labor costs, people familiar with its strategy have said. That is usually a priority for Detroit auto makers, but is viewed by GM executives as especially important this time because they are trying to prepare for a potential cyclical downturn.
Still, the strike could pressure the company to come back to the table with an enhanced offer, especially if losses accumulate and cloud its financial outlook.
estimates GM would lose more than $50 million a day in operating income from the strike.
puts the potential losses at closer to $80 million, while
forecasts roughly $100 million.
GM shares closed more than 4% lower on Monday.
A key point in the negotiations is the auto maker’s desire to use more union members classified as temporary workers, which helps it quickly cut production if the U.S. vehicle market contracts. GM executives have told investors that the company is better positioned to sustain profitability in a downturn because a larger percentage of its union workforce—including both temporary workers and some others—have relatively limited layoff benefits because of concessions won in past contracts.
Temporary workers account for about 7% of GM’s workforce. The UAW wants to limit the use of temporary workers because they receive fewer benefits even though they do the same work as full-time members
A union official at one GM factory, who didn’t want to be identified, said there are hard feelings in the plant every February, when full-time workers receive profit-sharing checks from GM that have topped $10,000 in recent years, while temporary workers get nothing.
“That’s the worst day of the year for me,” the union official said.
Even if GM and the UAW can settle their differences and swiftly reach a tentative deal, winning ratification from members is likely to be more difficult than in past contracts, labor experts say.
Some workers remain angry at GM over the plant closures. Others also have criticized the union’s leadership for an expanding, multiyear federal corruption investigation that last week led toembezzlement chargesagainst a high-ranking union official who was a former aide to UAW President Gary Jones.
The official has not responded to the charges. The UAW in a statement said while it is concerned by the allegations, the union strongly believes the government has misconstrued the facts.
“It wouldn’t surprise me if the rank and file turn down the first contract they’re offered just on general principle,” said Art Schwartz, a consultant and former GM labor-relations executive.
—Nora Naughton contributed to this article.
Write toMike Colias at[email protected]
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