The US auto strike against the Detroit Big Three is already taking its toll on automakers. Although the strike began in mid-September and took place in stages, the financial statements presented this Tuesday by General Motors (GM) reflect the first effects of the conflict. After a spectacular second quarter, sales growth has slowed and profits have declined due to various factors, including the strike, which caused the company $200 million in additional costs during the period and already left a total bill of $800 million in six weeks. And the conflict is not going away. That same Tuesday, the union called for a strike at another GM factory in Texas.
The company said it earned $3,064 million (about 2,880 million euros at current exchange rates) in the third quarter of the year, 7.3% less than in the same period last year, the company said. That profit, equivalent to $2.28 per share, beat expectations on Wall Street, which forecast a steeper decline to 1.84 euros per share. Sales, in turn, rose by 5.4% to $44,131 million, also exceeding forecasts. For the cumulative nine months, profit still rose 1.1% to $8,026 million, while revenue rose 13.4% to $128,863 million.
General Motors is benefiting from strong demand and rising car prices. Although the strike began to take hold, the company recorded surpluses that allowed it to close the quarter without inventory problems.
Uncertainty over the development of the strike has led the group to withdraw its full-year earnings forecast, which pointed to a gross operating profit of 12,000 to 14,000 million for the full year. As soon as there is an agreement on the collective agreement, the company will update its forecasts. Its finance director, Paul Jacobson, has indicated that the total cost over the six weeks of conflict is already at $800 million and that it is currently having an impact of $200 million per week as it has spread to more factories.
CEO Mary Barra said in a letter to shareholders that GM needed an agreement that would allow the company to maintain adjusted profit margin targets of 8-10% in North America. “Accepting unsustainably high costs would jeopardize our future and the jobs of GM team members, and putting our future at risk is something I will not do,” he said. “The current offer is the largest GM has ever proposed to the UAW, and most of our workers will be making $40.39 an hour, or about $84,000 a year, at the end of this agreement,” he argues.
According to the latest information released by the union, General Motors is offering a salary increase of 23% in four years, which the union still considers insufficient. The company has shown itself willing to shorten the transition period within the company’s double pay scale from eight to three years, but wants to be four years for new contracts, which the Ubited Auto Workers (UAW) strictly rejects. As far as living expenses compensation is concerned, only a few details remain to be clarified in order to reach an agreement. Restrictions on temporary employment are currently being negotiated and companies have also recognized two weeks of paid parental leave and additional leave on June 19th for the first time. So far, no agreement has been reached on pensions either.
The automobile strike began on September 15th and is the first to affect General Motors, Ford and Stellantis at the same time. In GM’s case, the first plant to cease operations was the Wentzville, Missouri plant that produces the GMC Canyon and Colorado. The following week, UAW union leader Shawn Fain called for nearly 6,000 more workers at 28 Stellantis and GM distribution centers in 20 states. On Friday, September 29, the union leader called for an additional 7,000 UAW workers to strike at two plants, including GM’s Lansing Delta plant in Lansing, Michigan, where the Buick Enclave and Chevrolet Traverse are assembled. And that same Tuesday, the union expanded the strike to include 5,000 workers at the Arlington, Texas, assembly plant, where some of its most profitable models come from, such as the Chevrolet Tahoe and Suburban, Cadillac Escalade and GMC Yukon.
Brake on an electric car
GM also announced it would postpone plans related to its electric vehicle business. “We are moderating the acceleration of electric vehicle production in North America to protect our prices, adapt to slower demand growth in the near term, and implement technical and other efficiency improvements that make purchasing our vehicles more cost-effective and profitable,” Mary Barra indicated in her statement Letter to.
The company has decided to delay the opening of its electric truck plant in Orion, Michigan, outside Detroit, by a year to 2025 and shift $1.5 billion in capital expenditures to that year. That means abandoning the goal of selling 400,000 electric vehicles next year. The company will continue to make its Chevrolet Silverado and GMC Sierra electric models and the electric Hummer at a factory in Detroit, but it won’t begin new production until it makes improvements to the trucks that increase its profitability.
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