General Motors’ Strike Rumbles on as the Damage Spreads

The United Auto Workers (UAW) strike at a number of General Motors factories started Sept. 16 is now into its fourth week, with losses mounting for both GM, the workers and GM’s wider supply chain.
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According to CNN, GM is estimated to have lost some $660 million already. Losses are rising, as non-unionized plants close for want of parts made in the striking operations.
The numbers are eye-watering, although only some 46,000 workers are directly involved. GM alone is said to be suffering losses that started at $10 million a day but are rapidly rising toward $90 million a day, CNN reported, citing the Anderson Economic Group.
If a resolution is not found soon, GM alone could lose over U.S. $1 billion, in addition to the workers’ salary losses of about $18 million a day this week rising to $25 million next week.
Among GM’s approximately 10,000 strong supply chain are also going onto short working, layoffs and in some cases, outright shutdown as the closure of GM plants spreads. A separate CNN article even suggests a Midwest recession, as GM’s problems are heaped on a farming sector already in recession and those Midwest manufacturers already hit by a slowdown due to tariffs and fallout from the trade war.
GM’s share price has taken a hammering and credit rating agency Moody’s has already warned that the stoppage would probably have a material impact on GM’s finances.
With GM’s credit rating just one step above junk bond status, a downgrade would impact the firm’s cost of borrowing.
To suggest both sides are desperate for a resolution is an understatement.
But to say they are close to any kind of agreement is an overstatement following a collapse in talks this weekend.
The union’s demands are broadly two-fold. It is seeking to enhance job security by forcing GM to shift production of sport utility and pick-up trucks from its three manufacturing operations in Mexico to U.S. plants, a move that many would probably welcome (although there would be margin losses for GM in the process).
The other areas of focus for the union is worker rewards and pensions, wage increases and a path for temporary workers to become permanent employees, according to CNN. Two unresolved matters include the time of service required for less senior workers to reach the top union-wage — it currently takes eight years — and inflation and cost-of-living adjustments for pensions and 401(k) retirement plans.
Support for these issues is less universal outside of the strikers, anyway. GM’s workers are already highly paid, with many making over $30/hr, plus benefits like health care, for which workers pay only 4% — a pittance compared to levels in the rest of corporate America, the Economist says.
The UAW is not out to win any popularity contests.
UAW sees the growth of electric vehicles as a major disruptor for established internal combustion engine manufacturers, like GM, which threatens the firm’s capacity to reward them in the future. The union has also accurately judged the public mood, at least on the topic of offshoring and globalization.
If ever there was a time to push GM to reshore production, even from neighboring Mexico to U.S. plants, it is now.
GM is currently Detroit’s most profitable company, with earnings of $8 billion last year. This strike will not bring the company down, but in a slowing Midwestern economy the damage is rippling beyond just the affected plants and their suppliers. Interconnected operations use up inventory and the impact spreads up and down the supply chains into the wider economy.
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Let’s hope increasing acrimony is reversed and a solution is found soon.