GM auto strike costly for everyone

As the United Auto Workers’ strike against General Motors stretches into a second week, it’s not just the company and striking workers getting pinched.

With many replacement part warehouses shut down, dealers are beginning to run short of components to repair cars, trucks and SUVs. And companies that make auto parts are also starting to see work slowdown. Dealer inventory of new vehicles is holding up but starting to get depleted on a few models.

Meanwhile, GM is losing millions of dollars and has been forced to close one Canadian factory and send workers home at another. The 49,000 striking workers are going to have to get by on US$250 per week in strike pay.

This doesn’t even include the restaurants and other businesses around the more than 30 US factories that have been closed due to the strike. And the longer the strike lasts, the worse it will get for everyone.

Talks went late into the night Tuesday and were resuming Wednesday with progress reported, UAW Spokesman Brian Rothenberg said.

As to the ripple effects, the biggest impact so far seems to be the lack of availability of some replacement parts for GM vehicles.

Parts suppliers, especially smaller ones where GM is the main customer, are also starting to get hit, says Morningstar analyst David Whiston. Even bigger ones like Magna International, a Canadian company that makes components for many GM models, is reporting temporary layoffs at some of its US and Canadian operations.

GM spokesman Jim Cain acknowledged there are some parts shortages, but says it is still shipping parts from depots staffed by management, dealers that stockpile parts for sale to other dealers, and directly from suppliers who make high-volume parts.

GM had a hefty 77-day supply of vehicles at the end of August, but big SUVs were only at about 55 days, lower than the industry average of 61. With no shipments since September 16, supplies are starting to drop.

Michelle Krebs, executive analyst for Autotrader, said dealers have told her that they’ll have ample supply for another week or so. Sales in September thus far have been slowing from August levels, so supplies aren’t being depleted that quickly, she said.

Citi analyst Itay Michalei estimates GM is losing US$100 million in profits per day. The strike has already caused GM to lay off 1,850 workers and shut down its assembly plant in Oshawa, Ontario, near Toronto. Another 730 were laid off from an engine plant in St Catherine’s, Ontario, according Unifor, the Canadian auto workers union.

So far, GM says no Mexican plants have been shut down, nor has a factory in Ontario that builds the Chevrolet Equinox compact SUV.

Whiston estimates that the work stoppage will cost the UAW’s roughly US$750 million strike fund about US$31.5 million per week in strike pay and healthcare costs.

AP