GM’s Strike Tab Now at $1 Billion, J.P. Morgan Claims

The strike by UAW-affiliated General Motors workers, now in its third week, is piling up costs for the automaker. It’s also hiking financial pressure on the UAW, which just started paying out $250 a week to roughly 48,000 picketing workers in the United States.

As bargaining teams negotiate behind closed doors to reach a tentative contract agreement, the growing financial consequences of the labor action is hitting GM in another way: it’s now impacting GM’s stock price.

Blame J.P. Morgan, which just estimated the cost to GM now stands at $1 billion.

In a note to investors Monday, J.P. Morgan analyst Ryan Brinkman wrote, “GM likely has some ability to recover a portion of these lost profits by shifting production from 3Q into 4Q, although the automaker will also likely be limited in its ability to add production for vehicles already in high demand or in launch mode.”

That seemed to sour the automaker’s stock, which has until now weathered the strike just fine. In Tuesday trading, GM shares fell from $37.47 to $36.37 at last check — a drop of 3 percent. Hardly a calamity, but unwanted movement, nonetheless. It’s the lowest stock price since trading opened on Day One of the strike (September 16th).

GM’s North American operations provide the overwhelming bulk of the automaker’s global income; last year saw the region account for $10.8 billion of GM’s $11.8 billion in EBIT-adjusted income. An anticipated third-quarter hit of a billion dollars or more would be enough to spook investors.

As the strike grinds on, GM announced the idling of its Mexican workforce in Silao on Tuesday, pushing the number of non-UAW workers on temporary layoff to 10,000, The Detroit News reports. Two Canadian plants in Ontario went offline not long after U.S. workers walked off the job.

The Silao plant handles production of the Chevrolet Silverado and GMC Sierra, leading Jefferies analyst Philippe Houchois to write, “Even assuming a prompt return to production, tight capacity in key segments suggests GM may not recoup all lost production.”

shared from TTAC