GM takes profit hit as UAW strike expands
Add Axios as your preferred source to
see more of our stories on Google.
United Auto Workers members walk the picket line in September. Photo: Patrick Fallon/AFP via Getty Images
The UAW strike is sapping the Detroit Three automakers' profits, but the union's strike fund is still in good shape even as the stoppage grows to include new facilities.
Why it matters: The UAW on Tuesday added another General Motors factory to its strike — the day after adding another Stellantis plant — bringing the total number of shuttered assembly plants to eight.
- The union — which has also shut down 38 parts distribution facilities — says more than 45,000 of its members are now on strike against the Detroit Three.
- That's nearly 1 in 3 UAW autoworkers.
Catch up quick: The latest expansion of the strike came the same morning as GM's third-quarter earnings report.
- The company reported a profit of $3.1 billion for the period, but said the strike has already cost it $800 million — including $600 million after the earnings period ended.
- Morningstar analyst David Whiston estimated that the strike would cost GM $4.77 billion in adjusted earnings if it lasts through the end of the year.
- Ford reports earnings Thursday, while Stellantis releases its report next week.
Between the lines: Strike costs are poised to balloon for the automakers after the UAW this week closed two of the most vital plants in the business — the GM SUV plant in Arlington, Texas, and the Stellantis pickup factory in Sterling heights, Michigan.
- The GM plant makes the Chevrolet Tahoe, Chevrolet Suburban, GMC Yukon and Cadillac Escalade, while the Stellantis plant makes the Ram 1500, which is one of the perennially best-selling models in the U.S.
The UAW's strike fund — which pays out $500 weekly to striking workers — started at $825 million when the stoppage began and had used only about $58 million as of Thursday, according to Evercore ISI.
- That burn rate will accelerate with the addition of two more plants, but the UAW has limited the damage to its strike fund by gradually expanding the strike to select facilities instead of shutting them all down at once.
What they're saying: "Another record quarter, another record year. As we've said for months: record profits equal record contracts," UAW president Shawn Fain said in a statement about the GM strike expansion. "It's time GM workers, and the whole working class, get their fair share."
The other side: GM defended its latest offer, which included a raise of 23% for permanent employees, similar to its rivals.
- "We are disappointed by the escalation of this unnecessary and irresponsible strike," the automaker said in a statement. "It is harming our team members who are sacrificing their livelihoods and having negative ripple effects on our dealers, suppliers and the communities that rely on us."
What to watch: How the automakers' finances are affected in the long run by the strike.
- "We believe GM should be able to offset most of the UAW-driven increased wage headwind" with ongoing cost management, Evercore ISI analyst Chris McNally said Tuesday in a research note, estimating it'll cost the company about $1.2 billion additionally per year.
Our thought bubble: The UAW appears to be increasing pressure on the automakers to get a deal done after union president Shawn Fain said Friday that the companies have made "record" offers but must offer more.
Go deeper: The UAW's strike success hinges on organizing more workers
