General Motors Co. has lost $800 million in operating profit so far in the now 40-day strike by the United Auto Workers, the automaker said Tuesday, signaling mounting financial impact of the walkout.
The Detroit automaker estimates it will continue to lose $200 million every week the strike continues with the facilities currently under a work stoppage. The losses could increase should the union decide to expand its strike against GM.
The UAW is striking at 20 GM plants, including two assembly facilities and 18 Customer Care and Aftersales parts distribution warehouses. Workers at GM’s Wentzville, Missouri, midsize truck plant have been on strike since Sept. 15, when the union’s contract expired with GM and its crosstown rivals Ford Motor Co. and Stellantis NV. GM’s parts warehouses were added to the strike target list on Sept. 22. The UAW on Sept. 29 added the Lansing Delta Assembly plant, home of the Chevrolet Traverse and Buick Enclave SUVs.
Uncertainty of the strike’s financial effects led GM to withdraw its 2023 full-year guidance, “even though our strong underlying business fundamentals were pushing us toward the upper half of our guidance prior to any of those strike impacts,” Chief Financial Officer Paul Jacobson said.
“After we’ve had a ratified contract, we will provide an investor update to quantify the final impact of the strike as well as costs moving forward,” Jacobson said.
In the second quarter — before the UAW strike — GM estimated it would amass $12 billion to $14 billion in operating profit for all of this year, up from the $11 billion to $13 billion guidance announced during first-quarter earnings; that was an increase from a previous outlook of $10.5 billion to $12.5 billion. GM’s net income for the year was expected to be $9.3 billion to $10.7 billion, up from the previous outlook of $8.4 billion to $9.9 billion.
GM had also increased its adjusted automotive free cash flow to between $7 billion and $9 billion, compared to a previous outlook of $5.5 billion to $7.5 billion. GM’s third-quarter results beat Wall Street expectations on Tuesday with net income of $3 billion on revenue of $44.1 billion.
GM’s third-quarter net income was down 7% year over year on revenue that was up 5%. GM’s operating profit for the quarter was $3.56 billion, down 16.9% year over year. GM’s net income margin for the second quarter was 6.9%, down from last year’s 7.9%.
Pre-tax earnings in GM North America totaled $3.5 billion in the quarter for a 9.5% decrease. GM International’s pre-tax earnings were $357 million for the third quarter of this year, up 6.9% from last year.
GM’s earnings were affected by the strike and higher warranty costs, Jacobson said. The UAW launched its unprecedented simultaneous strike against the Detroit Three on Sept. 15 with walkouts at three assembly plants in Michigan, Missouri and Ohio. It has since expanded to more than 40,000 workers across seven assembly plants and 38 parts distribution centers. Tuesday would mark 40 days — the length of the union’s national strike against GM in 2019.
Following that 40-day national strike across all of its plants in 2019, GM reported the strike cost the automaker $3.6 billion.
The Detroit automaker’s results come after GM earlier this month reported a 21% increase in new vehicle sales in the United States. With more inventory available on dealer lots this year, in the July-to-September quarter, GM sold 674,336 vehicles — including more than 20,000 electric vehicles — up from 2022’s third-quarter sales of 555,580. The automaker’s EV sales increased 28%.
Jacobson said GM is “moderating the acceleration of EV production to protect our pricing, adjust to slower near-term growth in demand and implement engineering changes that will bolster profits.” He stressed GM’s “commitment to an all-EV future is as strong as ever,” noting the automaker is continuing to plan annual EV capacity of 1 million units in North America.
GM recently decided to delay EV truck production at its Orion Assembly plant another year, pushing the launch there to late 2025. Those trucks still will be manufactured at GM’s Factory Zero Detroit-Hamtramck Assembly Center.
“We saw from competitors and from market dynamics, a little bit of a slowing of the growth rate in EV adoption,” Jacobson said. “We saw this as an opportunity to actually push it out a year before we significantly scale up and it’ll give us a chance to build that foundation of profitability and improve it before going forward.”
In the second quarter, CEO Mary Barra alerted investors the automaker was experiencing “unexpected delays” because an unnamed automation equipment supplier was struggling with “delivery issues that are constraining module assembly capacity.”
Jacobson said the “battery module constraint is getting better, which helped us more than double Ultium-platform production in the third quarter compared to the second quarter,” Jacobson said. “You’ll see us continue to scale at our EV plants throughout next year and build to customer demand rather than issuing new product targets.”
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