GM strike ends after almost six weeks at cost of $2 billion

Bloomberg

General Motors (GM) employees voted in favor of a new four-year labor agreement reached with the United Auto Workers (UAW), ending a nearly six-week-long strike that has cost the company about $2 billion and rippled through the US economy.
The union said the deal was approved by 57.1% of its members, enough to ratify the contract and stop the longest automotive walkout in 50 years. “General Motors members have spoken,” Terry Dittes, a UAW vice president said.
The union will next target Ford Motor Co in its contract negotiations. The Dearborn, Michigan-based company will be under pressure to avoid a work stoppage while it’s going through a high-stakes strategic revamp of its operations. S&P Global Ratings downgraded Ford’s debt to one level above junk saying the overhaul will be difficult to pull off.
The prolonged strike, which began on September 16, dented revenue up and down the automotive supply chain, and potentially shaved tens of thousands of workers from an October jobs report due out next week from the Labour Department.
GM and the UAW reached their agreement last week, awarding workers pay raises, $11,000 ratification bonuses and a route for temporary employees to reach full-time status. The contract also preserves the its healthcare plan.

Making up lost time
“GM is proud to provide good-paying jobs to tens of thousands of employees in America and to grow our substantial investment in the US,” Mary Barra, GM’s chief executive officer, said in a statement. “As one team, we can move forward and stay focused on our priorities of safety and building high-quality cars, trucks and crossovers for our customers.”
Now GM needs to make up for lost time. The automaker built up inventory before the strike, especially with its new full-size pickup trucks, but it will take a week to get production up to full capacity, said Jeff Schuster, senior vice president of forecasting for research firm LMC Automotive.
The company reports earnings on October 29 and is likely to detail the impact of the strike and address how much can be recouped. Of the $2 billion lost, it could recover $431 million by year’s end, But GM is unlikely to hit its adjusted earnings estimate of $6.50 to $7 a share, said David Whiston, a Morningstar Inc analyst.
Shares of the automaker rose 2.6% to $36.74, the highest close in almost a month.
The new contract is expected to raise the automaker’s labour costs by at least $100 million a year, though it allows the company to follow through with closing all but one of the four US plants it announced plans to shutter almost a year ago.
While the deal likely won’t help reduce the $13-an-hour premium that the Center for Automotive Research estimates GM pays workers over foreign automakers’ wage rates. GM is unlikely to hike vehicle prices.
Labour expenses only account for about 5% of the cost of a car.