Published 12:01 AM EDT Sep 17, 2019
For General Motors, the longer its workers are out on strike, the bigger a hit it stands to take to its bottom line.
While GM has enough completed cars on hand to keep up sales, and isn’t paying employees who’ve walked off the job, not operating in the U.S. for a week could cost the company roughly $450 million – or more than $60 million a day, says Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor, Michigan.
A precise breakdown is difficult to calculate, experts say, but the costs go beyond just production losses. The power has to be kept on even in idle plants, and GM will need to continue paying businesses that provide it with parts, even if no cars are rolling off the assembly line.
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Still pay your bills
“It’s keeping the utilities on,” Dziczek says. “They’re paying their suppliers … (and) if you’re not using the plant and the equipment, it’s not making you any money.”
Analysts with Credit Suisse said in an investors note that while “the impact could potentially be nominal if the strike is resolved quickly,” GM could suffer $50 million a day just in lost production because of the strike
However, the company could save some cash because plants are not operating, and “GM could potentially offset lost production once the strike ends,” wrote the analysts, Dan Levy and Robert Moon.
While inventory is currently strong, car shoppers could eventually take their business elsewhere if they can’t get the vehicle model or color they prefer, says Harley Shaiken, a professor at U.C. Berkeley who specializes in the study of labor.
Customers walk away
“If you can’t find the Chevy Silverado pickup in the color and options you want, you may not want to wait,” says Shaiken. “You may go to Toyota… The hot-selling, high-profit models, that’s where (GM) wants to have the inventory.”
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GM reported a financial uptick last year, with net revenue of $147 billion, and $8.1 billion in income.
Figuring out the exact financial toll a strike can take on GM is complicated, says Erik Gordon, a professor at the University of Michigan’s Ross School of Business who closely follows the auto industry.
“They’re all wild estimates,” he said of the varying figures. “You’d have to estimate how many sales they would have made. You have to estimate whether sales are merely deferred. … Those numbers are very broad guesses.”
Will it be a draw?
But if the strike goes on, there are a couple of certainties, Gordon says.
“It will have a big impact on GM’s finances and it will also have a big impact on the strikers’ finances,” he says. “Both sides are going to suffer. Think of two boxers punching each other..You can’t knock labor out because you need to have your cars assembled. You don’t want GM to go broke. At the end, you declare sort of a draw. And everybody has a broken nose.”