The possibility of a quick resolution to the United Auto Workers (UAW) strike against American Axle (AA) is fading fast. It's been a week since the full bargaining teams met; labor specialist Gary Chaison describes the non-meetings as "an awful sign." The AP [via Forbes ] reports the UAW sent an email to members of other organized companies stating "we expect this to be long and drawn-out strike," asking them to join AA workers on the picket line. So far GM has had to close all or part of 28 plants. Thousands of workers have been laid off at other suppliers. The UAW strike is also beginning to affect the Canadian Auto Workers (CAW). Several GM plants in Canada have cut back production, creating what CAW president Buzz Hargrove terms "a tough situation." So far, the strike hasn't seemed to affect GM's sales. The General started March with a 129-day supply of Silverados, a 123-day supply of Tahoes and a 141-day supply of Sierras. These models aren't exactly setting any sales records right now. You can bet that once The General starts feeling the pressure on the bottom line they'll be forced to dip into their pocket and bankroll a union buyout deal similar to their own. But what if AA balks or the suppliers can't make it 'til then? Dangerous times.
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Just an FYI – automakers juice their bottom line when they ship a completed vehicle to a dealer. The actual retail sale of that vehicle to a customer ultimately motivates dealers to order more cars. But, retail sales do not directly impact GM’s car-operations profitability.
GMAC still makes money when customers finance through them – but GM’s car operations should not (I hope) rely on GMAC to keep the car side going.
Large inventory levels in the dealer channel force higher incentives on those trapped vehicles. Higher incentives obviously reduce GM’s profitability.
The burden of the strike is mostly that GM is unable to earn cash within the process of shipping cars to dealers. They still need to pay for employees, continue investment, and spend loads on other overhead. And suppliers also rely on the constant flow of parts to GM for their cash flow. A long strike in conjunction with credit downgrades would manifest itself in failures when the cash well goes dry.
I read on Detnews.com that GM’s stock price is falling because of this strike. The fact that the end nowhere to be seen, cannot be good news for GM.
I’m not quite sure when this strike stops eating into GM’s surplus inventory and starts becoming a cash burn, but it can’t be that far away……can it?
You gotta wonder what is the strategy?
Is AA gonna take an extended strike and then capitulate after pocketing what they saved from the strike or is Dauche going to fight this out to the bitter end, which could be the end of GM. And then plan 3 would be to begin producing the parts elseware. With the current economic downturn, the inability of the Big 2.8 to be successful when times were good and now a crippling strike that will strain the already weak supplier system I just see no possibility for survival of the Big 2.8. The TTAC Death Watch series will prove true.
I’m wondering if GM isn’t letting this one go as long as they can to see if any of their suppliers go belly up so they can shift production of the parts to China.
I wonder if the UAW has done the cost analysis of the hit to the value of their VEBA fund caused by the sinking of GM stock value due to this strike vs the possible increase (or lack of decrease) in membership dues that can be gained by this strike.
Why would anyone buy a vehicle built with parts from unhappy workers?
GS650G asks:
Why would anyone buy a vehicle built with parts from unhappy workers?
Great question that I always ask people when they think about buying any of the Dom2.8 vehicles. Most people will think long and hard about it and most switch to another brand.
Does GM have to pay UAW workers not to work while their brothers are on strike at AA? That can’t be a legal situation.