Strike At GM :

A Month of Strike Will Deeply Hurt GM

Sep 2007

By Evander Klum

For more than two weeks, the negotiations between General Motors and the United Auto Workers have been watched by people especially those in the automotive industry. Since the beginning, a strike had been planned in case the talks would not satisfy UAW representatives and its members. Last Monday, due to unresolved job security issues, the strike was put into action. With 73,000 employees walking out, analysts estimated that if the strike will take long, it will cause deep financial problems to the top US automaker.

GM can handle a week of strike, said automotive analysts. GM has sufficient manufactured cars to survive a short term strike and car makers have worked to keep their inventories low to lessen the costs making a prolonged strike a major problem.

"This really hurts the car dealers and the customer a lot because carmakers are stuck with the cars they have on their lots," said said Rebecca Lindland, senior automotive analyst at consultancy Global Insight.

According to Paul Taylor, chief economist for the National Automotive Dealers Association, with GM's 65 day inventory for its over-all light vehicles, it is still in good shape for its commercial customers. To add its 90 days worth of pick-up trucks available, GM is healthy.

GM's Buick Enclave, a new crossover SUV that is garnering good press and has high market demand has only a 24-day supply said Taylor. The crossover SUV segment of GM is the only growing broad category of light vehicles. On the other hand, according to Edmonds.com, it is not only the Buick Enclave that is at risk if this strike continues, with low inventories of the GMC Acadia, Saturn Sky and the Saturn Vue, car shoppers may have difficulty in finding these models in case they want them.

"Generally, there will be a lasting loss of market share if there is a long work stoppage," Taylor said.

"A week is OK, but a month starts to be problematic. There are other popular vehicles and new cars being launched, so more than a week or two starts to create difficulties for GM's production schedule."

The US auto industry is not very promising at the moment for the automakers due to the slowing down of in the housing sector that raises monthly mortgage payments that makes consumers put off buying a new car. According to Wards data, car sales are expected to slump from its annual rate of 16.5 million units last year to 16.1 million this year.

"So we are expecting a soft year in light vehicle sales and the strike will exacerbate that," Taylor said.

"This is a brutally competitive industry in which a consumer is used to a large selection of cars and trucks, and now there is a bigger group of automakers manufacturing [profitable] full-size pickups than several years ago, so it's important that a strike be stetted quickly in what is already a weak retail environment."

The three US automakers, GM, Ford Motors (maker of top of the line Mercury catalytic converter) and Chrysler have combined losses of $15 billion last year. Their U.S market share fell to below 50 percent losing it their Asian rivals. Being the lead of the three companies, GM had been exerting efforts to work out the negotiations to recover from their loss and to prevent further losses.