GM Losses Due To Strike Top An Estimated $1 Billion

General Motors has missed out on $1.13 billion in profits due to the 25-day strike that has largely shut down its U.S. production facilities, according to a new economic analysis.

The Lansing, Michigan-based Anderson Economic Group also estimates that workers have lost around $624 million in wages since the strike began Sept. 16. That figure does not account for the $250 per week workers are receiving in strike pay from their union, the United Auto Workers.

The economic toll goes well beyond the company and its employees, to lost earnings at GM dealerships and slowdowns at companies that supply parts for GM vehicles. Cristina Benton, an analyst at the group, said high inventory levels have helped keep dealers afloat, but parts are getting harder to come by, delaying auto repairs.

Benton added that dealerships located near plants under strike have reported falling sales, likely due to money being pulled out of the local economy. One GM parts supplier told CNBC Friday that his company could see a 25% drop in sales for October if the strike isn’t settled soon.

Nearly 50,000 GM employees walked off the job after the company and the United Auto Workers union failed to reach a new four-year collective bargaining agreement. Workers have expected solid wage increases and strong benefits in their next contract due to both GM’s recent profitability and the sacrifices union members made as the company headed toward bankruptcy a decade ago. 

The last strike at GM, in 2007, lasted only two days. The current strike has gone on long enough to inflict pain on both sides. The question is how much more in losses GM is willing to sustain in order to avoid the union’s demands ― and how much longer workers can survive on strike pay before the union feels compelled to accept a deal it may not love.

This graph from Anderson Economic Group estimates the profits GM has lost over the 25-day strike. (The troughs represent weekends, when production would be down.)

While some sticking points appear settled, the UAW said in a letter to members earlier this week that the top issue remains “job security” ― that is, commitments from GM to devote production to U.S. facilities rather than sending work to Mexico, where labor comes at a fraction of the cost. 

“We have made it clear that there is no job security for us when GM products are made in other countries for the purpose of selling them here in the U.S.A.,” Terry Dittes, the union’s lead negotiator with the company, said in the letter Tuesday. “We believe that the vehicles GM sells here should be built here. We don’t understand GM’s opposition to this proposition.”

GM infuriated employees late last year when it announced plans to idle two assembly plants and two transmission plants in the U.S., as well as another facility in Canada. The company’s move was widely seen as an opening shot in negotiations aimed at putting the union in a defensive posture. 

The company took the rare step Friday of appealing directly to workers amid the negotiations, posting a note on its corporate website addressed to GM employees. Gerald Johnson, an executive vice president, said the company’s offer “commits to thousands of new jobs right here in the U.S. and billions of dollars in new investments in our communities.” He added that “it’s critical that we get back to producing quality vehicles for our customers.”

One of the thorniest issues has been GM’s use of temporary workers, some of whom fill-in for years with a lower pay rate and fewer benefits before becoming full-time. But GM said its latest offer would “create a clear path to permanent employment,” suggesting the two sides may be close to resolving that matter. 

Most GM plant workers start out around $17 per hour and can reach $28 after eight years of employment. That payscale, known as “in progression,” was created under the 2015 agreement. Many members believe the eight-year runway is too long, and the UAW has been working to shorten it.

After the company published its Friday letter, the UAW shot back and accused GM of undermining negotiations and “playing games” with its workforce. “Our members are ready to get back to work, but GM is purposefully stalling the process to starve UAW-GM workers off the picket lines to protect millions of dollars of corporate bonuses,” the union said in a statement.