- 49,000 General Motors workers went on strike this week, after contract negotiations between the automaker and the United Auto Workers labor union.
- Analysts at JPMorgan estimate that the strike could cost GM up to $75 million every single day.
- The new contract will set a precedent as the UAW begins negotiations with the other major automakers soon.
- Visit Business Insider’s homepage for more stories.
Nearly 50,000 General Motors went on strike last Sunday, beginning the largest labor action against the automaker in more than a decade.
Tensions between the automaker and the union began in 2018, when General Motors “unallocated” four plants in the American heartland in order to save money. But now the bad blood could be costing the Detroit automotive giant $75 million every day the strike continues, according to JPMorgan analysts.
That estimate is based on an assumption that the company can produce two million light vehicles over 261 working days, at an average historical profit of $10,000 per vehicle.
It’s a staggering figure, but it pales in comparison to GM’s whopping $26 billion in profits in 2018. That’s why the bank’s analysts are more concerned with what deal the two sides eventually make.
“We are less concerned about costs during the duration of the strike than we are about elevated costs or — still more important — any degradation in the flexibility of costs over the life of the four year contract,” the team, led by Ryan Brinkman, said in a note to clients.
“Details are scant at this point (and confirmed details virtually nil) but some elements of what GM has reportedly offered may undermine its planned $4.5 bn run-rate of cost savings by the end of 2020.”
In a statement, GM said it has been negotiating in good faith, with offers of higher wages.
“We presented a strong offer that improves wages, benefits and grows US jobs in substantive ways and it is disappointing that the UAW leadership has chosen to strike at midnight tonight,” the company said. “We have negotiated in good faith and with a sense of urgency. Our goal remains to build a strong future for our employees and our business.”
Still, the union says it’s not enough, eluding to the UAW’s role in GM’s 2009 bailout.
“We stood up for General Motors when they needed us most. Now we are standing together in unity and solidarity for our Members, their families and the communities where we work and live,” UAW Vice-President Terry Dittes said in a statement, alluding to the UAW’s role in GM 2009 bailout and bankruptcy during the financial crisis.
Shares of GM have fallen slightly since the strike was announced, by about 2.8%, but remain well above August lows, catalyzed by President Donald Trump’s trade war and dueling tariffs between the US and China.
“Likely these tariffs have cost GM and Ford an annualized roughly $1 billion each to North American EBIT,” JPMorgan said.
More on the strike:
- ‘GM is making a record profit, we’re just asking for a fair deal’: At a GM plant in Detroit, strikers share their grievances
- The UAW failed to organize Tesla and VW in the US and is now running a baffling strike against GM
- GM’s proposed deal with the UAW actually looks pretty good for Trump
SEE ALSO: FEAR NO PHARAOH: Labor demonstrations have powered pay increases for 3,000 years. Here are 10 of the most impactful strikes — for better or worse.
Join the conversation about this story »
NOW WATCH: Will Boeing recover from the 737 Max crisis?