GM has plenty of cars, but parts may be a problem
Over the past months, GM has boosted its inventory so it could be tough with the United Auto Workers union. The UAW is demanding a greater share of GM’s good fortune, and the maintenance of three plants which GM wants to close (or has closed); and GM wants the UAW to pick up a much larger share of health insurance costs.
The fact that GM is playing hardball appeared very quickly, as the company dropped employee health insurance—leaving some autoworkers waking up in hospitals to hefty bills and possible bankruptcy. The union is now paying for health insurance for 46,000 workers, and will have to send out $250 per week to each of them as well. The union does have $700 million in reserve for strikes, but that has to stretch to three automakers. Ironically, the worse the deal the union strikes with GM, the less likely it is that Ford and FCA will risk a strike to get better terms—though Ford, with its overstock of cars and trucks, may be more inclined to take risks.
GM may have to dig into its back rooms for parts
GM started out in fine shape, with months of cars on the lots—normally something automakers try to avoid—and the union looking untrustworthy after several union leaders turned out to be on the take (officials from Chrysler and GM were also implicated).
In theory, GM is losing $50 million to $100 million per day while the plants sit still, but the reality is that the company has enough cars and trucks to sell, and still needs to trim inventories further. GM has $34 billion available, so they can get through a long strike, but much of that money will be needed if the economy goes into recession as many expect. In addition, the longer GM stops production, the more likely it is that suppliers will start failing, which would hurt GM’s ability to restart production of Chevrolet, Cadillac, Buick, and GMC cars and trucks.
The company may have underestimate the importance of parts, too; dealers, wholesalers, and distributors have some supplies, but individual car and truck owners may end up waiting until the strike is over to get work done. Part of it depends on how many parts GM stockpiled, and how many are actually needed.
GM’s last offer was an $8,000 ratification bonus and maintaining health benefits. The union wants to reduce the number of temporary employees, increase their share of profits, and reduce the time it takes for new employees to get into the main wage tier.
The strike is also affecting the Canadian Auto Workers, as production had to stop at an Ontario plant. Sales are likely to be minimally affected, though, since most customers buy cars “off the rack.”
Clark Westfield grew up fixing up and driving past-their-prime American cars, including an F-body Camaro and Mopar V8s. He has ghostwritten auto news for the last few years, lives in Farmingdale, New York, and can be reached at +1.516-531-4021.