UAW members on strike outside a GM plant in Flint Michigan on Sept. 16th, 2019.
Michael Wayland | CNBC
DETROIT – The United Auto Workers’ 40-day strike against General Motors will cost the company about $3.8 billion to $4 billion for the year and $1 billion for the third quarter, the automaker said Tuesday, much higher than some Wall Street analysts had estimated.
The strike lasted from Sept. 16 until Friday, when a majority of the union’s 48,000 members approved the four-year deal. It was the longest national walkout against the automaker since a 67-day strike in 1970.
After accounting for about $900 million in interest and taxes, the strike shaved off about $2.9 billion in profit from the automaker’s 2019 earnings, or $2 a share, the company said in releasing its third-quarter earnings before the markets opened. That includes $700 million in after-tax costs, or 52 cents per share, for the third-quarter alone.
Later, it said the cost to adjusted earnings before interest and taxes for the year is expected to range from $3.8 billion to $4 billion.
Some Wall Street estimates had placed it at more than $2 billion in lost vehicle production during the third and fourth quarters. The high end of estimates pegged it at closer to $100 million in losses per day.
GM CEO and Chairman Mary Barra said executives know they have “a lot of work to do” in an attempt to make up losses from the strike.
“We are moving forward as one team,” she told investors during a conference call on Tuesday, adding dealer inventories are “leaner” than the company would like.
GM expects it lost about 300,000 units in production due to the strike, according to GM CFO Dhivya Suryadevara. She said the automaker also lowered its expected saving from cost-costing initiatives announced in November from $4.5 billion to between $4 billion and $4.5 billion through 2020.
“We’re obviously going to maximize and figure out every opportunity to get every dollar we can from a cost-savings perspective,” she said during a briefing with media on Tuesday.
The strike’s impact was far-reaching, causing GM plants in Canada and Mexico to temporarily shutter due to a lack of parts to produce vehicles. It also significantly impacted suppliers of GM, many of whom confirmed temporary layoffs and undisclosed financial losses.
While most of GM’s major suppliers have not reported third-quarter earnings, executives with Lear Corp. on Friday said each week of the strike cost the Southfield, Michigan-based supplier between $50 million and $75 million a week.
Lear, while discussing third-quarter results with analysts, cited the strike as the primary reason for lowering its earnings forecast for the year. The revised forecast included adjusted net income of between $765 million and $845 million, down from between $885 million and $965 million on lower sales of between $19 billion and $19.5 billion, down from $19.8 billion to $20.3 billion.