GM says UAW strike has cost it $800 million so far

DETROIT—General Motors said the cost of the ongoing UAW strike has so far cost the company $800 million—and that was before the union added one of the company’s most profitable assembly plants to the walkout only a few hours later.

The Detroit-based auto maker also withdrew its 2023 financial guidance and its electric vehicle production targets through mid-2024 as it reported that third-quarter net income declined 7.3 percent to $3.1 billion.

GM said adjusted earnings before interest and taxes fell 17 percent in the third quarter to $3.6 billion, including a $200 million reduction attributed to the strike that began Sept. 15. Production lost so far in the fourth quarter amounts to $600 million, CFO Paul Jacobson told reporters.

Jacobson said the cost of the strike was rising by $200 million a week based on the plants that were shut down before Tuesday. He declined to talk about the potential impact if the strike expanded to plants such as Arlington Assembly in Texas, which the UAW struck later Tuesday morning. The Arlington plant builds some of GM’s lucrative full-size SUVs, including the Chevrolet Tahoe, GMC Yukon and Cadillac Escalade.

“It's clear that we're dealing with a lot of near-term uncertainty,” GM CEO Mary Barra said on an analyst call before the Arlington strike started, citing both the UAW’s actions and the EV transition.

“I hope it's equally clear that we're going to be acting with purpose, we're going to remain agile and we're making sure we have a system that has the ability to respond to where the market is. And our commitment is to deliver a strong and profitable ICE business, as well as a strong and profitable EV business, for our future.”

Global revenue rose 5.4 percent in the quarter ended Sept. 30 to $44.1 billion, and net profit margins fell to 6.9 percent from 7.9 percent a year earlier.

GM earned $3.5 billion in North America before interest and taxes, down 9.5 percent, and its adjusted margin for the region fell to 9.8 percent, from 11.2 percent a year ago.

The auto maker withdrew its guidance for the full year, citing uncertainty from the strike, which is now in its sixth week. GM in July had raised its 2023 guidance to net income of $9.3 billion to $10.7 billion and adjusted EBIT of $12 billion to $14 billion.

GM said its EV production plans also have become more uncertain, though not because of the strike. The company is no longer saying it expects to build a total of 400,000 EVs in North America by mid-2024 "just to make sure that we're balancing production to demand," Jacobson said.

However, GM said it still expects to have the capacity to build 1 million EVs in North America by the end of 2025.

GM last week said it would delay starting production of electric Chevrolet Silverado and GMC Sierra full-size pickups at its Orion Assembly plant in Oakland County until late 2025. It said that move was unrelated to the strike and cited the need "to better manage capital investment while aligning with evolving EV demand," along with updated engineering that is expected to help with profitability.

"The decision to push out and defer Orion by a year will actually allow us to incorporate some of the changes and improvements that we've seen in early-stage production that will ultimately help the margins of the vehicle" at scale, Jacobson told reporters.

GM continues to target low- to mid-single-digit EV margins in 2025, he said. It's scaling up production of EVs and has made progress alleviating battery module supply constraints, Jacobson said.

None of GM's EV plants have been shut down by the UAW's strike. Workers are picketing at assembly plants in Lansing and Wentzville, Mo., that build the Chevrolet Colorado and Traverse, GMC Canyon and Buick Enclave, as well as 18 parts distribution centers. More than 2,300 workers at other GM facilities have been laid off temporarily because of a lack of parts, including an assembly plant in Kansas that builds the Chevrolet Malibu and Cadillac XT4.

In early October, GM obtained a $6 billion line of credit to ensure flexibility in operations during the strike.

The UAW's 40-day strike in 2019 cost GM $3.6 billion, but it involved more plants and workers than the current walkouts that have targeted certain Detroit 3 plants while other facilities remain in operation.

With the addition of 5,000 workers at Arlington Assembly on Tuesday, GM now accounts for about 14,000 of the 45,000 UAW members on strike at the Detroit 3.

Barra said Tuesday that GM will slow the pace of scaling up EV production to maintain pricing amid a slowing adoption rate. GM expects its Ultium Cells joint venture battery plant in Ohio to reach full capacity next month and said it’s on track to produce 36 million battery cells this year, with plans to build 100 million cells next year.

A second battery plant in Spring Hill, Tenn., will come online in early 2024, rather than this year, as a result of construction delays, Barra said. Production on GM’s Ultium platform doubled in the third quarter compared with the second quarter, she said.

The auto maker will push back the launch of three upcoming EVs—the Chevy Equinox EV, the retail-oriented RST trim of the Silverado EV that already is being built for commercial customers, and the GMC Sierra EV Denali—by a few months, Barra said.

She did not provide timing for the next-generation Chevrolet Bolt EV, to be built on GM’s Ultium platform, but said they will use lithium iron phosphate battery cells purchased from China—it’s first use of that battery type in North American Ultium-based vehicles.

“Our strategy is to build on the tremendous equity we have in the brand and to do it as efficiently as possible. Our prior portfolio plans included several newly designed vehicles in the entry-level segments and a capital commitment of $5 billion over the next several years,” Barra said.

The upcoming Bolt will mean “we are saving billions in capital and engineering expense, delivering a significantly cost-improved battery pack using purchased LFP cells, we’re getting to market at least two years faster and our unit costs will be substantially lower.”

GM shares slipped 0.4 percent to $29.11 in morning  trading on Wall Street.