40-day strike cost General Motors nearly $3 billion
Only two weeks of a lengthyhappened in the third quarter, but that was enough to dent the company’s net profit by about $1 billion.
The company reported Tuesday that its third-quarter net profit fell 7% as a strike by the United Auto Workers union brought its U.S. factories to a standstill. The Detroit automaker made $2.35 billion, or $1.60 per share, but the strike cost it 52 cents per share of earnings.
Most of the impact from the 40-day strike will hit in the fourth quarter. GM said the strike will wind up costing it $2.86 billion in net income for the year. That forced the company to cut its full-year pretax profit guidance from $6.50 to $7 per share, to $4.50 to $4.80.
Excluding one-time restructuring costs, the company made $1.72 per share, beating Wall Street estimates of $1.38, according to data provider FactSet. Revenue fell 0.9% to $35.5 billion, but still surpassed analyst estimates of roughly $35 billion.
GM shares rose 1.6% to $37.22 in pre-trade. The stock is down 6% on the year.
Workers, who ended their strike on Friday, were able to win a mix of. They also got an $11,000-per-worker signing bonus, faster pay raises for newly hired employees and a path to full-time work for temporary workers. They kept their current top-notch health insurance with workers picking up only a 3% of the cost.
But GM won significant cost savings because it was able to close three underused factories that made cars and transmissions. The company is closing factories in Lordstown, Ohio; Warren, Michigan; and near Baltimore.
GM’s profit declined even though sales jumped 6.3% in the U.S., the company’s most profitable market. The average sales price rose 2.8% to $41,661 per vehicle compared with a year ago, according to the Edmunds.com auto pricing site. Edmunds provides content to The Associated Press.
“Despite the strike, GM had a lot working to the company’s advantage in the third quarter,” said Jeremy Acevedo, senior manager of insights, said in a statement. The company, he said, is showing benefits of shedding slow-selling cars from its lineup, and production of new full-size pickup trucks are getting up to speed.
Light trucks accounted for just over 88% of GM’s sales during the third quarter, and truck sales rose during the quarter for the first time. GM has been switching factories over to the new truck through the year, a process that was halted by the strike.