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News > Companies
GM strikes cost $1.2 bln
June 30, 1998: 6:49 p.m. ET

Auto maker says pair of Flint, Mich. walkouts to hit 2Q by $1.79 a share
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NEW YORK (CNNfn) - General Motors Corp. Tuesday warned the ongoing strike at two plants in Michigan will cost the automaker about $1.2 billion, making the walkout one of the most expensive labor disputes in the company's history.
     The nation's largest automaker said in the Securities and Exchange Commission filing that the 26-day walkout has reduced its output by 227,000 vehicles and would likely depress second quarter profits by about $1.79 a share.
     The charge is among the largest ever at GM due to a strike and surpasses the $900 million quarterly charge incurred two years ago from an 18-day walkout at two Ohio brake plants.

    
GM may try to make up for losses

     GM left open the possibility it could make up some of the losses when the strikes are settled, according to the filing, and analysts agreed.
     "They will make up at least 70 percent of those losses by the end of the first quarter next year, unless there is another strike," said Nick Lobaccaro, an auto analyst at Merrill Lynch.
     There was still some question whether other strikes may be on the way, as two GM brake plants in Ohio, voted Tuesday whether to seek union approval for another strike there.
     Sparking the losses at GM was a walkout by 9,200 workers earlier this month at GM's Flint Metals Center stamping plant and Delphi East plant in Flint, Mich., which have crippled the auto maker's production.
     Members of the UAW Local 659 at the stamping plant began a strike 26 days ago, claiming GM reneged on its promise to invest $300 million in new equipment at the plant.
     UAW members also have demanded GM stop exporting jobs to cheaper labor markets overseas.
     GM claims its North American plants are inefficient and hurt competitiveness.
     UAW Local 651 at the Delphi East parts plant, where the company makes spark plugs, filters and electronic systems, went on strike June 11.
     With those key parts plants closed, GM has shut down 26 of 29 North American assembly plants and sent home 162,700 workers.
     GM's labor problems have hurt the company over the past few years as it tries to reduce its payroll. UAW officials have vowed to oppose GM's streamlining efforts by calling a number of local strikes at key parts plants that have the effect of shutting down the whole company within days because the company operates its factories on a just-in-time delivery basis.

    
Another UAW local mulls strike

     On Tuesday, members of United Auto Workers Local 696 in Dayton, Ohio -- whose 18-day walkout two years ago caused GM $900 million in losses - voted overwhelmingly to request authorization from the international union to strike.
     The vote would allow the local union to call a strike, pending approval from the UAW headquarters in Detroit. However, such a move would likely be put off until the current labor dispute is settled because a walkout now would bring little additional pressure on GM.
     "A strike would be moot unless they waited until GM was back in production after the Flint strikes," said Burnham Securities auto analyst David Healy. "If they went down now, who would care? It wouldn't mean anything."
     But Lobaccaro said the Dayton plant may be getting ready to go take up the relay when the Flint strikes get settled.
     Dayton union leaders claim GM has moved work out of the plants to subcontractors and abandoned promises to increase jobs. Instead, they claim, GM has proposed cutting back on the labor force at the brake plants.
     With the Dayton vote pending, talks between GM and striking UAW workers at two Michigan plants resumed Tuesday morning amid signs negotiations are intensifying.
     Richard Shoemaker, UAW vice president, met for 90 minutes Monday with GM's labor chief Gerald A. Knechtel, while separate talks by local negotiators continued at each plant.
     Over the weekend, GM started its annual two-week shutdown to prepare for the launch of new models, which would have begun with or without the strike.
     GM shares (GM) fell 1-7/16 to 66-13/16 Tuesday on the New York Stock Exchange.
     Healy said he lowered his second-quarter earning estimate for GM to 62 cents a share, down from $2.30 a share before the strike.
     The strikes have come as sales at the "Big Three" auto makers -- GM, Ford Motor Co. and Chrysler Corp. -- have risen sharply over year-ago levels.
     Analysts said Ford and Chrysler, which are respectively the nations No. 2 and No. 3 auto makers behind GM, are set to distance GM in the second quarter as a result of the strikes.
     The strikes have spilled over to dozens of companies that do business with GM and may show up in their quarterly earnings reports as well. Back to top

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.