|
GM calls July a bust
|
 |
July 1, 1998: 8:36 p.m. ET
Automaker stands to lose longstanding top rank due to lost sales from strike
|
NEW YORK (CNNfn) - General Motors Corp. Wednesday warned a pair of devastating labor strikes could leave GM dealer lots practically empty this month, allowing arch-rival Ford Motor Co. to pass GM in the monthly sales race.
GM (GM) said the 27-day-old walkout is costing the automaker 21,000 customers a day.
"We could even wind up No. 2 in July," Ron Zarrella, vice president of vehicle sales, servicing and marketing for GM's North American Operations told reporters in Detroit Wednesday.
The last time Ford sold more vehicles than GM in a given month was December 1970 when GM was embroiled in a bitter labor battle with the United Auto Workers Union.
That strike lasted 75 days and cost GM an estimated $1 billion.
Even if the current strikes were settled immediately, analysts estimate GM won't regain full capacity until August because of the lag time needed to revamp production and re-tool plants.
"The month of July is down the tubes for GM," said Michael Luckey, president of Luckey Consulting Group of Woodcliff Lake, N.J.
The UAW struck GM's metal fabricating plant in Flint on June 5 over the union's concerns of outsourcing; health and safety issues and broken promises of investment. But GM has contended it won't invest in the facilities because the union, Local 659, has failed to meet its predetermined production goals.
On June 12, an additional local, 651, in a nearby parts plant operated by GM's Delphi East division also walked out. The labor disputes have idled 26 out of the 29 North American production plants and furloughed nearly 200,000 workers.
GM, though, was still able to sell 23 percent more vehicles in June. With 492,937 units sold, GM expects to have 31.5 to 33.0 percent of the U.S. market, Zarrella told reporters.
"Don't look for any number near this in July," said Zarrella, who projected market share would likely be "well under" 25 percent for the month.
GM's vehicle sales in July are projected to fall 30 to 40 percent from a year ago. The total could bring sales as much as 30 to 35 percent below its initial sales projections.
But rather than fuel sales for GM's competitors, mainly Ford (F) and Chrysler Corp., (C) analysts like Luckey predict that sales for the entire industry could slump if the strike lasts much longer.
"Some of GM's lost business will be picked up by Ford and Chrysler but not all of it. The GM strike is going to depress total industry sales," Luckey said.
Adding to GM's problems is the fact that production can't immediately return to full capacity because its pipeline of auto supplies have already dwindled.
Even if the strike were settled now, workers don't return until after the customary two-week shutdown on July 13. Luckey projects it will take at least two weeks for the automaker to replenish its stockpiles of parts.
Additionally, GM typically closes certain plants from mid-July to late August to re-tool plants for the following model year.
"GM sales for sure will drop substantially in July any way you measure it," he said.
GM has about a 70-day supply of vehicles for retail customers, Zarrella said. But the company is losing fleet business because of limited production capabilities.
Zarrella indicated the strike and sales decline may prompt GM to accelerate some of its cost-cutting plans to eliminate slow-selling, low-profitability cars in favor of higher-profit trucks.
GM shares closed at 68-1/2, up 1-11/16.
|
|
|
|
|
|
GM
UAW
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
