NEW YORK (CNNfn) - General Motors Corp. recently resolved a massive strike with the Canadian Auto Workers union, but that conflict and new strikes in the United States are hitting the automaker where it hurts: the bottom line.
Walkouts are localized at the Indianapolis stamping plant and Janesville, Wisconsin, assembly plant, which makes the profitable Chevrolet Tahoe, Suburban and the GMC Yukon. The impact, however, is widespread.
GM says the average profit per vehicle is around $8,000. High demand had those plants running at full capacity. (1.4MB QuickTime movie)
"Light trucks, Tahoe, Yukon, Suburban represent 40 [percent] to 50 percent of GM's profitability in North America, so every day is extremely painful for the economy," said Thomas Galvin, an auto analyst at Deutsche Morgan Grenfell.
Analysts say the spreading strikes have cost GM nearly $200 million so far, on top of the $300 million the 20-day strike by Canadian autoworkers cost the company.
That's $500 million off GM's fourth-quarter net income, a figure that could double if the UAW strike continues beyond next week
But through it all, GM's stock has gained ground. Investors are betting the UAW strike will be short and GM will emerge the victor.
"The street is applauding General Motors' ability to stand firm with the union, [and] get the flexibility it needs," said Michael Ward, an auto analyst at Paine Webber. "In addition, the street has historically overlooked any negative financial impact from a strike."
Two sticking points remain in the negotiations:
- GM wants to close plants it considers uncompetitive, and
- the union wants the same guarantees it got from Ford and Chrysler to protect jobs from outsourcing.
GM already is taking a big hit to its bottom line, but as long as Wall Street believes holding out against the UAW is a risk worth taking, the automaker will likely stand firm.