GM earned more than $3 billion in profit, even after hit from UAW strike
GM on Tuesday posted a quarterly profit of more than $3 billion, down 7% from a year earlier due to lost production from the United Auto Workers strike as well as increased warranty costs.
Thousands of UAW members have been on strike since Sept. 15 — nearly six weeks — against GM and its Detroit competitors, Ford and Jeep maker Stellantis.
So far the union has spared factories that make GM's most profitable vehicles, pickup trucks and large SUVs, from its targeted strikes. Yet the UAW demonstrated again this week that risks to those money making facilities can rise the longer the strike goes on.
The work stoppages will likely reduce GM's pretax earnings by $800 million this year, the company's chief financial officer Paul Jacobson warned Tuesday during an earnings conference call. The strike would cause another $200 million every week in 2024, he added.
Jacobson said the third-quarter strike loss was $200 million, since the walkouts were only in effect the final two weeks of the period. He predicted another $600 million of losses from October through December.
Revenue during the most recent quarter, which ran from July through September, rose 5.4% to $44.1 billion.
"We remain optimistic and hopeful that we'll make progress and get this resolved going forward," Jacobson said.
He said many have expressed concerns about the company taking on higher labor costs, but GM has planned for it by cutting in other areas. For example, GM's annual fixed costs will be $2 billion lower than 2022 by the end of 2024, Jacobson said. The company also is slowing electric vehicle production to adjust to slower short-term growth in demand.
Jessica Caldwell, head of insights at Edmunds, said GM's sales numbers looked good on the surface, but that could change in the next few months. As cold weather arrives, those in the market are usually looking for larger four-wheel-drive vehicles. But she said a lingering strike could close plants, cut production of those lucrative vehicles and "be harbingers of sales declines during an important stretch of the calendar ahead."
UAW leaders and Detroit's Big Three have spent weeks trying to produce a new, four-year labor contract. The union's demands include a hefty pay increase, annual cost-of-living adjustments, pension benefits for all employees, greater job security, restrictions on the use of temporary workers and a four-day work week. Along with a wage hike, the union also wants the automakers to eliminate a two-tiered wage system the companies adopted in 2007 as the companies were struggling financially.
Roughly 6,800 UAW members walked out of Stellantis' largest plant in the Detroit suburb of Sterling Heights on Monday. Two weeks ago, 8,700 workers walked off their jobs at Ford's largest and most profitable plant, one that makes pickups and big SUVs in Louisville, Kentucky. As of Tuesday, 28% of the union's 146,000 members at the Detroit Three are on strike.
For their part, the automakers say they have made reasonable counteroffers, while arguing that the UAW's wage and other demands would make it hard to compete with other car manufacturers. Both sides have said they're open to further negotiations.
GM's most recent offer to the union features a 23% wage increase, matching employee contributions to a retirement plan up to 8% and reinstated cost-of-living adjustments, among other things.
"The current offer is the most significant that GM has ever proposed to the UAW, and the majority of our workforce will make $40.39 per hour, or roughly $84,000 a year by the end of this agreement's term," GM CEO Mary Barra said Tuesday in a letter to shareholders. "It's an offer that rewards our team members but does not put our company and their jobs at risk."