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Here's How Much The General Motors-UAW Strike Has Cost Automaker, Workers

Here's How Much The General Motors-UAW Strike Has Cost Automaker, Workers

General Motors Company (NYSE: GM) stock rose Tuesday on reports that CEO Mary Barra and President Mark Reuss joined contract talks with the United Auto Workers union, bringing hopes for a possible end to a strike that Bank of America Merrill Lynch said has cost the company more than $2 billion and could "bring GM to its knees" if not resolved soon. 

As the UAW walkout entered its fifth week amid reports that the stances of management and the union in contract talks had hardened in recent days, Reuters reported that top management officials had stepped in, attributing the news to sources close to the talks. 

The report pushed GM stock up amid new hopes that the roughly 48,000 workers on picket lines could soon be back on the job. 

BofA: GM In Tough Situation

The strike is costing GM about $100 million per day in EBIT losses, and the Detroit automaker is in "between a rock and a hard place" in trying to satisfy investors, BofA analyst John Murphy said in a Tuesday note. 

"A prolonged strike could burn significant cash and bring GM to its knees, but investors likely will also react negatively if management is perceived to have caved into labor’s demands and GM’s long-term competitiveness is threatened," the analyst said. 

But Murphy is optimistic a compromise will eventually be reached.

"GM and the UAW do not appear too far apart in terms of a new labor agreement, and we would note the common interests of stability and profit-sharing have served both parties fairly well in recent past," he said.

GM's long-term value remains strong, leading Murphy to reiterate a Buy rating on the stock with a $55 price objective. 

BOA: Strike Costing Workers Too

The profit loss is hitting the workforce too. 

Murphy estimates that the loss of $2 billion in earnings through the four-week strike has cost each GM worker about $2,000 in profit-sharing, and potentially up to $4,000 in net take home pay on average after accounting for strike pay from the union.

Much of that pay could be made up if the contract includes a bonus of $8,000 offered by GM — and if the strike doesn't go on too much longer.

Other Costs of Strike

Other hits to GM from the strike include the possibility of negative effects on key vehicle launches and overall production and a possible hit to dealer inventory, which could impact sales, according to BofA. 

Price Action

GM shares were up 2.03% at $36.22 at the time of publication. 

Related Links 

General Motors Lays Off Another 615 Workers At Two Auto Factories In Mexico 

Linamar Says GM Strike Costing Up To C$1 Million Per Day 

GM CEO Mary Barra. Photo by Dustin Blitchok. 

Latest Ratings for GM

Nov 2020Morgan StanleyMaintainsOverweight
Nov 2020Morgan StanleyMaintainsOverweight
Nov 2020Credit SuisseMaintainsOutperform

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