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May 27, 2008

US: Strikes cost GM $2bn

With the American Axle and Manufacturing (AAM) strike that began on 26 February finally ending, General Motors' finance department got out the abacus and calculated that the stoppages both at some of its own plants (over in-house issues that needed settling with local United Auto Workers branches) and at several key AAM plants would cost it about US$2bn pre-tax in the second quarter.

With the American Axle and Manufacturing (AAM) strike that began on 26 February finally ending, General Motors’ finance department got out the abacus and calculated that the stoppages both at some of its own plants (over in-house issues that needed settling with local United Auto Workers branches) and at several key AAM plants would cost it about US$2bn pre-tax in the second quarter.

According to the Associated Press (AP), GM also expects to produce 230,000 fewer vehicles during the quarter due to the AAM strike, which crippled its production of large sport utility vehicles and pickups. The other strikes will cost it 33,000 vehicles.

“We anticipate only a portion of this lost production will be recovered, due to the current economic environment in the United States and to the market shift away from the types of vehicles that were impacted by the action at American Axle,” GM was reported to have said in a filing with the US Securities and Exchange Commission.

According to AP, GM said the American Axle strike was expected to have the biggest effect by far, costing it $1.8bn in the second quarter before taxes. GM had previously said it lost $800m in the first quarter and produced 100,000 fewer vehicles in that period because of the AAM strike.

GM also said in the filing that it put in $215m to help settle the American Axle strike, the news agency report added, noting that GM earlier had said that it had agreed to provide American Axle and Manufacturing Holdings up to $200m to help fund buyouts, early retirements and buydowns to help end the strike.

Michael Robinet, vice president of global forecast services for CSM Worldwide, told the Associated Press that, without the strike at AAM, GM likely would have had to cut production of SUVs and pickup trucks to keep supply in line with demand.

“Nobody wants to take a strike,” Robinet told AP. “But it certainly had a lesser effect than if it had happened a few years ago.”

The report said strikes over finalising local UAW agreements at several of GM’s own plants were expected to cost the automaker about $200m before taxes in the second quarter, resulting in the loss of about 33,000 vehicles in the period.

“We plan to recover the lost production due to the impact of the local strikes over the remainder of this year,” GM reportedly said in the filing.

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