GM Idles Chevrolet Silverado, GMC Sierra Plant in Mexico Due to UAW Strike in US
Over 6,000 employees have been temporarily let go.
The United Auto Workers (UAW) strike against General Motors is affecting the supply of its most profitable vehicles. GM chose to idle its pickup truck plant in Silao, Mexico as well as a nearby transmission plant due to a parts shortage caused by the strike, reports the Wall Street Journal. The Mexican truck plant builds the Chevrolet Silverado and GMC Sierra, which are GM's two best-selling vehicles in the United States.
GM's Mexican employees are not part of the UAW, however, they rely on components shipped from UAW-affiliated facilities to build the trucks. The UAW strike started 17 days ago, stopping production lines at over 30 GM factories in the U.S. as well as suspending work at GM parts warehouses and distribution centers. About 46,000 full-time UAW members at GM remain on strike after their previous four-year labor contract with GM expired.
A GM spokesman confirmed to the Wall Street Journal that around 6,000 employees at the Mexican plants had temporarily been let go. He also confirmed that the plants were idled due to the lack of parts coming from plants on strike. Employees at the plants will receive some pay or can use vacation time during the shutdown.
It's a big problem for GM, as this means that it's not building new pickup trucks at all for the time being. The Silverado and Sierra models generate most of GM's global profit, according to analyst estimates cited by the Wall Street Journal. These highly profitable pickups are also built in Indiana and Michigan, but those two plants were idled by the strike over two weeks ago.
The strike hasn't affected GM's supply of new pickups for sale quite yet, as the company had roughly a three months' supply of both models—about 202,000 Silverados and 78,000 Sierras—on dealers' lots at the start of September, according to Ward's Intelligence numbers cited by the WSJ.
However, because automakers book revenue when trucks are shipped to dealers, analysts estimate that GM was losing somewhere between $50-100 million per day before the Mexican plant shut down. The strike has already cost GM $1 billion to date, according to JP Morgan estimates cited by the WSJ. At this point, GM won't be able to recoup all of their losses from the lost output in the fourth quarter of the year even if the strike ends soon.
Shares of General Motors stock fell 3.7% Tuesday to $36.11.
If the strike continues for much longer, it could affect GM's plan to roll out its new redesigned versions of the Sierra and Silverado. GM lost some market share earlier in the year when popular trim levels weren't widely available in dealerships, leading them to increase production of the trucks to catch up.
This Mexican truck plant shutdown is yet another example of how the UAW's strike continues to have a ripple effect across all of GM's operations. The Wall Street Journal notes:
Large parts suppliers have suffered from the continuing work stoppage at GM, with some facing a weekly hit to the bottom line of more than $10 million a week, JPMorgan Chase & Co. said in a research note Tuesday. GM dealers are also scrambling to find parts to fix vehicles and perform regular maintenance, resulting in customers having to wait for service work.
GM has already had to idle three additional non-UAW plants in North America due to the strike, leading to the temporary layoff of over 3,000 employees.
Contract negotiations between GM and the UAW remain ongoing. GM sent a proposal for a new labor agreement Monday night, but the proposal did not meet the UAW's demands, so the UAW responded with a counter-proposal Tuesday.
Workers have been striking for a fairer pay structure, better health care, and job security. GM's recent decision to shut down its Lordstown and Detroit-Hamtramck facilities has made this year's contract negotiations particularly tense, leading to GM's first full work stoppage since 2007 and the longest nationwide walkout at GM since 1970. As such, plans to keep Lordstown and Hamtramck open have been part of the negotiations.
Top bargainers have been brought in to negotiate the contract, and both sides plan to spend longer hours bargaining to find a resolution. However, a tentative deal to end the strike would still need the approval of the UAW's membership, and it's uncertain whether such a deal would be enough for UAW leaders to call off the strike.