General Motors Temporarily Lays Off Workers in Canada

General Motors (NYSE:GM), "the company" or "GM", temporarily laid off 1,200 workers from its Oshawa assembly plant following a strike involving 48,000 of the company's U.S. workers. The Oshawa plant produces the Chevy Silverado and GMC Sierra pickup trucks and soon after the strike it ran out of parts.

The strike began on September 16 and involved GM workers who are part of the United Automobile Workers (UAW) union. This was the union's first strike since 2007. It is estimated that the strike may cost General Motors approximately $50 - $100 million a day in EBIT (earnings before interest and taxes) due to lost production. The strike is also expected to affect GM's Mexico operations.

According to Cox Automotive, the company has enough inventory at the moment on its dealer lots to last 77 days given the current sales rate. Dan Levy, senior equity research analyst at Credit Suisse, believes that "from a bottom line standpoint, the impact could potentially be nominal if the strike is resolved quickly; yet, the longer it lasts, the more it will be felt in GM's earnings profile".

The UAW is pushing for General Motors to increase wages and reopen idled plants to increase job opportunities. General Motors idled three plants in the U.S. after car sales and overall demand for vehicles fell as a result of the U.S. - China trade war. This has overall been quite a challenging time for the automobile industry not just because of the trade war but also because of increased pressure to invest in electric/clean vehicle technology. General Motors wants its employees to contribute a greater portion of their healthcare costs and increase workforce productivity.

In a statement, the company stated that it will invest more than $7 billion in new plants within the U.S. and add 5,400 jobs as well as increase wages and improve benefits. The company also issued the following comment following the strike, "We presented a strong offer that improves wages, benefits and grows U.S. jobs in substantive ways, and it is disappointing that the UAW leadership has chosen to strike at midnight tonight. We have negotiated in good faith and with a sense of urgency. Our goal remains to build a strong future for our employees and our business". A federal corruption inquiry has also been placed on UAW officials and Fiat Chrysler executives. The investigation details use of union funds for lavish personal travel and spending.

Wall Street; however, has not begun to panic yet over the strike. Consumer will not notice the impact of the strike for at least a few weeks; however, product shortage could become evident if General Motors and the UAW do not reach a negotiation.