Vehicle suppliers hit as GM strike in US grinds on

New York

AS the General Motors strike grinds on, more vehicle suppliers and contractors are sending workers home, adding to the economic drag on Michigan and other US midwestern car manufacturing hubs. The idling affects companies that supply parts, computer systems and raw materials to GM at the 31 striking plants in the US, as well as trucking and logistics companies that move items in and out of factories.

The furloughs have come gradually since the strike began on Sept 16 for members of the United Auto Workers (UAW) Local 659 in Flint, Michigan, said local president Steve Gruener. In addition to the 1,800 GM employees on strike, another 1,200 workers from supply and trucking firms have been laid off, he said. "The hit to the economy is already huge," said Mr Gruener, a die maker. "We're committed to bargaining for a fair and equitable contract for our members," he added. "We'll stay out as long as it takes."

Talks resumed on Wednesday between GM and the UAW. A strike update from the UAW posted on Tuesday night emphasised job security. Other key elements of the negotiations have focused on health care benefits and the status of temporary workers.

The strike directly affects nearly 50,000 GM hourly employees, but the ripple effects have grown as the stoppage has persisted. "What started as a concentrated event affecting a select group of workers has now ballooned in scope," said Brian Peterson, director of public policy and economic analysis at Anderson Economic Group, a research consultancy. He said in a report this week that nearly 150,000 workers throughout the vehicle industry have been affected by the strike, including 25,000 salaried GM workers whose pay level is tied to plant work and some 75,000 employees of vehicle supply companies. As at Sept 30, the Michigan Unemployment Insurance Agency had processed claims from about 5,000 workers at vehicle suppliers believed to be due to the strike, said a Michigan government spokeswoman.

Leading supply companies also have significant operations in other states in the industrial Midwest, including Ohio, Indiana and Illinois. Paul Traub, a senior business economist with the Federal Reserve in Detroit, said a rough calculation of the economic hit in Michigan would be around US$42 million per week based on lost wages for GM's 14,000 hourly workers in the state plus another 28,000 or so contract workers.

GM normally produces 8,400 vehicles per day in the US, representing roughly US$100 million in lost gross domestic product per day based on rough calculations. Mr Traub said the loss of some US$2 billion in output will have an incremental impact on GDP estimates. The strike is also expected to weigh on results at vehicle supply companies, prompting Wall Street analysts to slash profit forecasts for leading companies such as Magna, a Canadian company that lists General Motors as its biggest customer, accounting for 15 per cent of sales. Other companies expected to see a big hit include American Axle & Manufacturing, which relied on GM last year for 41 per cent of company revenues, and Lear, which garnered 18 per cent of its revenues from GM.

Meanwhile, Reuters reported that GM's July to September vehicle sales in China fell 17.5 per cent, as the US carmaker was hurt by a slowing economy amid the Sino-US trade war and by heightened competition in its key mid-priced SUV segment.

GM delivered 689,531 vehicles in China in the third quarter this year, said the company. The drop for the quarter ended Sept 30 marks the fifth straight quarterly sales decline for GM in China, the world's biggest car market. It delivered 2.26 million vehicles in the first nine months this year, according to Reuters calculation.

GM, the second biggest international carmaker in China by sales, sold 3.64 million units in China last year, down from 4.04 units in 2017. AFP, REUTERS