Via Financial Times

Fallout from the protracted United Auto Workers union strike against General Motors has seen the total number of temporary lay-offs mount to nearly 60,000.

The first auto industry walkout in more than a decade entered its fourth week on Monday after contract talks between the two sides broke down over the weekend. Wall Street analysts have estimated that GM’s losses from the strike exceed $1bn.

GM on Monday temporarily laid off 415 workers at one of its plants in Mexico, following the 6,000 it furloughed at a separate pick-up truck plant in the country last week. That adds to the 49,000 hourly UAW workers in the US and about 4,500 in Canada idled since the strike began on September 16.

Terry Dittes, UAW’s vice-president, said in a statement on Sunday that the “negotiations have taken a turn for the worse”. He said GM provided an inadequate response to an “extensive package proposal” by the union, which addressed issues such as wages, job security, pensions and profit sharing.

“They reverted back to their last rejected proposal and made little change. The company’s response did nothing to advance a whole host of issues that are important to you and your families!” he said, adding that the union “could not be more disappointed.”

GM said parts shortages prompted the temporary lay-offs in Mexico at its plant in Ramos Arizpe on Monday as well as facilities in Silao the previous week.

A spokesman for GM in Mexico said workers were either taking the days as vacation or, if they had no leave available, were being paid a percentage of their salary.

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GM said the assembly line in Mexico producing the Chevrolet Blazer and Equinox was working normally, as was the engine factory which was producing the CSS engine. “We have registered a small impact in production at the engine and transmission plant due to the lack of components coming from a plant in the US that has been halted by the strike,” it said in a statement.

Colin Langan, auto industry analyst at UBS, said his base case forecast was for a five-week strike that would result in lost production of about 100,000 in the 2019 financial year, with 87,000 of that in the third quarter.

Crucially, the lost production “will be at high profit pick-up & SUV plants with [greater than] 100% utilisation,” he wrote in a note earlier this month. GM made about 2.95m vehicles in the US last year.

Last week, car sales data for Detroit’s big three carmakers showed GM sold nearly 739,000 vehicles in the three months ended September 30, which was 6.3 per cent higher than a year ago but less than the 750,000 forecast by car web site Edmunds. Fiat Chrysler had a flat annual performance and Ford, which is in the middle of a major corporate turnround, saw sales decline 4.9 per cent over the past 12 months.

UBS cut its earnings per share forecast for GM in 2019 to $6 from $6.90, with 70 cents of that cut owing to the strike and the remainder related to marking-to-market the value of its investment in ride-hailing company Lyft.

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Mr Langan estimated the strike would depress earnings at suppliers by about 1.5 per cent on average, and was likely to pose the biggest negative surprise to expectations as most of the companies were “using more conservative assumptions”.

Analysts at JPMorgan estimated the strikes had cost GM more than $1.1bn, or that the company was losing money at a rate of $82m a day.

GM shares have fallen by just over 10 per cent to around a four-month low since the strike began, exceeding the declines for rivals Ford and Fiat Chrysler. By comparison, the S&P 500 has declined 0.2 per cent over the same period. So far in 2019, however, GM shares are up 3.9 per cent.