Only two weeks of a lengthy strike in opposition to General Motors happened in the third quarter, but that was enough to damage the company’s net profit by about $1 billion.
The company has reported that its third-quarter net profit dropped 7% as a strike by the United Auto Workers (UAW) union brought its U.S. factories to a standstill. The Detroit automaker generated $2.35 billion, or $1.60 per share, but the strike cost it 52 cents each share of revenues.
Majority of the impact from the 40-day strike will impact in the fourth quarter. GM stated the strike will wind up costing it $2.86 billion in net income for 2019. That forced the company to slash its full-year pretax profit guidance from $6.50 to $7 per share, to $4.50 to $4.80.
Excluding one-time restructuring expenses, the company made $1.72 per share, beating Wall Street estimates of $1.38, as per the data provider FactSet. Revenue dropped 0.9% to $35.5 billion, but still surpassed experts estimates of roughly $35 billion.
GM shares increased 1.6% to $37.22 in pre-trade. The stock is dropped 6% on the year.
Workers, who put an end to their strike on Friday, were able to win a mix of pay increases and lump sums. They also got an $11,000-per-employee signing bonus, faster pay raises for recently hired employees and a path to full-time work for temporary employees. They kept their current top-notch health insurance with workers picking up just a 3% of the cost.
But GM won major cost savings because it was able to shut three underused factories that made cars and transmissions. The company is shutting down factories located in Lordstown, Ohio; Warren, Michigan; and near Baltimore.
GM’s profit decreased even though sales increased 6.3% in the U.S., the company’s most profitable market. The average sales price increased 2.8% to $41,661 per vehicle compared with a year earlier, according to the Edmunds.com auto pricing site.
“Despite the strike, GM had a lot working to the company’s advantage in the third quarter,” stated Jeremy Acevedo, senior manager of insights. The company, he said, is showing advantages of shedding slow-selling cars from its lineup, and production of latest full-size pickup trucks are getting up to speed.
Light trucks accounted for just more than 88% of GM’s sales during the third quarter, and truck sales increased during the quarter for the first time. GM has been switching factories over to the new truck through 2019, a process that was stopped by the strike.
