How the GM strike could affect your next car purchase

Nearly 50,000 members of the United Auto Workers Union walked out at General Motors overnight, a day after the union’s contract with the largest of the Detroit automakers expired.

The walkout followed months of unsuccessful negotiations that appeared to center around the issues of plant closings and U.S. investment, as much as traditional issues such as wages and benefits. The discussions were complicated by several external factors, including a federal investigation into union corruption, and the ongoing pressure GM has faced from President Donald Trump over plant closings.

How long the strike might last is far from certain, with the daylong delay in the walkout suggesting both sides hoped to head off a confrontation. Also uncertain is the impact the first strike against GM since 2007 will have on potential buyers of GM products. The automaker pushed production in the weeks leading up to the Saturday night contract deadline, hoping to have enough product in showrooms to weather at least a short-term confrontation.

GM has enough inventory on the ground so as not to hinder sales in the short run.

“If a strike occurs, GM has enough inventory on the ground so as not to hinder sales in the short run,” said Cox Automotive analyst Michelle Krebs, shortly before the strike began.

Ironically, August new car sales were strong, at least briefly reversing the downward trend the industry had faced earlier in the year. That trimmed overall industry inventories to their lowest levels in three years, said Krebs. Even so, data from Cox indicated GM has about a 77-day supply of cars, trucks and crossovers, compared to the industry norm of 61.

Perhaps more significant is the fact that its inventory of light trucks stands at around 80 days. But that varies by model. There are 93 days of inventory for the popular Chevrolet Silverado pickup, for example, but inventory stands at only 57 days for the Chevy Tahoe SUV.

And the longer the strike drags on, the fewer choices buyers may have as the most popular configurations of GM vehicles could sell out first.

Further complicating matters, the International Brotherhood of Teamsters on Sunday announced it will not transport GM vehicles while the UAW remains on strike, stranding some products at factory lots.

“Teamsters and the UAW have a decadeslong relationship of having each other’s back,” said the trucker union’s president Jim Hoffa.

The walkout by the UAW comes at a challenging time for both GM and the union.

On Aug. 28, federal agents raided the home of Auto Workers Union President Gary Jones, as well as the homes of his predecessor, Dennis Williams, and others linked to the union. That move escalated an ongoing probe into corruption that has already seen a number of union officials, along with executives from Fiat Chrysler and GM, plead guilty.

Evidence has suggested that UAW officials took bribes, at least in part, to go easy during previous rounds of contract talks. With workers openly voicing not only their anger but also questioning whether their negotiators will deliver this time around, union representatives are under extreme pressure to come up with a substantial win at the bargaining table, according to Krebs and other analysts.

But GM faces pressure of its own. The company has downsized since Mary Barra became its CEO in January 2014, among other things leaving the unprofitable European market. In November, it announced plans to close three North American assembly plants, including two in the U.S. The Lordstown, Ohio, factory producing the Chevrolet Cruze sedan is already shuttered, and another plant in Detroit producing multiple vehicle lines is expected to close next year.

The restructuring at GM has reduced its UAW workforce to just over 49,000, a fraction of the more than 600,000 union members toiling at its American plants in the 1960s and 1970s — and far fewer workers than at Ford and FCA plants.

Trump has repeatedly hammered the company for its strategy, tweeting on Aug. 30: “General Motors, which was once the Giant of Detroit, is now one of the smallest auto manufacturers there. They moved major plants to China, BEFORE I CAME INTO OFFICE. This was done despite the saving help given them by the USA. Now they should start moving back to America again?”

Barra subsequently met with Trump at the White House, though the specifics of their conversation were not revealed.

However, in an unusual move, the carmaker released some of the details of its rejected offer to the UAW, and it claimed it was ready to commit to $7 billion in U.S. investments and 5,400 jobs, as well as “best-in-class” wages and benefits and a signing bonus of $8,000 once the contract was ratified by workers.

For his part, Terry Dittes, the UAW vice president in charge of the union’s relationship with GM, said at a Sunday news conference, “We do not take this lightly,” as workers were told to prepare to strike. “This is our last resort.”

The president again weighed in Sunday, urging the two sides in a tweet to “get together and make a deal.”

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