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GM: Strike losses to total about $2 billion

GM's stock dropped 5 percent after the company reported that strikes at some of its own plants and parts supplier American Axle will cost the automaker about $2 billion before taxes.
/ Source: The Associated Press

General Motors Corp.’s stock dropped almost 5 percent Friday after the company reported that strikes at some of its own plants and parts supplier American Axle will cost the automaker about $2 billion before taxes in the second quarter.

GM also expects to produce 230,000 fewer vehicles during the quarter due to the nearly three-month American Axle strike, which crippled its production of large sport utility vehicles and pickups. The other strikes will cost it 33,000 vehicles.

“We anticipate only a portion of this lost production will be recovered, due to the current economic environment in the United States and to the market shift away from the types of vehicles that were impacted by the action at American Axle,” GM said in a filing with the U.S. Securities and Exchange Commission.

In late Friday trading, GM’s shares fell 96 cents to $17.47, after touching $17.38 earlier in the session, their lowest level in nearly 26 years.

GM said the American Axle strike was expected to have the biggest effect by far, costing it $1.8 billion in the second quarter before taxes. GM previously said it lost $800 million in the first quarter and produced 100,000 fewer vehicles in that period because of the American Axle strike.

Detroit-based GM also said in Friday’s filing that it put in $215 million to help settle the American Axle strike. GM earlier had said that it had agreed to provide Detroit-based American Axle and Manufacturing Holdings Inc. up to $200 million to help fund buyouts, early retirements and buydowns to help end the strike.

Without the strike at American Axle, GM likely would have had to cut production of SUVs and pickup trucks to keep its supply in line with demand, said Michael Robinet, vice president of global forecast services for CSM Worldwide, an auto industry consulting company based in Northville.

“Nobody wants to take a strike,” Robinet said, “but it certainly had a lesser effect than if it had happened a few years ago.”

High gas prices and a slow economy have reduced demand for trucks and SUVs.

At GM’s plants, strikes over finalizing local UAW agreements were expected to cost the automaker about $200 million before taxes in the second quarter, resulting in the loss of about 33,000 vehicles in the period.

Those facilities include the Fairfax assembly plant in Kansas City, Kan., where GM said production resumed Thursday, and the Delta Township plant near Lansing, Mich., where production resumed Monday. The Fairfax plant makes the hot-selling Chevrolet Malibu as well as the Saturn Aura. The Delta Township plant makes the Buick Enclave, Saturn Outlook and GMC Acadia, which are popular crossover vehicles.

“We plan to recover the lost production due to the impact of the local strikes over the remainder of this year,” GM said in the filing.

American Axle said Friday it expects production to resume next week after United Auto Workers members overwhelmingly approved a new contract that contains steep pay cuts and other concessions. The vote was finalized Thursday.

“This new contract provides AAM and its UAW-represented work force the opportunity to transition through a most difficult period of structural change in the domestic automotive industry,” American Axle Chairman and CEO Richard Dauch said in a statement.

American Axle shares fell 81 cents, or 4.2 percent, to $18.44 in afternoon trading Friday.

About 3,650 UAW members went on strike Feb. 26 over American Axle’s demand for lower wages to match its U.S. competitors. American Axle makes axles, drive shafts and stabilizer bars, mainly for GM’s pickups and large SUVs. GM accounts for 80 percent of business at American Axle, which was formed from parts plants sold by GM in 1994.

“Our members have had to make some tough decisions for themselves and their families and have done so with careful deliberation,” UAW President Ron Gettelfinger said in a statement.

The strike forced GM to temporarily close or cut production at more than 30 factories. It also caused thousands of layoffs at GM and other auto parts suppliers.

GM spokesman Dan Flores said Friday the automaker has a plan to bring its idled factories back on line, but didn’t release details.

“We want to get our operations back to normal as soon as we can,” he said.