Is The GM Strike Really Costing GM?

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When you make most of your profits overseas, your American workers going out on strike is almost a blessing.
Some prognosticators claim that General Motors has lost almost a billion dollars so far in the strike and that the strike is costing them hundreds of millions of dollars per day.  These prognosticators, however, might be shorting GM stock - act shocked.  Yea, it is legal to do that - publish "expert opinions" that a company is going bankrupt, and then short the stock for personal profit.  That's not considered insider trading, either!
However dire a picture they paint, it might not be as bad as it seems - and in fact, this strike might actually work to GM's favor.  The bulk of General Motors profits are made in China, thus even if the entire US workforce goes out on strike, they're still making money in China, and probably overall making money as an ongoing concern.  As I noted before, so long as a company is making at least a penny in profit, they can stay in business and keep the lights on.
GM can afford to sit on its hands and prolong the strike - even making things worse by going back to proposals that were already rejected (as it has).   Striking workers, who live "paycheck-to-paycheck" because they mortgage their paychecks to the hilt with car payments, mortgages, jet-ski payments, and whatnot, can't afford to go too many weeks without work.  If GM can out-wait the strikers, say by a month or more, they likely will see pressure from the "rank and file" to cave in to GM's offer.
In the long-term, GM benefits.  The shit is about to hit the fan, big-time, worldwide.  Trump has juiced the economy for a few extra quarters of growth, by using one-time tax cuts and keeping interest rates artificially low.  But we are overdue for a recession, and the longer we wait, the bigger it will be - and the harder the landing.   GM has wisely trimmed its sails for the coming storm - selling off the money-losing European operations (which will hemorrhage cash for PSA once the recession fully takes hold).
GM also realizes that the Buick party in China can't go on forever.  The Chinese are becoming more and more nationalistic, what with the blowup over Huawei and with Trump's trade war. Already, other countries, such as Japan and Korea, have felt the pinch, when perceived slights of Chinese culture or the Chinese government are deemed to be worthy of boycott.   Even today, a basketball team gets down on one knee - not to protest Black Lives Matter, but to apologize to the Chinese government, because the television rights to their games in China are so lucrative.
It is a short-sighted move. Like an abusive spouse, the apologies only work for so long before the beatings begin again. The Chinese government will find new reasons to hate America - and to instruct their people to hate America as well.  The billions - if not trillions - that American and other foreign companies have poured into China will evaporate overnight, as they nationalize industry after industry, and ban outside cultural influences, such as televised American sports.  The Chinese are not going to let history repeat itself and let themselves be colonized by outside economic powers.  And you can't blame them for that, and you can't act surprised when it happens. And it is already happening, and will continue to happen, over time.
But for the time being, sales of Chinese Buicks will keep GM in the black. GM may be "losing revenue" from the lost sales of trucks and SUVs not being assembled while the strike is going on, but don't confuse lost revenues with lost profits. Those idled plants cost a lot less in overhead, once your payroll is reduced to nearly zero and the lights are shut off.  You don't  have to pay for those raw materials and parts when the assembly line isn't running.  So sure, maybe that Silverado represents a $50,000 sale for GM.  But only $5,000 of it might be profit.  Their losses aren't as great as you might think.
If GM caves into the union, and hires more full-time workers and is saddled with high health insurance costs, this will only ensure that GM will have to go to Congress in 2022, hat-in-hand, and ask for yet another bailout.  Because with a high cost structure, and a product line limited to SUVs and pickup trucks, they will be in a bad state when gas goes to $6 a gallon and China tells them to shove it.
On the other hand, if they can keep their cost structure low - or at least reasonable - they can survive without China, and be adaptable when the market changes - and it will change - and have the cash-on-hand to develop new products, whatever they may be (the world's other automakers seem to think, pretty unanimously, that electric cars or plug-in hybrids are the future, and GM seems to concur).
The union wants the "profits" GM is making today as a result of their aggressive trimming of costs, which includes closing plants, closing product lines, and keeping wages reasonable (only twice the prevailing non-union wages, instead of 4x, 5x, or 10x as in the past).  Keeping ridiculous work rules out of the workplace is the other half of the equation.  When it takes three union employees to move a pallet of parts 50 feet (with three forklifts) something is wrong - but that is the way it was back in the bad old days.
The UAW wants to go back to those days - when the union decided which plants remained open and which products got built, even if no one wanted to buy them.  Workers were paid to stay home and do nothing when money-losing plants were idled because no one wanted a Pontiac.  Just because GM has made a few quarters of profit doesn't mean it can bankroll that kind of waste, particularly today when so much is at stake, worldwide.
Even if gas prices don't spike, GM faces major headwinds in its primary product markets in the USA.   As I noted before, in our travels across the USA, we see more foreign-made SUVs and pickup trucks, even in the home of "Motor City", Michigan.  It is no longer considered unpatriotic to drive your Toyota Tundra or Nissan Titan to the feed store in Montana.   None of the cowboys are going to snicker at you for driving a "Jap truck" anymore.  And this spells trouble for GM and Ford and Chrysler.
Because when the shit hits the fan, people will want to spend as little as possible on a new truck, and get the best value for their dollar.  This may mean that an American-built Japanese pickup truck, built in a lower-cost non-union plant in the South, may be a better value.  Nissan and Toyota will be able to shave prices further than GM can, if the UAW gets it way.
Unionism sucks.  It is akin to organized crime, and often organized crime is directly involved in unionism - as it was with the Teamsters.   And yes, I was once a Teamster.   Even without the mafia directly involved, unionism encourages corruption, as we are seeing with the various trials and convictions of corrupt UAW officials.
The problem with unionism also, is that the rank-and-file often don't see the big picture.  They want extra money - on top of the generous salaries and benefits they already receive that dwarf prevailing wages in non-union plants.  They don't need the money, so much as, hey, why not ask for more?  And in the past, management caved in and gave it to them.   They saw short-term success, but at the long-term expense of the company.   American cars got more and more expensive, and became less and less of a value.  American car companies cut corners on quality to try to remain competitive.  Union workers, immune from discipline or firing, assembled the cars poorly.  Customers ran away in droves - into the arms of the Japanese, who offered cheaper cars (back then) with better quality.
That was then.  The "big-3" were forced to cut prices to stay competitive. Japanese cars, once cheaper than American iron, became more expensive but were still perceived as a better value. A Camry or an Accord is a better car than an Impala or a Taurus - and worth correspondingly more.  They no longer make the Impala or Taurus.   And largely this is due to unionism.
Compounding the problem was shrinking market share and automation.  As GM sold fewer and fewer cars, they closed plants and laid people off (or ran plants at less than half capacity - hemorrhaging even more cash).  Automation, embraced by Europeans and Japanese, was fought by the UAW, and often sabotaged in the plant.  But it was a force that could not be held back.  So today, GM has a smaller market share, far fewer plants, and far fewer workers - but legions of retirees still drawing pensions and health care benefits.   Toyota, Honda, and Nissan don't have this problem - health care is nationalized in Japan, and their US workforce is just now old enough to see retirees in the pipeline.
But the "worker" doesn't understand much of this - if he understands anything at all, other than "gimme, gimme" and to punish the "suckers" who buy the products he makes by sabotaging them.  You punish your customers enough, they become former customers.    Hard to feel sorry for idiots like that.
A prolonged strike may have other benefits for GM as well. As sales have dropped off in recent months, inventories of cars are piling up in storage lots and on dealer lots. The UAW picked a poor time to strike - when the market is down. The strike will help GM clear out a lot of cars from inventory, and so long as it doesn't go on for more than a couple of months, most dealers will still have something to sell.   It was only last week that parts shortages finally forced the shutdown of the Mexican Silverado plant. From what I can see, the local dealers seem to have some trucks still in stock, though.  Quite a few, in fact.
And if smaller dealers run out of cars to sell, that's even better.  As GM has slimmed down in size, its dealer network has remained largely intact.  Sometimes it has been an asset, keeping GM going by pushing cars into commerce.  Other times, well, some of these smaller dealers do more to piss off customers and tarnish the brand.   Most of the US carmakers would rather sell larger numbers of cars through a fewer number of mega-dealers.  If a few of the weaker dealers go under as a result of the strike, well, that's an added bonus.
So this strike, as I see it, is nothing but a win-win for GM, and no, I am not an owner of GM stock, options, shorts or whatever. It is just interesting to me, as a former employee (and former shareholder) to see how this plays out.  Maybe finally GM will strap a pair on and stand up to unionist bullying.  Funny it took a woman CEO to do that.   It's either that, or slow-motion death for GM, a second time around.
In the long run, it pays for GM to stand firm and get the best deal they can.  The outcome of the  strike means life or death for GM, but not for its workers, who at best might get a few more bucks out of the deal.  GM can hold its breath a long, long time. Can the average assembly line worker say the same?



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