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article imageGM appeals directly to employees as strike losses pile up

By Karen Graham     Oct 11, 2019 in Business
Detroit - General Motors told all its hourly and salaried employees Friday morning that it is "critical" the strike against the company ends and a tentative contract agreement is reached. The ongoing strike could cost GM $1.5 billion.
General Motors took the unusual step of appealing directly to employees in a blog post written by Gerald Johnson, GM's executive vice president of manufacturing. In the letter, GM laid out the terms of its latest offer intended to end the UAW strike.
In the letter, Johnson wrote: "We have advised the Union that it’s critical that we get back to producing quality vehicles for our customers. We are committed to the collective bargaining process, and we are committed to our future together."
The letter states the proposal would: "offer wage increases, profit sharing boosts, leave health-care benefits intact with no cost hike, provide a pathway to permanency for temporary employees and GM would make widescale investments in U.S. manufacturing," according to the Detroit Free Press.
The Friday letter comes just after an exchange of letters from the negotiators on both sides that indicated tensions were still a bit high. The union's letter said it will give the company "a comprehensive proposal" after subcommittees have completed renewed work on outstanding issues. GM's letter urged them to speed it up.
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Credit Suisse weighs in on strike
The brokerage Credit Suisse said on Friday that the lengthy UAW strike could end up costing General Motors $1.5 billion, throwing a wrench into the automaker's cost-reduction plans. Not only that, but should the strike continue much longer, it would force key suppliers to cut their 2019 outlook.
GM has probably lost production of about 100,000 vehicles in the third quarter and risks losing production of close to 170,000 vehicles in the fourth quarter. The impact is expected to spread to GM's facilities in Canada and Mexico.
“While investors may look through the one-time impacts...the strike reminds us of the challenge of investing in OEMs at this point in the cycle,” analyst Dan Levy wrote in a note.
GM will also have to revise its target of $4.5 billion in cost savings through 2020, according to Credit Suisse. “We assume just under $900 million of reduced costs or 20 percent of the original (target),” Levy said.
Reuters notes that of "19 brokerages, 14 rate GM “buy” or “higher” and five “hold”, with no “sell” rating. The median price target for the stock is $48, representing an upside of more than 38 percent to Thursday’s close."
More about UAW GM strike, letter to employees, cost savings, Stock market, Credit Suisse
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