GM stocks up on vehicles amid strike threat
General Motors Co. has stocked up on its vehicle supply ahead of a Saturday night contract deadline with the United Auto Workers.
With a strike looking more likely than it has in years, the Detroit automaker has more than 11 weeks' supply of its profit-heavy trucks and SUVs at dealerships should the labor union stage a walkout when the contract expires after 11:59 p.m. Saturday. And that supply count does not include vehicles GM may have produced but not shipped.
GM was chosen by the UAW as the "target" company with which the union is negotiating first. Contracts with Fiat Chrysler Automobiles NV and Ford Motor Co. are expected to be extended Saturday night.
GM has built up a stock of 77 days of inventory at its dealerships, according to Cox Automotive. Although that is down from recent months following strong end-of-summer sales, it remains more than two weeks longer than the industry average of 61 days. Fiat Chrysler and Ford are at 67 and 81 days respectively.
Those overall numbers don't tell the full story: GM's profit-heavy truck and SUV inventory is at a more-robust 80 days at dealerships, while its inventory of slower-selling cars stands at 59 days.
Also, GM has a number of storage and distribution locations throughout the country for vehicles before they are sent to dealers, spokesman David Barnas said. Cox Automotive said its days' supply does not include such in-transit vehicles. Some 150 Cadillac crossovers and Escalade SUVs lined a fence along Grand River Avenue in Novi on Thursday. Street view images from May on Google Maps shows the front half of the vacant lot near the Suburban Collection Showplace empty.
"We have an appropriate amount to meet our sales and marketing objectives," said Barnas, who declined to provide the full accounting.
An extended walkout would dent that supply.
“If it’s a day strike or a week strike, it’s not a big deal; they can always come back and make up the production,” said Michelle Krebs, an analyst at Cox Automotive. “If it’s more lengthy than that, then yes, they would have a problem.”
Art Schwartz, president of Labor and Economics Associates in Ann Arbor and the former general director of labor relations at GM, said, “Usually you try to build up as much inventory as you can get away with. That’s about all you can do.”
Although it depends on the plant and product, every hour of lost production costs automakers approximately $1.3 million per hour at each plant, according to the Center for Automotive Research in Ann Arbor.
“The ripple effect is much larger,” added Kristin Dziczek, the center’s vice president of industry, labor and economics. “It doesn’t include costs incurred by suppliers that have plants idled because of the lack of need for work.”
To prepare for a strike, GM should collaborate with dealers to plan incentives and, in the event of a walkout, try to sell the inventory already on lots, especially since automakers usually look to taper their stock of older models at this time of year, said Rebecca Lindland, founder of rebeccadrives.com, an auto industry and car review website.
“At least initially, buyers won’t feel the pain,” she said. “Dealers tend to work with each other. ‘If you need a Chevrolet Silverado in white, I need your black one or silver one.’ They’ll help each other out, negotiate with each other. If the strike goes on and inventory starts to tighten, that’s when we feel the pain.”
Inventory at Lou LaRiche Chevrolet in Plymouth is slightly larger than last year, said Joe Wendt, the new-car sales manager there, who added the dealership has not had communication with GM on the labor talks.
GM, Fiat Chrysler and Ford declined to comment on what preparations are being made for possible strikes.
Management supervisors at a GM plant met for a strike preparation meeting earlier this week, according to an elected UAW official who spoke on the condition of anonymity over concerns members at the plant would be affected. A manager asked the official to have workers plug in the forklifts before any walkout so they would be fully charged when employees return, the official said.
The last time auto workers went on strike was for 17 hours in 2007 at GM, idling 80 facilities and affecting 73,000 workers. Prior to that in 1998, 9,200 workers walked off the job at two parts plants in Flint, shutting down production for 54 days and causing sales to sink.
But strikes nowadays could have less of an impact than in the past, Lindland said. More model nameplates and the need to update technology frequently have led automakers to spread out vehicle rollouts over the year. Traditionally, new-vehicle production ramped up in September.
The best outcome, though, is negotiators stay at the table and make an agreement that workers ratify, Lindland said.
“The main thing they can do is to negotiate,” she said. “Both sides come to the table with the same goals, which should be to avoid a strike.”
Staff Writer Kalea Hall contributed.