Economist: GM may not have lost much during strike, but contract could be costly

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FLINT (WJRT) (10/16/2019) - A University of Michigan-Flint economist doesn't believe General Motors has lost badly during the strike, but the stakes are high for getting a new United Auto Workers contract correct.

United Auto Workers members are on strike from General Motors.

Some economic experts have estimated that the automaker lost well over $1 billion during the 31-day strike, which has idled dozens of factories and warehouses around the United States.

Even more suppliers and vendors laid off workers or reduced hours during the strike, sending ripples through the Mid-Michigan economy.

U of M-Flint economics professor Chris Douglas said GM had a significant inventory of new vehicles built up before the strike started on Sept. 16 and dealers were able to continue selling unabated, so the company likely didn't lose badly.

"I'm not super concerned about the automaker losing money in the long term," he said. "If you look at their stock price over the last couple of years, there's not much of an impact of the strike on their stock price in terms of where it was beforehand."

Douglas is more concerned about what the upcoming UAW contract will mean for GM in the future. The labor agreement likely will boost pay and benefits, increasing the automaker's overhead and legacy costs.

If the economy goes through another downturn like 2009, those higher costs could spell trouble for GM, Douglas said.

"It was those legacy costs as a product of previous strikes which led to the 2009 bankruptcy," he said. "You don't want to go down that road again, probably because there's no second bailout coming, should that happen."

With a tentative agreement reached between GM and the UAW on Wednesday, hopes were high that the strike could end soon. The UAW-GM National Council was scheduled to meet Thursday morning to discuss the agreement and decide whether to let workers return to their jobs before a contract is ratified.

Douglas believes the multitude of suppliers affected by the strike, including Nexteer Automotive and Lear Corp., will get back to work quickly. GM suppliers work on a just-in-time production model, so they don't keep a lot of excess inventory on hand.

"Parts are produced as needed, so once production starts at GM they'll instantly need production to start at the suppliers," Douglas said.

He also believes small businesses like restaurants and convenience stores who lost business during the strike should bounce back quickly once workers get their first GM paychecks.