Strike cost $3 billion but not GM’s electric future

Industry

DETROIT — General Motors projects the cost of the UAW’s 40-day strike to be almost $3 billion, but the new labor pact that emerged from it takes the automaker one step closer to an electrified future.

Executives said the four-year contract keeps GM competitive and allows the manufacturing flexibility needed as the market transitions to more EVs.

And with that future in mind, GM elevated its EV chief, Doug Parks, to lead global product development and purchasing last week. Parks takes over product development duties from President Mark Reuss and purchasing from Steve Kiefer, who now oversees GM’s international operations.

“We see a huge opportunity in electrification, and that’s why we’re investing,” CEO Mary Barra told analysts on GM’s earnings call. “Our technology road maps that we have for [battery] cell development are going to well position us.”

The contract calls for GM to invest $3 billion in the Detroit-Hamtramck Assembly plant, which was scheduled to close but instead will stay open to build electric trucks, vans and battery modules. The company plans to spend $4.7 billion retooling and refurbishing other U.S. plants.

Although the deal adds to GM’s labor costs with wage increases and bonuses, it allowed the automaker to shut down three underutilized plants and pursue its zero-emissions vision. Getting the deal meant withstanding a strike that dragged down earnings by $1 billion in the third quarter and is projected to result in a nearly $2 billion hit in the fourth quarter.

GM’s net income in the third quarter declined 8.7 percent to $2.3 billion, but North American profits increased 7 percent to $3 billion.

Job security was a hot-button issue at the bargaining table as GM planned plant closures and mapped out an EV future. GM has said it would launch 20 all-electric and fuel cell vehicles globally by 2023.

GM and the UAW agreed to create a national committee to discuss the impact of advanced technology on UAW members. The committee will tour GM’s tech centers to learn about its long-term manufacturing vision and upcoming electric and autonomous vehicles, review plans for new technology at UAW facilities and ensure that UAW members are properly trained before launches.

Over the next five years, Barra expects to devote more r&d dollars and plant investments to EV production than internal-combustion vehicles.

But that doesn’t mean transmission and engine plants will disappear anytime soon, Barra said. Battery-electric vehicles made up only 1.6 percent of U.S. retail sales this year through July, according to J.D. Power.

“The balance of the vehicles being sold in the country are internal-combustion engine vehicles. We’re well positioned because we’ve renewed all those architectures and we’ve invested in very efficient internal-combustion engine technology that will continue to improve,” Barra said. “And there are components in the drive unit from an EV perspective that need to be built somewhere.”

Electric vehicle production is simpler from a component perspective than building a vehicle with an internal-combustion engine, she said, but vehicle production is more complicated than the engine alone.

“You’ve got to look at the whole vehicle, not just the propulsion system,” she added.

GM has prioritized lightweighting, especially in EVs. “Lightweighting is so important across every component,” Barra said. “From a body structure’s perspective, that lightweighting generally requires a little bit more labor.”

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