GM Reduces 2019 Prospects as Strikes Weigh on Profits

On Tuesday, General Motors Co reduced its earnings forecast for 2019. The company has also stated that a 40-day U.S. labor strike by the United Auto Workers union has brought virtually all of its North American processes to a deadlock.

All of the operations would cost around $3 billion in profits this year.

On the flip side, GM shares grew 1.6% on pre-market trading on the back of a better-than-expected quarterly net profit. It is because of strong U.S. sales of high-margin pickup trucks and SUVs.

Meanwhile, a Wall Street analyst has observed the strike costs as a compromise for three U.S. plant closures. This was agreed upon by the union that will further strengthen GM’s profitability.

Last Friday, the 48,000 United Auto Workers union associates at GM sanctioned a new four-year labor deal. The agreement comes with the Detroit company.

On the other side, the 40-day strike has cost GM more than $2 billion, according to experts.

The Detroit-based automaker saw a 6% upsurge in third-quarter U.S. sales. This was led by its vastly lucrative full-size pickup trucks, SUVs, and crossovers.

Practically, all of the pre-tax profits originated from its North American company and its lone finance arm.

Equity Income Inches Down In China 

In China, the establishment’s equity income declined by 40% to $300 million. This is also where GM reported a 17.5% slide in third-quarter sales.

The decline was the fifth straight quarterly sales waning for GM in China. It is the world’s largest auto market, where the business is anticipating a second consecutive annual sales drop.

In 2019, the China Association of Automobile Manufacturers expects a 5% drop for industry sales.

Over the next three years, it is expecting to move in a fading movement, or it will grow slowly.

Last week, GM’s smaller U.S. opponent, Ford Motor Co, cut down its calculation for operating profit for the year.

The reducing of profit was after an unacceptable quarter upset the higher warranty costs, more significant discounts, and weaker-than-expected performance in China.

Moreover, GM stated that the strike by the UAW had a total of $1 billion on pre-tax earnings in the quarter or 52 cents per share.

As a result, the union twisted higher pay and other benefits from GM as part of the contract to end the strike.