Saturday, May 24, 2008
GM’s share price briefly sank to its lowest level in 26 years.
DETROIT (AP) — General Motors Corp.’s stock dropped 5 percent Friday after the company reported that strikes at some of its own plants and parts supplier American Axle will cost the automaker about $2 billion before taxes in the second quarter.
GM also expects to produce 230,000 fewer vehicles during the quarter due to the nearly three-month American Axle strike, which crippled its production of large sport utility vehicles and pickups. The other strikes will cost it 33,000 vehicles.
In Ohio, a lack of parts idled workers at the Moraine GM plant near Dayton and meant changes at GM plants in Parma, Mansfield and Toledo.
“We anticipate only a portion of this lost production will be recovered, due to the current economic environment in the United States and to the market shift away from the types of vehicles that were impacted by the action at American Axle,” GM said in a filing with the U.S. Securities and Exchange Commission.
In late Friday trading, GM’s shares fell 85 cents to $17.58, after touching $17.38 earlier in the session, their lowest level in nearly 26 years.
GM said the American Axle strike was expected to have the biggest effect by far, costing it $1.8 billion in the second quarter before taxes. GM previously said it lost $800 million in the first quarter and produced 100,000 fewer vehicles in that period because of the American Axle strike.
Detroit-based GM also said in Friday’s filing that it put in $215 million to help settle the American Axle strike. GM earlier had said that it had agreed to provide Detroit-based American Axle and Manufacturing Holdings Inc. up to $200 million to help fund buyouts, early retirements and buydowns to help end the strike.
Without the strike at American Axle, GM likely would have had to cut production of SUVs and pickup trucks to keep its supply in line with demand, said Michael Robinet, vice president of global forecast services for CSM Worldwide, an auto industry consulting company based in Northville.
“Nobody wants to take a strike,” Robinet said, “but it certainly had a lesser effect than if it had happened a few years ago.”
High gas prices and a slow economy have reduced demand for trucks and SUVs.
American Axle said Friday it expects production to resume next week after United Auto Workers members overwhelmingly approved a new contract that contains steep pay cuts and other concessions. The vote was finalized Thursday.
About 3,650 UAW members went on strike Feb. 26 over American Axle’s demand for lower wages to match its U.S. competitors. American Axle makes axles, drive shafts and stabilizer bars, mainly for GM’s pickups and large SUVs. GM accounts for 80 percent of business at American Axle, which was formed from parts plants sold by GM in 1994.