Autos

GM lays off 6,000 additional workers in Mexico due to UAW strike

Key Points
  • GM on Tuesday idled a plant in Mexico that produces its highly-profitable Chevrolet Silverado and GMC Sierra 1500 pickups, temporarily laying off 6,000 workers.
  • The cuts at GM's Silao plant bring the number of layoffs for non-UAW represented employees in North America with the automaker to about 10,000.
  • The idling of the facility means all of GM's pickup production in North America has been cut-off as a result of the UAW's strike, which started Sept. 16.
United Auto Workers members on strike picket outside General Motors' Detroit-Hamtramck Assembly plant on Sept. 25, 2019 in Detroit.
Michael Wayland / CNBC

DETROIT - General Motors on Tuesday idled a plant in Mexico that produces its highly-profitable Chevrolet Silverado and GMC Sierra 1500 pickups, temporarily laying off 6,000 workers.

The automaker said the decision was a result of a parts shortage due to the United Auto Workers union's strike against GM, now in its 16th day. A GM spokesman said the "primary focus is to get a deal and get everybody back to work" as soon as possible.

GM shares were down more than 3% early afternoon after opening Tuesday at $37.47. The stock is up about 8.5% for the year.

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GM lays off 6,000 workers at factories in Mexico

The Tuesday cuts at GM's plant in Silao, Guanajuato, Mexico bring the number of layoffs for non-UAW represented employees in North America with GM to about 10,000, according to officials.

GM last week confirmed it had idled engine production at the Silao facility last week, temporarily laying off 450 workers. Those cuts were in addition to roughly 3,200 GM manufacturing workers in Canada and 525 hourly employees at the automaker's jointly operated DMax engine facility in Ohio.

The total number of employees at auto suppliers who have been temporarily laid off by the strike is unknown but estimated to be in the thousands.

'Feeling the pain'

The idling of the Silao plant means all of GM's pickup production in North America has been cut-off as a result of the UAW's strike, which started Sept. 16 after the two sides failed to reach tentative deal by a Sept. 14 deadline.

Pickups are essential to GM's profitability. Despite dealers having a healthy amount of the vehicles in stock, it's likely going to be difficult for the automaker to make up lost production of the pickups in the fourth quarter.

"It's a big deal," said Michelle Krebs, executive analyst with Autotrader. "The longer this strike goes on, the more other plants will be affected. This comes at a critical time for GM and its truck launch because it was just introducing the heavy-duty version. This time of year is the biggest time for truck sales."

Cox Automotive, Autotrader parent company, reports dealers had a 93 days-supply of Chevrolet Silverados and 84-days supply of GMC Sierras to begin September, the latest available data. The healthy industry average is 64 days.

Art Wheaton, a labor professor at the Worker Institute at Cornell University, said production of the pickups is "one of the first triggers" that he believes will push GM to concede to a deal with the UAW.

"That's' what's finally going to make GM start to move to get a deal because they are not going to be able to make up that revenue," he said. "GM is going to start feeling the pain."

$1 billion headwind

Wall Street analysts estimate GM is losing roughly $50 million to $100 million per day in lost production.

J.P. Morgan, in a note to investors Monday, estimated the UAW's strike cost GM more than $1 billion during the third quarter. Barclays analyst Brian Johnson last week cautioned the strike could drag on into the fourth quarter, leading to roughly 100,000 units of lost production in the third quarter, costing roughly $750 million for GM.

UBS' Colin Langan estimated a prolonged strike would shave roughly 10 cents off GM's earnings per share during the third quarter, specifically from the lost production at its pickup and SUV factories.

Correction: This story has been updated to correct the spelling of Silao in one reference.