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As the UAW-American Axle & Manufacturing strike enters its fifth week, part shortages of a previously unidentified brake component to several GM car programs will force GM to idle its Detroit-Hamtramck and Lordstown plants in the coming week.
Detroit-Hamtramck produces the Cadillac DTS and the Buick Lucerne, and GM can weather an extended shutdown due to high inventory levels and a strong overbuild prior to the plant shutdown expected later today. GM’s Lordstown plant produces the Chevrolet Cobalt and Pontiac G5 compact cars and faces being idled by the end of next week.
Unlike GM’s trucks, which are affected by the strike, the Cobalt and DTS continue to sell at a reasonable pace with current inventory levels below the 60-day industry average. Strong production levels in recent weeks and reduced incentive spending can support a Cobalt and DTS outage for roughly one month before inventory levels reach a critical stage. Inventory levels for their sister vehicles, the G5 and Lucerne, are well above average and could withstand an extended six- to eight-week shutdown before sales would be impacted.
GM’s Arlington and Shreveport plants continue to operate with a continuous flow of required component sets from American Axle’s Mexican operations. We expect operations to be impacted beginning the week of 7 April 2008 with single-shift scenarios in effect due to part shortages.
Negotiations are irregular yet ongoing with both sides far apart. Recent statements indicate that the company could reluctantly shift sourcing to other plants across its global operations if a competitive agreement cannot be reached. The strike could conceivably continue through the month of April before GM will be inclined to interfere with the negotiation process.
Without a settlement, the volume impact of lost production through mid-April would amount to nearly 160,000 units. If the UAW strike were to continue through April, total lost production would reach 270,000 units. Even if an agreement is reached, it would still take a week or longer for all operations to be fully functional.