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Strikes hurt GM less than oil prices

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Brent Snavely
April 24, 2008
— The UAW strike against American Axle & Manufacturing Holdings Inc. cost General Motors Corp. only a few thousand sales in the first three months of the year, a GM executive said Wednesday.

“It may have cost us some fleet sales in March in the range of 7,000 to 10,000 units,” Mike DiGiovanni, GM’s executive director of global markets and industry analysis, said Wednesday. “It’s obviously reduced our total dealer inventories, which are down.”


As GM copes with lost production because of a lack of parts, its more pressing concern is high oil prices holding down global demand for new vehicles.


The automaker is negotiating with several UAW locals that are striking or threatening to strike five of its plants. And the union’s action against the Detroit company that makes axles for GM’s profitable pickups and SUVs has no end in sight.


UAW members are planning a rally Thursday at American Axle’s headquarters to coincide with the company’s annual meeting. A flier on the Internet urges members who are stockholders to attend the company’s annual meeting and to vote against a long-term compensation plan for executives.


The strike has forced GM to either shut down or limit production at 30 plants, as well as at an Indiana factory that makes the Hummer H2.


But for GM’s DiGiovanni, there is an even bigger concern: the price of oil and gas.


The average price of a gallon of regular gas hit $3.53 Wednesday, up 67 cents from a year ago, according to AAA. Oil closed at $118.30 on the New York Mercantile Exchange for light sweet crude, up from $100 a barrel just a few weeks ago.


DiGiovanni said total auto sales for the industry were higher during the first quarter than GM expected. But he is very worried that gas prices could have a broader economic impact in during the second quarter, and could even stall a national economic recovery.


“This is the reason why we are wondering now if the second quarter will be worse than the first quarter,” DiGiovanni said. “Gas prices have exceeded our expectations.”


Based on first quarter sales, the industry is on track to sell 15.6 million vehicles this year in the United States. GM, he said, expected a pace of 15.3 million. He declined to provide an updated forecast, saying the unpredictable price of oil and gas will be the key factor.


The U.S. government’s stimulus program and the Federal Reserve’s interest rate cuts could help, but probably not until well into or after the second quarter, he said.


During the first quarter, DiGiovanni said, high gas prices caused American consumers to buy smaller and mid-size cars. But if oil prices continue to escalate, more consumers might stop buying, rather than just shifting their purchases.


“Once it affects the economy, it will take the industry down,” DiGiovanni said.


The bright spot for GM was its sales overseas. Although GM’s sales fell 10.2 percent in North America, sales in most other parts of the world increased. Sales in GM’s Asia Pacific region rose 5.8 percent to 410,935, sales in Latin America rose 19.6 percent to 323,376 and sales in Europe rose 3.3 percent to 572,137.



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