Ontario auto-parts maker Linamar Corp. says it is costing as much as $1-million a day in profit as the economic damage mounts from a strike by 49,000 General Motors Co. workers in the United States that is nearing the end of its third week.
The U.S. GM employees, members of the United Auto Workers, walked off the job on Sept. 16, which led to a halt of almost all GM’s auto production in North America, causing thousands of layoffs in Southern Ontario and a plunge in orders at GM suppliers Linamar, Martinrea International Inc., Magna International Inc. and others.
“The resultant decline in GM orders is currently estimated to impact Linamar earnings at a [daily] rate of up to $1-million,” Linamar said in a brief market-conditions update issued late on Wednesday.
Linamar is based in Guelph, Ont., and makes transmission, drivetrain, chassis and other components. Its share price fell by 10 per cent on the Toronto Stock Exchange on Thursday.
The company employs 28,000 people at 61 factories and 35 sales and research sites in Canada, the United States, Mexico, China and other countries. The automotive market accounted for 68 per cent of its $7.6-billion sales total for 2018. Linamar also makes industrial and agricultural equipment.
“The strike is impacting us, of course, as long as it continues,” chief executive officer Linda Hasenfratz said in an e-mail on Thursday. “We hope to see some recovery in volumes after GM gets back to work to make up for depleted inventories.”
She declined to say how many people Linamar has laid off as a result of the strike, noting it changes as they are reassigned within the company.
Most of Linamar’s Canadian production is shipped to plants in the United States, Ms. Hasenfratz said, adding the company does not serve GM’s Oshawa assembly lines, which are slated to close in December.
Ontario’s auto-parts makers employ about 100,000 people and sell $18-billion in components to U.S. manufacturers. GM is a major customer for the companies in Ontario and elsewhere.
The U.S. strike by the UAW shut down more than 50 factories and warehouses in the United States. GM’s Ontario operations soon followed, owing to the interconnected nature of auto-making.
Production has halted at two of three GM factories in Ontario. About 2,000 hourly workers have been laid off at the Oshawa plant, which makes Chevrolet Impalas and GM pickup trucks. Engine production at the powertrain plant in St. Catharines has stopped, putting 700 workers on temporary layoff.
GM’s Ingersoll plant, which makes the Chevrolet Equinox SUV, is closed this week for scheduled inventory management. The move, announced in the summer, has put 2,300 workers in Ingersoll and 300 transmission assemblers in St. Catharines on layoff, said Jennifer Wright, a spokeswoman for GM.
Ms. Wright said the shutdowns in Ingersoll and at the St. Catharines transmission line are unrelated to the strike, and both sites are scheduled to be running on Monday.
The number of temporary layoffs at GM suppliers is not known, but is believed to be in the thousands. Unifor, the union that represents GM workers in Ontario, has said 1,700 members have been sent home from the companies that serve the Oshawa plant. The list of companies that have laid off workers includes Lakeside Plastics, Martin Transportation Systems Inc., Lear Corp., Ceva Logistics, Syncreon and Oakley Industries.
The UAW, which is seeking better wages, job security and work for idled U.S. plants, said on Tuesday it rejected GM’s latest offer as insufficient.
JPMorgan analyst Ryan Brinkman said in a research note the strike has already cost GM more than US$1.1-billion, and the Detroit-based automaker loses US$82-million in profit every day it drags on.
GM’s stock price has fallen by about 13 per cent in New York since the strike began, compared with a 4-per-cent drop on the benchmark U.S. stock index, the S&P 500.
Martinrea’s share price fell by nearly 4 per cent on Thursday, bringing the decline to 13 per cent since the GM strike started. Magna’s share price fell more than 1 per cent on Thursday, for a drop of about 5 per cent since the strike began.
Linamar’s update included warnings of slower sales in its two other markets, construction equipment and farm machinery, due to global trade uncertainty and a decline in business spending. In the automotive market, Linamar noted the global vehicle production forecast from IHS Markit Ltd. for all manufacturers in the third quarter has been cut by 1.1 million units to 21.2 million.
Peter Sklar, a stock analyst at Bank of Montreal, said investors overreacted to Linamar’s update on the strike impact. He said he has cut Linamar’s expected profit for the third quarter by 26 cents a share, putting the strike’s impact at 13 cents a share, or $13-million.
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Eric Atkins