GM's longest strike in 49 years is about to end — and markets reacted rationally
You're gonna have to fix that carburetor solo... 48K car-crafting General Motors employees spent the last 30 days on strike — GM's longest walkout since 1970. The union and the car giant reached a tentative labor contract after CEO Mary Barra finally intervened last weekend. But here are the key $$$ numbers:
- $2B: That's the estimated hit GM's business suffered while employees picketed.
- $800M: That's the size of the United Automobile Workers union's “strike and defense fund” — it's been paying out-of-work union humans $275/week during the strike.
So what's in the trunk?... Details aren't public yet (and Union members still have to vote in favor of the deal). But early reports show the month-long strike got the union 3%-4% annual raises/bonuses for workers, a $9B investment by GM in American factories, and thousands of new jobs. And temp workers will have a path to become full-time ones.
GM’s stock price during the strike shows that markets are rational... Investors punished GM shares by almost the perfect amount — the same amount as the lost profits caused by the strike. Here's how the numbers break down:
- Losses to GM: $2B. We mentioned that the strike cost the company an estimated $2B in losses while cars weren't being produced.
- Losses to GM's stock: $2.5B. GM's stock price dipped 5% during the strike, meaning the company lost $2.5B in market value (5% of GM's $52B market cap = $2.5B)
Stock markets often seem emotional and erratic, but they can be rational, too.