General Motors Corp. will cancel one shift of production at its Oshawa, Ont., car plant beginning Monday, but restore another shift for two weeks at the neighbouring truck plant as the impact from a strike at a major parts maker ripples through the auto maker's North American operations.
The seven-week strike at American Axle and Manufacturing Holdings Inc. has caused GM to shut most of its large pickup truck plants for several weeks – including the Oshawa truck plant. But it's also affecting other parts makers already battered by the slump in U.S. sales, soaring commodity prices and permanent plant shutdowns by the Detroit Three auto makers in the past two years.
“Clearly, particularly in North America, I would characterize the supply base as generally distressed,” Keith Wandell, president of automotive interiors giant Johnson Controls Inc. , told investors and analysts during a conference call yesterday.
Such Canadian parts makers as Magna International Inc. , Martinrea International Inc. and others have been affected by the GM shutdowns and the slump in the U.S. market. The companies have shut some of their operations in Ontario and elsewhere until GM resumes production at several plants that receive parts from American Axle.
The problem lies in the just-in-time supply formula that drives the North American industry.
Cutting one link in the supply chain almost immediately causes a shutdown at a vehicle assembly plant, which then cascades through the sector.
Magna, for example, has shut parts of a plant in St. Thomas, Ont., that assembles frames for GM's large pickups and SUVs. The parts maker has also laid off some workers at a plant in Syracuse, N.Y., that puts together four-wheel-drive components for those same vehicles.
Analysts who follow Magna have reduced their forecasts for first-quarter profit because of the strike.
Martinrea has laid off most of the workers at its frame-making plant in Kitchener, Ont.
David Tyerman, who covers Magna and other parts makers for Scotia Capital, cut his profit forecasts yesterday for Magna, Martinrea, Linamar Corp. , Wescast Industries Inc. and Exco Technologies Ltd.
The first quarter “was a terrible quarter for the auto industry by any measure,” Mr. Tyerman said in a note to clients. “The combination of the [American Axle] strike and weak consumer demand pushed auto production to the lowest level in our historical database,” he wrote.
He's now forecasting share profit of $6.40 (U.S.) this year for Magna, down from an earlier forecast of $6.76.
The strike has led to a production cutback of 100,000 vehicles at GM's plants, Citigroup Global Markets Inc. analyst Itay Michaeli said in a report this week. Mr. Michaeli cut his profit forecast to $6.85 a share from a previous level of $7.02.
The truck plant will resume production for just two weeks, Canadian Auto Workers local 222 president Chris Buckley said yesterday, which means 1,200 to 1,300 employees will go back to work. The shift reduction at the car plant means layoffs for about 1,000 workers.
Although the American Axle strike has led to layoffs in Oshawa, two busloads of retirees from Canadian Auto Workers local 222 will travel to a picket line in Tonawanda, N.Y., Friday, local 222 president Chris Buckley said Wednesday.
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