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25. May 2008

USA- Strikes cost GM $2 billion pretax

Crippled production eats 263,000 vehicles in quarter

DETROIT – General Motors Corp.’s stock dropped almost 5 percent Friday after the company reported that strikes at some of its own plants and parts supplier American Axle will cost the automaker about $2 billion before taxes in the second quarter.

GM also expects to produce 230,000 fewer vehicles during the quarter because of the nearly three-month American Axle strike, which crippled its production of large sport utility vehicles and pickups. The other strikes will cost it 33,000 vehicles. GM’s Allen County plant assembles pickups and experienced a temporary shutdown because of the strike. The automaker’s Defiance, Ohio, foundry also faced work interruptions.

“We anticipate only a portion of this lost production will be recovered, due to the current economic environment in the United States and to the market shift away from the types of vehicles that were impacted by the action at American Axle,” GM said in a filing with the U.S. Securities and Exchange Commission.

GM’s shares fell 83 cents to close at $17.60, after touching $17.38 earlier in the session, their lowest level in nearly 26 years. The last time GM traded below $17.46 was Oct. 6, 1982, when it was at $17.32, according to the Center for Research in Security Prices at the University of Chicago.

GM said the American Axle strike was expected to have the biggest effect by far, costing it $1.8 billion in the second quarter before taxes. GM previously said it lost $800 million in the first quarter and produced 100,000 fewer vehicles in that period because of the American Axle strike.

Detroit-based GM also said in Friday’s filing that it put in $215 million to help settle the American Axle strike. GM earlier had said that it had agreed to provide Detroit-based American Axle and Manufacturing Holdings Inc. up to $200 million to help pay for buyouts, early retirements and buydowns to help end the strike.

Without the strike at American Axle, GM likely would have had to cut production of SUVs and pickup trucks to keep its supply in line with demand, said Michael Robinet, vice president of global forecast services for CSM Worldwide, an auto industry consulting company based in Northville, Mich.

“Nobody wants to take a strike,” Robinet said, “but it certainly had a lesser effect than if it had happened a few years ago.”

High gas prices and a slow economy have reduced demand for trucks and SUVs. Erich Merkle, vice president of industry forecasting for the consulting company IRN Inc. in Grand Rapids, Mich., said GM now must focus on selling more cars and crossover vehicles, since truck and SUV sales don’t appear likely to rebound.

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