Strike At Suppliers Helping GM (GM)

March 8, 2008 by Douglas A. McIntyre

According to Bloomberg, GM (NYSE: GM) has a 113 day supply of trucks. That is well above the 60 days that most industry analysts believe is ideal. Strikes have closed some companies which supply GM parts to shut down. That, in turn, has forced GM to close some of its facilities.

The over-supply of truck inventory leads to dealers and the big car company to offer incentives to get the vehicles off their lots. The incentives cut profits margins. When aggressive promotions hit levels as high as "$5,000 cash back", GM may actually be losing money on some product lines.

Is the strike a godsend? It is until the work stoppage goes on for two or three months. After that, the worm turns at GM. A shortage is worse than an glut. Customers will go elsewhere when the inventory runs out.

Douglas A. McIntyre