General Motors reported better-than-expected quarterly results on Tuesday but warned it would take a big earnings hit for the year from the 40-day strike at its U.S. factories.

For the third quarter, GM had adjusted earnings of $1.72 per share, ahead of analysts’ estimates of $1.31 per share. The strike, which ended last week when United Auto Workers members ratified a four-year contract, shaved $1 billion, or 52 cents per share off the earnings, due to lost production and other costs.

Net revenue dropped 0.9% to $35.47 billion, topping estimates of $33.82 billion.

CFO Dhivya Suryadevara said the company lost output of about 300,000 vehicles from the strike but the new contract should allow GM to more effectively operate its U.S. factories and preserves its ability to manage any future downturn in U.S. auto sales.

The agreement allows GM to close four plants. “Our new labor agreement maintains our competitiveness, preserves our operating flexibility, and allows us to continue improving our quality and productivity,” CEO Mary Barra said in the earnings release.

But The Wall Street Journal said the recovery from the strike “will add to GM’s list of challenges in coming months as pressures build on the car business globally” and the company “will have to dig deeper in search of savings to offset the higher costs” of the deal, which is estimated to add $100 million to the hourly payroll in the first year.

For the full year, GM expects the cost of the strike to earnings before interest and taxes to be $3.8 billion to $4 billion, with $2.9 billion being trimmed from the bottom line after accounting for about $900 million in taxes, interest, and other adjustments.

The company’s 2019 forecast is now for earnings of $4.50 to $4.80 per share, down from its previous projection of $6.50 to $7 per share. It also lowered its automotive adjusted free cash flow to a range of zero to $1 billion, down from $4.5 billion to $6 billion.

“We’re obviously going to maximize and figure out every opportunity to get every dollar we can from a cost-savings perspective,” Suryadevara said.

Photo by Bill Pugliano/Getty Images

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