GM Strike Negotiations in ‘Home Stretch’? Banks Weigh In


Oct. 15 2019, Updated 2:43 p.m. ET

  • General Motors stock has been on a downtrend since UAW called for a strike on September 16.
  • According to the latest developments, final negotiations might be close between the workers and GM’s management.
  • Morgan Stanley and Bank of America weighed in on the impact of the strike on GM. While MS believes that Wall Street is “comfortable” with the prolonged strike, BAC believes that a prolonged strike could bring GM to its knees.
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General Motors and the ongoing UAW strike

General Motors (GM) stock has been on a downtrend ever since UAW (United Automobile Workers) called for a strike on September 16. The stock has shed 8.6% of its value since then. UAW extended its contracts with Ford (F) and Fiat Chrysler (FCAU). GM, however, hasn’t been able to reach a deal—especially when it comes to profit sharing and temporary workers. The strike is affecting the company’s production in the US, Mexico, and Canada. In the latest development, the union has scheduled a meeting for October 17 to update leaders of the various local unions around the nation on the status of the talks.

GM-UAW talks in the home stretch?

Moreover, CNBC reported today that GM’s CEO, Mary Barra, had joined the negotiations with UAW. This development could mean talks are “in the home stretch,” as per CNBC. As reported by CNBC, analysts estimate that GM has lost more than $1 billion due to the strike. 

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GM’s, F’s, and FCAU’s third-quarter deliveries

Apart from the strike, there are other factors impacting GM’s stock price. Its third-quarter deliveries rose 6.3% YoY (year-over-year), which missed analysts’ estimate of 7.8%. Ford’s third-quarter deliveries fell 4.9% during but were still higher than analysts’ estimate of a fall of 6.1%. Fiat’s deliveries rose 0.1% due to strong Ram pickup truck sales. Read F, GM, FCAU: Who’s Winning the US Truck Sales Race? for more on these companies’ third-quarter deliveries.

Tesla’s deliveries underwhelm

Tesla (TSLA) reported deliveries of 97,000 in the third quarter, surpassing its previous record of 95,200. However, the figure still fell short of Wall Street’s expectation of 98,000 and Elon Musk’s aim of 100,000. Read Tesla’s Deliveries Underwhelm, but TSLA Gets a ‘Buy’ Nod for more on Tesla’s delivery record.

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Morgan Stanley on GM’s UAW strike

Analysts are weighing in on the ongoing UAW strike at GM facilities and its impact on the company. Morgan Stanley (MS) analyst Adam Jonas thinks that Wall Street remains “comfortable” with the prolonged strike, as reported by CNBC. He was quoted as saying, “Investors we have engaged with are comfortable with extended strike duration and potential upfront multibillion-dollar financial impact as long as GM preserves long-term cost and strategic flexibility.” He added, “We don’t sense capitulation among investors as long as 2020 forecasts remain intact.” MS has an “overweight” rating on GM stock.

Bank of America: Prolonged strike could bring GM to its knees

Bank of America (BAC) analyst Joseph Murphy, on the other hand, has a different take on the matter. As reported by CNBC, Murphy thinks that the strike has cost General Motors $2 billion through the first four weeks. He added, “A prolonged strike could burn significant cash and bring GM to its knees, but investors likely will also react negatively if management is perceived to have caved into labor’s demands and GM’s long-term competitiveness is threatened.”

In October, UBS raised its price target on the stock from $46 to $47, while Barclays cut its price target from $51 to $48.


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