The GM Strike Could End Today. Here's What That Means for Stocks.
KeyBanc is reporting that General Motors and the United Auto Workers have reached a preliminary deal to end the strike and that an agreement could be announced Wednesday.
That should be good news for GM stock, which has lagged behind the market since the strike began. General Motors (ticker: GM) shares have dropped almost 7% over the past month, while the Dow Jones Industrial Average, by comparison, has been flat. The 30-day work stoppage, which entered its fifth week Monday, is the longest walkout since 1970.
General Motors declined to comment. GM shares were down 0.5% in premarket trading after rising 2.1% Tuesday.
"We are trying to provide a path for our temporary workers to become [permanent] workers," said UAW vice president Terry Dittes in a recorded message to members on Monday. It also said it raised strike pay for members to $275 from $250l.
"While ratification may take up to an additional week...we estimate GM lost 25 production days, or 250,000 to 200,000 units, representing third- quarter and fourth-quarter drags on North American industry production of 2.5% and 4.4%, respectively," wrote KeyBanc analyst James Picariello in a Wednesday research report.
The impact on his 2019 earnings estimates range from essentially nothing-in the case of BorgWarner (BWA)-to a 25% cut for American Axle & Manufacturing (AXL). He estimates Axle's earnings will fall from $1.90 a share to $1.57 a share in 2019 based on the output lost due to the strike. The average impact on parts' supplier earnings is about 5%; it correlates with suppliers' overall exposure to General Motors.
Investors should be ready for weak third-quarter earnings when car companies start reporting their numbers next week.
"Many [suppliers] are likely to cut 2019 guidance, [which] investors might look through," wrote Credit Suisse analyst Dan Levy in a Friday research report.
"Bottom-line, we wouldn't be surprised if the group rallies on a GM/UAW resolution given some clarity," added RBC analyst Joseph Spak in a Sunday research report.
GM reports its third-quarter numbers on Oct. 29.
Write to Al Root at [email protected]
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