GM tumbles on first union strike in 12 years, which could cost it $50 million a day
- General Motors dropped as much as 3.6% on Monday as the United Auto Workers union kicked off its first strike against the company in 12 years.
- The strike could cost GM as much as $50 million per day in earnings as production slows, Credit Suisse analyst Dan Levy said in a client note.
- UAW members are looking to improve healthcare benefits and earnings, with a focus on temporary hires who do similar work as full-time employees.
- GM countered Sunday with an offer to invest $7 billion in US factories and add more than 5,400 new jobs.
- Watch GM trade live here.
General Motors shares fell as much as 3.6% on Monday as the United Auto Workers union kicked off its first strike in 12 years, slowing the automaker's production.
The strike could cost GM as much as $50 million per day in earnings, Credit Suisse analyst Dan Levy said in a note to clients. He noted that the best possible outcome for GM's stock would be a swift outcome, as a prolonged issue could eventually eat away at profitability.
"The longer it lasts, the more it will be felt in GM's earnings profile," Levy wrote. "The strike potentially could dampen the earnings, and at the very least is an optical negative and a reminder of the challenges of investing in automakers at this point in the cycle."
The union is asking for entry-level pay raises, improved health care, and a faster process for short-term workers to earn higher salaries. UAW noted that temporary workers are doing similar work as full-time hires for less pay, and that entry-level roles should pay nearly $30 an hour in three or four years. The roles currently pay less than $20 an hour.
"We are standing up for fair wages, we are standing up for affordable, quality health care. We are standing up for our share of the profits," UAW vice president Terry Dittes said at a Sunday press conference. "We are standing up for job security for our members."
GM countered Sunday with an offer to invest $7 billion across eight US factories and add more than 5,400 jobs. The company would pay a $8,000 signing bonus for workers ratifying the deal. It added that health-care contributions would stay the same as in the previous contract.
While UAW's main focus is on temporary workers, automakers are seeking "added flexibility" amid warning signs of economic slowdown, Levy said.
He did add, however, that GM could counteract the lost production if it ends the strike quickly, and even spin it into a positive event.
"GM could potentially offset lost production once the strike ends; it could also use the strike as an opportunity to keep inventory levels in-line," Levy wrote. "There may also be cost offsets with production offline."
The automaker traded at $38.06 per share as of 10:00 a.m. ET Monday, up about 14% year-to-date.
GM has 16 "buy" ratings, six "hold" ratings, and no "sell" ratings from analysts, with a consensus price target of $48.11, according to Bloomberg data.
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