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© Reuters. General Motors (GM) CFRA cuts GM to Strong Sell as risk of UAW strike grows
CFRA downgraded General Motors (NYSE:) to a Strong Sell rating (From Hold) and cut their price target on the stock to $28.00 (From $40) as the risk of a UAW strike becomes more likely.
Recent reports indicate that the United Auto Workers (UAW) union and GM are still significantly distant in their labor negotiations, as the current UAW contract is set to expire on September 14th. The UAW is said to be pursuing a 40% wage increase, structured as 20% upon ratification, followed by annual 5% raises throughout the four-year agreement. Additionally, the UAW is requesting a reduced 32-hour work week, along with other benefits.
CFRA analysts wrote in a note, “Newly elected UAW President Shawn Fain appears to be aggressive and eager to make his mark with the Detroit Three.”
In the event of a strike, GM faces substantially higher earnings risk compared to both Ford (NYSE:) and Stellantis (NYSE:). This was evident during the 40-day strike, which had a significant adverse impact on GM’s earnings, resulting in a decrease of $1.89 per share in 2019.
“We are also cautious on the near-term earnings drag from GM’s EV transition as well as ultimate demand for its new models at a time of growing EV market oversaturation,” the analysts added.
Prior to this rating, General Motors had 15 buy ratings, 9 hold ratings, and 1 sell rating.
Shares of GM are up 0.08% in pre-market trading on Monday.
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