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GM Workers' Strike Continues

Zacks Equity Research

Three weeks into a workers’ strike at Detroit-based General Motors GM, there appears to be no end in sight. Some 49,000 employees in the United Auto Workers (UAW) union continue to carry picket signs, as negotiations between the union’s office and the automaker’s board appear to have hit a snag.

Proposing a new deal whereby job security for the Detroit plant workforce is more seriously considered in the next 4-year workers’ contract — as well as a more generous sharing of company profits, which are expected to fetch $1.79 per share in the company’s Q3 earnings report (due out on Tuesday, October 29th) — is where the current impasse lies. Reportedly, GM came back with a counter-proposal union officials said resembled an earlier, already rejected offer. Things are now reported to “have taken a turn for the worse,” according to UAW Vice President Terry Dittes.

Workers are concerned the company may pull up stakes and invest in a new plant south of the border. Currently, 22% of GM autos sold in the U.S. are built in Mexico. For their part, GM is interested in cutting costs to levels of those they see with foreign automakers who have built plants in cheaper areas in the U.S. south. The UAW is currently supplying $250 per week to striking workers as the impasse continues, roughly 20% of average normal pay.

GM is currently a Zacks Rank #2 (Buy)-rated company, with a Value-Growth-Momentum grade of B. Over the past 4 quarters, the company has beaten estimates all 4 times at an average of 27.7% above expectations. In fact, the company has only missed estimates twice in the last 5 years — most recently in Q2 2018. Earnings of $1.79 per share would represent a year-over-year drop of 4.3%, whereas expected revenues of $36.65 billion would demonstrate 2.4% growth.

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