GM Shares Up on Hope for Talks
General Motors Corp. shares rose 8.5% on Friday, spurred by reports that the world’s largest automaker was pressing the United Auto Workers for concessions and that the union had authorized leaders to negotiate.
Leaders of UAW locals gave authority to union Vice President Dick Shoemaker, who oversees relations with GM, to negotiate with the automaker on cost cuts within the framework of the contract that expires in 2007, according to union officials.
GM shares gained $2.70 to $34.51 -- their highest closing price in three months. They have fallen 14% this year.
“Anything that creates a sense that a constructive dialogue is possible has to make you feel better about the prospects for GM in the future,†said Dana Johnson, senior economist at Detroit-based Comerica Bank. “There was a sense that the union was going to stonewall GM, but now there seems to be room for flexibility.â€
GM Chief Executive Rick Wagoner said this week that the Detroit-based automaker would cut at least 25,000 U.S. manufacturing jobs by 2008 and close plants. The cost-cutting effort follows a $1.1-billion first-quarter loss, GM’s biggest for any quarter in 13 years. The GM-UAW contract expires in September 2007.
Wagoner said Tuesday that GM had been “in intense discussion†with the UAW on ways to reduce healthcare costs. The Detroit News reported Friday that the local union leaders voted to help GM on those expenses.
GM is cutting costs because of declining earnings as it loses sales to competitors such as Toyota Motor Corp. GM’s market share for its U.S. brands fell to an 80-year low of 25.4% this year through May from 27% a year earlier. Toyota’s share rose to 13.3% from 12%.
“The fact that the UAW appears to be willing to negotiate and that some type of deadline has been set is an incremental positive,†Morgan Stanley analyst Stephen Girsky wrote in a report Friday. “However, we would caution that the deadline may just be hypothetical and ... it is not clear if GM can obtain meaningful savings without opening at least part of the contract.â€
GM spokesman Stefan Weinmann said he couldn’t discuss the union negotiations other than to say the automaker would “prefer to work out something jointly.†UAW spokesman Roger Kerson couldn’t be reached for comment.
“The way I understand it, GM had a list of take-aways†and would implement them by the end of the month if the UAW didn’t agree, said Al Benchich of Local 909 in Warren, Mich.
