GM shares rise on cost savings outlook
By Jui Chakravorty Das
DETROIT (Reuters) - Shares of General Motors Corp (GM.N: Quote, Profile, Research) rose 3 percent on Friday, a day after the automaker said it plans to cut annual U.S. labor costs by $5 billion in the next three years to help improve its earnings.
In a conference call with analysts, the largest U.S. automaker said on Thursday the labor contract it reached with the United Auto Workers union late last year — which allows GM to shift hourly retiree health-care liabilities to a trust fund and hire new workers at lower pay — would be the primary driver of the savings.
GM shares were up 69 cents to $23.53 in morning trade on the New York Stock Exchange. The shares have lost more than 40 percent of their value since their recent high in mid-October, when the stock was buoyed by the landmark cost-saving labor deal with the UAW.
“Near-term macro concerns likely to keep stock under pressure, but we continue to like GM long-term, given substantial UAW contract savings potential,” JP Morgan analyst Himanshu Patel wrote in a note to clients on Friday.
U.S. auto sales fell for the second consecutive year in 2007, dragged down by a slowing economy, a slumping housing market, and tighter credit markets that pinched less credit-worthy borrowers.
While the consensus view among Wall Street analysts and high-profile investors points to a further decline in the world auto industry’s largest market in 2008, there is debate about how deep it will go — especially if the U.S. economy tips into recession.
Full-year 2007 sales dropped almost 3 percent to 16.14 million vehicles, the lowest level since 1998 and down from 16.55 million a year earlier.
GM Chief Executive Rick Wagoner, more optimistic than many other industry experts and analysts, has said he expects total U.S. industry sales to come in at 16.3 million to 16.5 million vehicles in 2008. Continued…
Tags: Auto, auto industry, Auto Sales, auto workers union, automaker, economy, general motors corp, gm, landmark, lows, reuters, rick wagoner, united auto workers, united auto workers union
