Wall Street's Not Too Worried, Yet
From The Detroit Free Press:
The strike might be on, but Wall Street doesn't believe that an agreement between GM and the UAW to create a new retiree health care fund is completely off.
GM stock held its own. GM closed at $34.74 Monday, down 20 cents a share. Ford Motor Co. closed at $8.48 a share, up 25 cents a share. GM has requested that the UAW take control of a new retiree health care fund to pay out future liabilities estimated at $50 billion in exchange for a onetime payment into the fund from the automaker.
Reportedly, the two sides have agreed in principle to the fund, known as a voluntary employee beneficiary association, or VEBA.
"This strike is in no way about VEBA discussions," UAW President Ron Gettelfinger said Monday.
And Wall Street analysts remained optimistic.
"We expect the eventual solution to include a VEBA deal in exchange for some job security," wrote Morgan Stanley analyst Jonathan Steinmetz.
Steinmetz said GM stock initially could trade up on investor enthusiasm about a tough stand on terms.
"A rally may fade, however, if a strike lingers," Steinmetz wrote.
Maryann Keller, an auto consultant in Stamford, Conn., said from Wall Street's view an agreement on the retiree health care fund would be a dramatic and beneficial shift for GM. "If it didn't happen, then I'd be very concerned about the stock," Keller said...click to continue.
