Personally, I see the strike as negative short-term but extremely positive long-term for General Motors.
My reasons are as follows:
1) Unlike Chrysler and Ford, GM never restructured its methods of doing business in the eighties. While the other auto makers reduced costs by outsourcing and through negotiations, GM fundamentally chose a path where it would avoid many of the hard decisions that needed to be made to improve productivity. This strike is a clear demonstration that GM is ready to make a change.
2) In the past five years, the outside directors in the Board of Directors, led by Smale, have forced management to reduce costs. This has really had an effect of "waking-up" a very complacent management.
3) In the 80's, Roger Smith made the the decision in Flint that has led to this strike. He sacrificed productivity for labor peace. Current management is reversing that.
4) Losing its #1 position in domestic sales to Ford even for one year will have the effect of shaking up the organization.
5) It will give GM an excuse to close the rest of its Flint operations over the next few years.
Most of the analysts that I have heard in Windsor, ON have basically stated that if the Flint strike were resolved in June prior to the planned vacation period, they would downgrade the stock. A quick resolution would indicate that management was not serious in eliminating the noncompetitive work rules in Flint. A longer strike would be positive in that it would indicate that GM would be able to reach some of the manufacturing efficiencies that you see at F or C.
I would not short the stock. I believe that there may be a 2-5 point downturn. However, that might quickly disappear if the strike is settled *OR* if GM looks to spin off some of its subsidiary, ala Ford's spin-off of the Associates. |
