Are GM Labor Concessions Built Into The Stock?

Four days have passed since the labor contract between the United Auto Workers and Detroit’s traditional Big Three expired and talks on a new deal are still ongoing. As of Tuesday evening, there was no strike, no settlement, and no deadline to reach an agreement.

“It’s quite unlike anything I’ve ever seen,” said Buzz Hargrove, president of the Canadian Auto Workers. “I’m surprised by it all.”

For investors, the question is not how much job security the union will get, but whether there is any more upside in shares of General Motors Corp. (GM) and Ford Motor Co. (F) that’s not already built in to their price now.

Goldman Sachs says no. It downgraded GM shares to a “neutral” rating Monday.

“[GM] shares are up 21% since September 7th, when we revisited our call and now trade near our US$37 target price, so the value of a UAW concession package we find most likely looks largely priced in,” Goldman analysts wrote in a note to clients. They counseled some profit taking now in GM shares.

Contrast that with the view of analyst Rod Lache at Deutsche Bank. Mr. Lache says a deal expected on healthcare should build even more value for GM shares. He rates them “buy” with a price target of US$45. GM shares closed up 54¢ to US$35.77. They’ve gained 16% since the start of the year.