According to analysts, General Motors should be able to manage a short United Auto Workers' strike without greatly hurting its balance sheet. Most experts do not see the strike lasting more than a couple weeks, noting that a strike lasting long enough to bankrupt GM would not be in the best interest of the UAW. David Cole, chairman of the Center for Automotive Research, called that scenario "unimaginable," because "the stakes are so high." Workers began walking off the job midday Monday, as disputes over job security caused negotiations to go past the deadline (full story). According to estimates, the strike will cost the automaker $100 million per day. Credit rating agencies S&P and Moody's both left their current investment grades on GM unchanged. S&P said in a statement "We still expect GM and the UAW to reach an agreement in the near future... Still, if the work stoppage were to persist beyond a brief and largely symbolic period, 
GM's ratings could be placed on CreditWatch with negative implications." Moody's said that GM should "be able to adequately fund the cash requirements associated with a U.S. work stoppage approximating 30 days." After that, the strike does have the potential to cripple both GM and its suppliers. However, Fitch Ratings warned Monday it may cut its ratings on GM, as well as those of several auto suppliers. "The UAW strike has the potential for far-reaching, crippling repercussions throughout the industry," it said. "Although the strike is expected to be short-lived, due to the potentially devastating consequences to both sides, the onset of a strike could limit the ability of both parties to control the subsequent chain of events." GM stock drifted down 0.83% to $34.45 in pre-market activity on Tuesday.
Sources: Reuters, Detroit News, MSNBC
Commentary: The General Motors-UAW Dance • Are GM Labor Concessions Built Into The Stock?
Stocks/ETFs to watch: GM. Competitors: F, TM. ETFs: PRFG, RPV.
Earnings call transcript: General Motors Q2 2007
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