Posted by: David Welch on October 30, 2007
There are signs that some investors think General Motors is turning things around. The company has gotten to break even this year. GM has a few hit cars, like the Cadillac CTS and Buick Enclave. A concession-laden union contract has promted another analyst to recommend GM’s stock. This week, UBS analyst Rob Hinchliffe put a “buy” rating on the stock, saying it could go as high as $48 a share from today’s price of just over $38 a share. His reason: The new labor contract is revolutionary. And indeed the deal with the union is supposed to erase about three-fourths of the $30 an hour labor cost penalty versus Toyota. With Hinchliffe’s vote of approval, seven Wall Street analysts are recommending the stock, which another seven aren’t yet ready to take the plunge on GM.
Why the 50-50 vote? It’s simple. GM may have cut a deal with the union to slash costs, but this company needs to ring the register. And on that score, it still has some real challenges. The first is the fact that oil is selling at around $92 a barrel. Not good for suv and pickup truck sales, which are still GM’s money makers. Car buyers still don’t flock to GM dealers for passenger cars. The housing mess still will wreak further mayhem on consumers. And today, reports show that consumer confidence in the job market is sinking. All of those factors will make it tough for GM to truly turn things around at home. GM may be saving enough money to weather the current consumer malaise, but for Wall Street the jury is still out.