Behind the Wheel with Phil Lebeau

GM: How Long Can The Auto Maker's Run Last?

For investors, employees and retirees of General Motors this has been the spring of smiles. Consider this: shares of GM are at a multi-year high, Wall Street (including S&P today) is becoming more optimistic about GM's recovery and there's a genuine feeling the company will come out of the UAW contract talks in pretty good shape.

Can't you see GM Chairman and CEO Rick Wagoner smiling? He should be. in the last week and a half the company has finalized the UAW/Delphi buyout agreement (eliminating the possibility of a crippling strike by GM's largest parts supplier) and the company has sold a good chunk of Allison Transmission business for $5.6 Billion. That one-two does of good news has investors pushing GM stock over $38. A long ways from the $20 and bankruptcy talk that weighed down the stock last year.

But how long and how far can GM's stock run? Is $40-$45 in the next two months a realistic possibility?

The folks I've talked with on Wall Street think so. But their enthusiasm is tempered by concerns about the upcoming UAW contract talks. GM will be asking for substantially lower labor costs (most likely through concessions in the UAW healthcare and pension package) and while many believe the Big 3 will ultimately get much of the savings they want, it's not a certainty.

The UAW under president Ron Gettlefinger has done a solid job of striking deals that help the big 3 with labor costs while not giving up as much as the big 3 want. At this point, my gut says the UAW talks come down to the wire (contract ends September 14th) and there will be legitimate concerns about a strike. That will put the GM stock under pressure. So even if GM shares move higher in the next month or so, be careful GM investors. This spring fling may not last.

Questions?  Comments?

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