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GM Earnings: UAW Strike Not a Huge Hit to Q3, but Q4 Damage May Be Billions

Though we’re reducing our earnings estimates, we still believe GM stock is undervalued.

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What We Thought of General Motors’ Earnings

General Motors GM had a good third quarter, despite about a $200 million adjusted EBIT loss from the United Auto Workers strike. Adjusted diluted earnings per share of $2.28 beat the $1.88 Refinitiv consensus. We are leaving our fair value estimate unchanged, but reducing our 2023 adjusted EBIT estimate by $4.77 billion to account for the impact of the UAW strike lasting the rest of the year and increasing in magnitude during the fourth quarter. This change reduces our 2023 EPS estimate by about 35%.

We are not surprised that management withdrew 2023 guidance, as estimating the duration and magnitude of the strike when not all plants are on strike makes giving guidance practically impossible. GM said the strike is costing the company $200 million a week in EBIT. However, immediately after GM’s earnings call, the UAW called a strike at GM’s sole full-size SUV plant in Arlington, Texas. We estimate Arlington contributes slightly over $5 billion in annual EBIT, so the impact of this plant for the rest of 2023, plus $2.4 billion for fourth-quarter impact excluding Arlington, and $200 million for third-quarter strike loss is the basis for our $4.77 billion estimate. We expect more strikes before a deal is reached, and we expect the union to next hit GM’s heavy-duty pickup truck plant in Flint, Michigan, or its light-duty full-size pickup production in Roanoke, Indiana.

GM is also slowing its electric vehicle scaling efforts (notably by delaying $1.5 billion in capital spending at Lake Orion in Michigan) to better integrate learnings in engineering and software into EV production. Management has therefore withdrawn its target of making 400,000 EVs for 2022 through June 2024, but they remain committed to exiting 2025 with 1 million units of North American EV capacity. However, CEO Mary Barra stressed that if the demand is not there for 1 million, GM will not make them. We are not bothered by this slowing because GM still makes ample profit on its combustion portfolio and more charging infrastructure is coming next year.

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Source: Morningstar Direct.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

David Whiston

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David Whiston, CFA, CPA, CFE, is a strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007.

Before Morningstar, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner. In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011.

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