RBC Capital Markets, LLC
Joseph Spak, CFA (Analyst)
(212) 428-2364
joseph.spak@rbccm.com

A.J. Ribakove, CFA

Garrett Klumpar

(Associate)
(212) 428-6522
garrett.klumpar@rbccm.com

(Associate)
(212) 428-3050
adam.ribakove@rbccm.com

September 16, 2019

Sector: Autos & Auto Parts

UAW Strike Implications

Outperform

General Motors Company

NYSE: GM
Price: USD 38.86

Impact: UAW strike could cost GM $40-$50mm per day
UAW members are striking GM’s U.S. factories as ~46k hourly GM UAW
members walked off the line at midnight, marking the first major strike
since 2007 (which lasted two days). We estimate that each day of the
strike could cost GM ~$40-$50mm in EBIT. There are also working capital
considerations though this is much harder for us to estimate. Contract
negotiations are expected to restart this morning.

All values in USD unless otherwise noted.

Major sticking points for the UAW include limiting the number of
temporary workers GM is allowed to use, giving new members a faster
route to senior-level wager of >$30/hour. The UAW was clearly annoyed
with GM’s decision to unallocate product to certain US facilities, but as we
have also noted in prior research, we believe rank-and-file distrust among
union leaders is high given the leadership scandals. Also remember, in
March the UAW increased strike pay to $250/week from $200/week as
they raised dues to boost the strike fund to $850mm.
GM’s offer to the UAW included over $7bn in investments, more than
5.4k jobs, wage increases in all four years of the agreement (plus other
benefits), retention of healthcare benefits with some new coverage for
certain conditions, a ratification payment of $8k (~$368mm total). The
offer also included solutions for unallocated assembly plants in Michigan
and Ohio, investments in 8 facilities across 4 states, the introduction of allnew electric trucks (likely to Detroit-Hamtramck), and the opportunity to
become the first union-represented battery cell manufacturing site in the
U.S. (likely to Lordstown) as well as additional new vehicle and propulsion
programs. In the last round of negotiations (2015), negotiators secured
similar benefits from GM including 3–4% annual wage growth, ~$8.3bn in
investments, plans to create/retain ~3k jobs, along with an $8k ratification
bonus.
In terms of retail, GM’s U.S. inventory levels are relatively heightened (~77
days vs. industry ~61 days). On the trucks, Silverado at 94 days, Sierra 84
days. So GM may have “pre-built” some vehicles as a buffer against a strike
risk. So consumers shouldn't really feel much of an impact. But clearly
the longer a strike persists, the greater magnitude of a headwind for the
company. We continue to monitor the situation.
From a supplier perspective, many have content on GM vehicles produced
in the US. Below we present a list of GM U.S. final assembly locations,
vehicles produced there, estimates daily units produced, and suppliers we
believe are on the vehicles (work in progress).

Disseminated: Sep 16, 2019 08:49ET; Produced: Sep 16, 2019 08:49ET

Priced as of prior trading day's market close, EST (unless otherwise noted).

For Required Conflicts Disclosures, see Page 3.

 Autos & Auto Parts
General Motors Company

GM US Final Assembly Locations and Vehicles Produced
Plant

Vehicle

Daily Units

Suppliers

Arlington

Tahoe, Yukon, Suburban, Escalade

~1,000

AXL, APTV, BWA, DLPH, LEA, MGA, TEN

Bowling Green
Detroit-Hamtramck

Corvette

~55

CT6

~30

Impala

~55

Malibu

~365

XT4

~100

Flint Truck

Silverado HD, Sierra HD

~650-700

AXL, APTV, BWA, DAN, DLPH, LEA, MGA, TEN

Fort Wayne

Silverado, Sierra

~850-900

AXL, APTV, BWA, DAN, DLPH, LEA, MGA, TEN

Lansing Delta Township
Lansing Grand River

Traverse, Enclave

~600

Camaro

~60

CT5

~90

Sonic

~40

Bolt EV

~70

Spring Hill #2

Acadia, XT5, XT6

~600

Springfield
Wentzville

Savanna, Express

~50

Savanna, Express

~250

Colorado, Canyon

~400

Fairfax

Orion

ALV, BWA, DLPH, LEA, MGA, TEN, VNE

DAN

Source: IHS, RBC Capital Markets estimates

September 16, 2019

Joseph Spak, CFA (212) 428-2364; joseph.spak@rbccm.com

2

 Autos & Auto Parts
General Motors Company

Required disclosures
Conflicts disclosures
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including
total revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated
by investment banking activities of the member companies of RBC Capital Markets and its affiliates.
Please note that current conflicts disclosures may differ from those as of the publication date on, and as set forth in,
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29th Floor, South Tower, Toronto, Ontario M5J 2W7.
RBC Capital Markets, LLC makes a market in the securities of General Motors Company.
RBC Dominion Securities Inc. makes a market in the securities of General Motors Company.
A member company of RBC Capital Markets or one of its affiliates received compensation for products or services other than
investment banking services from General Motors Company during the past 12 months. During this time, a member company
of RBC Capital Markets or one of its affiliates provided non-investment banking securities-related services to General Motors
Company.
RBC Capital Markets is currently providing General Motors Company with non-investment banking securities-related services.
RBC Capital Markets has provided General Motors Company with non-investment banking securities-related services in the past
12 months.

Explanation of RBC Capital Markets Equity rating system
An analyst's 'sector' is the universe of companies for which the analyst provides research coverage. Accordingly, the rating assigned
to a particular stock represents solely the analyst's view of how that stock will perform over the next 12 months relative to the
analyst's sector average.
Ratings
Top Pick (TP): Represents analyst's best idea in the sector; expected to provide significant absolute total return over 12 months
with a favorable risk-reward ratio.
Outperform (O): Expected to materially outperform sector average over 12 months.
Sector Perform (SP): Returns expected to be in line with sector average over 12 months.
Underperform (U): Returns expected to be materially below sector average over 12 months.
Restricted (R): RBC policy precludes certain types of communications, including an investment recommendation, when RBC is
acting as an advisor in certain merger or other strategic transactions and in certain other circumstances.
Not Rated (NR): The rating, price targets and estimates have been removed due to applicable legal, regulatory or policy constraints
which may include when RBC Capital Markets is acting in an advisory capacity involving the company.
Risk Rating
The Speculative risk rating reflects a security's lower level of financial or operating predictability, illiquid share trading volumes,
high balance sheet leverage, or limited operating history that result in a higher expectation of financial and/or stock price volatility.

September 16, 2019

Joseph Spak, CFA (212) 428-2364; joseph.spak@rbccm.com

3

 Autos & Auto Parts
General Motors Company

Distribution of ratings
For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories
- Buy, Hold/Neutral, or Sell - regardless of a firm''s own rating categories. Although RBC Capital Markets'' ratings of Top Pick/
Outperform, Sector Perform, and Underperform most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings
are not the same because our ratings are determined on a relative basis.
Distribution of ratings
RBC Capital Markets, Equity Research
As of 30-Jun-2019
Investment Banking
Serv./Past 12 Mos.
Rating
BUY [Top Pick & Outperform]
HOLD [Sector Perform]
SELL [Underperform]

Count

Percent

Count

Percent

772
588
81

53.57
40.80
5.62

215
114
2

27.85
19.39
2.47

Rating and price target history for: General Motors Company, GM US as of 13-Sep-2019 (in USD)
22-Jul-2016
Rtg:SP
Target: 34.00

08-Dec-2016
Rtg:SP
Target: 36.00

20-Dec-2016
Rtg:SP
Target: 37.00

25-Jul-2017
Rtg:SP
Target: 38.00

05-Oct-2017
Rtg:SP
Target: 44.00

24-Oct-2017
Rtg:SP
Target: 51.00

19-Dec-2017
Rtg:O
Target: 52.00

10-Jul-2018
Rtg:O
Target: 53.00

25-Jul-2018
Rtg:O
Target: 49.00

15-Oct-2018
Rtg:O
Target: 45.00

11-Jan-2019
Rtg:O
Target: 50.00

06-Feb-2019
Rtg:O
Target: 52.00

08-Jul-2019
Rtg:O
Target: 48.00

50
45
40
35
30

Q2

Q3

2017

Q1

Q2

Q3

2018

Q1

Q2

Q3

2019

Q1

Q2

25
Q3

22-Jul-2019
Rtg:O
Target: 52.00

Legend:
TP: Top Pick; O: Outperform; SP: Sector Perform; U: Underperform; R: Restricted; I: Initiation of Research Coverage; D: Discontinuation of Research Coverage;
NR: Not Rated; NA: Not Available; RL: Recommended List - RL: On: Refers to date a security was placed on a recommended list, while RL Off: Refers to date
a security was removed from a recommended list; Rtg: Rating.

Created by: BlueMatrix

References to a Recommended List in the recommendation history chart may include one or more recommended lists or model
portfolios maintained by RBC Wealth Management or one of its affiliates. RBC Wealth Management recommended lists include
the Guided Portfolio: Prime Income (RL 6), the Guided Portfolio: Dividend Growth (RL 8), the Guided Portfolio: ADR (RL 10),
and the Guided Portfolio: All Cap Growth (RL 12). RBC Capital Markets recommended lists include the Strategy Focus List and
the Fundamental Equity Weightings (FEW) portfolios. The abbreviation 'RL On' means the date a security was placed on a
Recommended List. The abbreviation 'RL Off' means the date a security was removed from a Recommended List.

Equity valuation and risks
For valuation methods used to determine, and risks that may impede achievement of, price targets for covered companies, please
see the most recent company-specific research report at https://www.rbcinsightresearch.com or send a request to RBC Capital
Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7.
General Motors Company
Valuation
September 16, 2019

Joseph Spak, CFA (212) 428-2364; joseph.spak@rbccm.com

4

 Autos & Auto Parts
General Motors Company

Our $52 price target is derived using our SOTP analysis, which values "Core" GM and "GM Tech" separately, and also considers
cash, pension, and GM Corporate. The blended multiple comes to ~3.6x 2020E Auto EV/EBITDAP. Note that we value GM Financial
separately at 0.7x book value. Our price target and implied return support our Outperform rating.
Risks to rating and price target
• The auto industry is highly cyclical with sales volumes influenced by employment levels, interest rates, and consumer confidence,
among other things. A weaker-than-expected macro environment could result in increased pricing pressure/more incentives
and lower-than-expected financial results.
• There is a secular shift toward smaller, more fuel-efficient vehicles, which could be a negative for GM, which historically has
been more successful with higher-margin trucks.
• A good portion of our GM investment thesis depends on the company’s leading position in BRIC/developing markets, where
political risks are not insignificant.
• In a rising commodity price environment, GM may not be able to pass along higher input costs.

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September 16, 2019

Joseph Spak, CFA (212) 428-2364; joseph.spak@rbccm.com

5

 Autos & Auto Parts
General Motors Company

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September 16, 2019

Joseph Spak, CFA (212) 428-2364; joseph.spak@rbccm.com

6

 Autos & Auto Parts
General Motors Company

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September 16, 2019

Joseph Spak, CFA (212) 428-2364; joseph.spak@rbccm.com

7