GM Earnings: UAW Strike Not a Huge Hit to Third Quarter but Fourth-Quarter Damage May Be Billions

GM had a good third quarter, despite about a $200 million adjusted EBIT loss from the United Auto Workers strike and adjusted diluted EPS of $2.28 beat the $1.88 Refinitiv consensus. We are leaving our fair value estimate unchanged, but reducing our 2023 adjusted EBIT by $4.77 billion to estimate the impact of the UAW strike lasting the rest of the year and continuing to increase in magnitude during the fourth quarter. This change reduces our 2023 EPS by about 35%. We are not surprised 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 it $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 light-duty full-size pickup production in Roanoke, Indiana.