Lengthy UAW strike at General Motors to cost $1.5 billion: Credit Suisse

General Motors likely lost production of about 100,000 vehicles in the third quarter because of an ongoing workers’ strike. (AFP)
Updated 11 October 2019

Lengthy UAW strike at General Motors to cost $1.5 billion: Credit Suisse

  • General Motors likely lost production of about 100,000 vehicles in the third quarter
  • The carmaker may now have to revise its target of $4.5 billion in cost savings through 2020

An ongoing workers’ strike at General Motors Co. could cost the automaker about $1.5 billion, brokerage Credit Suisse said on Friday, throwing the US automaker’s cost reduction plans off the track and forcing key suppliers to cut their 2019 outlook.
The brokerage has assumed the strike by the United Auto Workers (UAW) union, currently in its 26-day, to last until Oct. 21.
GM, which likely lost production of about 100,000 vehicles in the third quarter, is at the risk of losing another 170,000 vehicles in the current quarter, the brokerage said, with the impact spreading to some of GM’s facilities in Mexico and Canada that receive parts from its US factories.
“While investors may look through the one-time impacts ... the strike reminds us of the challenge of investing in OEMs at this point in the cycle,” analyst Dan Levy wrote in a note.
The brokerage said GM may now have to revise its target of $4.5 billion in cost savings through 2020, announced last year, as production curtailments and labor-related cost reductions may not happen as fast as the company had expected.
“We assume just under $900 million of reduced costs or 20 percent of the original (target),” Levy said.
Credit Suisse said the strike will hurt suppliers, including American Axle, Aptiv, Lear Corp, Delphi Technologies, and Dana Inc, whose exposure to GM varies between 5 percent and 18 percent, with American Axle at 40 percent.
Last week, Canadian auto parts maker Linamar Corp. estimated a profit impact of up to C$1 million per day due to a fall in orders from its customer General Motors.
Credit Suisse lowered its 2019 earnings per share estimate for GM by 83 cents to $6.11, below the Wall Street consensus of $6.56, according to IBES data from Refinitiv, as the No.1 automaker is also at the risk of losing market share to smaller rivals such as Ford Motor.
The brokerage has cut its price target on GM’s stock to $46 from $50, while reaffirming its “outperform” rating.
Of 19 brokerages, 14 rate GM “buy” or “higher” and five “hold,” with no “sell” rating. The median price target for the stock is $48, representing an upside of more than 38 percent to Thursday’s close.


Cirque du Soleil walks a tightrope through pandemic

Updated 06 June 2020

Cirque du Soleil walks a tightrope through pandemic

  • Suitors wage backstage battle to rescue debt-stricken Canadian circus icon
  • Among the potential bidders is former fire eater Guy Laliberte, who fouded the acrobatic troupe in 1984

MONTREAL: Its shows canceled due to the COVID-19 pandemic, an already heavily indebted Cirque du Soleil’s fight for survival has invited an intense backstage battle to try to save the Canadian cultural icon.

High on a list of potential suitors is former fire eater Guy Laliberte, who founded the acrobatic troupe in 1984 but later sold it.

“Its revival will have to be done at the right price. And not at all costs,” said the 60-year-old, determined not to see his creation sold to private interests.

The billionaire clown said after “careful consideration,” he decided “with a great team” to pursue a bid, but offered no details.

Under his leadership, the Cirque had set up big tops in more than 300 cities around the world, delighting audiences with contemporary circus acts set to music but without the usual trappings of lions, elephants and bears.

Then the pandemic hit, forcing the company in March to cancel 44 shows worldwide, from Las Vegas to Tel Aviv, Moscow to Melbourne, and lay off 4,679 acrobats and technicians, or 95 percent of its workforce.

Hurtling toward bankruptcy, the global entertainment giant and pride of Canada commissioned a bank in early May to examine its options, including a possible sale.

Meanwhile, shareholders ponied up $50 million in bridge financing for its “short-term liquidity needs.”

Laliberte, the first clown to rocket to the International Space Station in 2009, ceded control of the Cirque for $1 billion in 2015.

It has since fallen into the hands of American investment firm TPG Capital (55 percent stake) and China’s Fosun (25 percent), which also owns Club Med and Thomas Cook travel. The Caisse de depot et placement du Quebec (CDPQ) retains the last 20 percent.

The institutional investor, which manages public pension plans and insurance programs in Quebec, bought Laliberte’s last remaining 10 percent stake in the business in February, just before the pandemic.

Since 2015, the Cirque has embarked on costly acquisitions and renovations of permanent performance halls, while its creative spirit waned, according to critics in the Quebec press.

Meanwhile, it piled on more than $1 billion in debt.

Fearing that the Cirque would be “sold to foreign interests,” the Quebec government recently offered it a conditional loan of $200 million to help relaunch its shows as restrictions on large gatherings start to be eased worldwide.

But the agreement in principle is conditional on the Cirque headquarters remaining in Montreal and the province being allowed to buy US and Chinese stakes in the company at an unspecified time in the future, “at market value” and with “probably a local partner,” said Quebec Minister of the Economy Pierre Fitzgibbon.

“The state does not want to operate the circus, but the circus is too important to Quebec (to leave it to foreigners),” he said.

In addition to Laliberte, other prospective buyers include Quebecor, the telecoms and media giant of tycoon Pierre Karl Peladeau, whose opening lowball bid was outright rejected.

“It is essentially the value and reputation of the brand” that has piqued interest in the company, says Michel Magnan, corporate governance chair at Concordia University in Montreal.

But “as long as there are restrictions on gatherings of people, the future is not very rosy” for the Cirque, he said.

Several challenges await, according to Magnan.

“There were a lot of people working in all of these shows. Where are they now? What are they doing? How are they doing? In what shape are they, what state of mind?” he said.

“The more time passes, the more this expertise risks evaporating.”

Small consolation: The Cirque resumed its performances on Wednesday in Hangzhou, China, five months after a coronavirus outbreak in the city.