Shares of General Motors Corp. have swung from the worst performer in the Dow Jones industrial average last year to one of the best as investors bet the automaker will reduce losses and avoid a crippling strike by its chief supplier.
The stock rose Friday for the sixth time in the last seven sessions–up 28 cents, to $26.09–after it was upgraded to “buy” at KeyBanc Capital Markets and a Goldman Sachs analyst warned short sellers that there is less risk of a strike at Delphi Corp., the largest maker of its auto parts.
GM’s stock, which plunged 52 percent in 2005, is competing with that of Peoria-based Caterpillar Inc. to post the best return among the 30 Dow stocks. GM has been the top performer in the index for the last six weeks.
“GM’s earning will improve materially in 2006 and 2007, driven primarily by the introductions of the company’s new full-size SUVs and pickup trucks,” KeyBanc analyst Brett Hoselton wrote in a report Friday. GM’s discussion with Delphi and the United Auto Workers will probably “be successfully completed with no material labor disruptions,” he said.
The automaker reported its first profit in six quarters in the first quarter. GM lost $10.6 billion in 2005, capping its longest string of quarterly losses in 13 years with a $6.66 billion fourth-quarter loss.
Competition from rivals such as Toyota Motor Corp. pushed GM’s U.S. market share to an 80-year low last year. The company plans to cut 30,000 jobs and close nine manufacturing plants to restore profit at its North American operations.
Chief Executive Rick Wagoner said this week that the biggest issue hanging over the automaker is helping Delphi reach a labor agreement without a strike that forces GM to shut plants.
Chief Financial Officer Fritz Henderson told analysts at a meeting in New York this week that an agreement to settle labor issues at Delphi might be possible in as soon as 30 to 60 days.
Shares of GM gained 13 percent this week after GM said an accounting revision changed its first-quarter results to a $445 million profit from a $323 million loss.
GM’s stock has risen 34.1 percent in 2006, compared with 34.7 percent at Caterpillar, the world’s largest maker of earthmoving equipment.
