After a very rough June where both GM and Ford had terrible overall sales vs. the same month in 2006, one would expect investment firms to further downgrade their stock forecast. As it turns out, firms like JP Morgan aren't that interested in sales numbers after all, as the investmant stallwart upgraded both domestic automakers to "overweight". The reason for Wall St.'s optimism has a lot more to do with the UAW and the current feeling that the union will finally grant concessions in upcoming contract talks, including the possibility that the union will take on responsibility for retiree benefits. JP Morgan points out the obvious that savings from oppressive union contracts would help the each automaker's bottom line, though the cash influx could take 12-18 months to bear fruit. The General, whose stock was $18/share about 18 months ago, has received an adjusted target of $50 per share, which is still almost 50% better than it was just a few weeks ago. It looks like the folks over at JP Morgan haven't talked to to Jim Cramer lately.
Most don't want an upgrade to "overweight", but in the stock world, it's a good thing. This is good news for GM and Ford investors, but we don't even want to imagine the fallout if the big-time concessions don't end up happening.
[Source: Detroit News]