What happened
All week long, the stock market has been in a funk -- and Thursday doesn't look to be different.
Lousy economic news is the major culprit today, with the U.S. Bureau of Economic Analysis having just downgraded its assessment of the economy's performance in Q1 to a contraction of 1.6%, and the Commerce Department reporting that "core" U.S. inflation remains high at 4.7% (and that doesn't even count inflation from higher food and energy prices) -- at the same time as consumer disposable income is falling.
As you might expect, none of this is great news for General Motors (NYSE: GM), which needs consumers to remain financially healthy so that they can afford to buy its cars. Accordingly, GM stock is sinking 3.3% through 11:40 a.m. ET today.
So what
And that's not the only disconcerting news for shareholders of the automotive giant today. As the Detroit Free Press reported last night, employees at four plants in Michigan that build subsystems for GM were prepared to go on strike this morning unless the employees' union -- the United Auto Workers -- reached an agreement with the company.
Now, the good news is that, 15 minutes before the strike was set to commence, GM and the UAW reached a "tentative" agreement on a new contract. The bad news is that we don't yet know the details of this agreement (for example, does it contain wage hikes that will eat into profits?). And also, the agreement is only tentative, and has not yet been ratified by the workers -- so the potential for a production-halting strike remains.
Now what
What would that mean for GM, if talks break down again, or workers fail to ratify the tentative agreement? Potentially, it could delay production of such new electric vehicles as the Hummer SUV, 2024 Chevrolet Silverado EV, and Cruise Origin self-driving EV -- three models on which GM is pinning its future as an electric vehicle maker.
As the race heats up to see who can replace Tesla as the leader in the EV industry, now would be a lousy time for GM to hit a hiccup in its production plans. For the time being, it appears GM has recognized this fact and found a compromise to keep its production humming -- but this situation bears watching.
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