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General Motors Slaps Fiat With Lawsuit for Bribing UAW Staff

Zacks Equity Research

General Motors Company GM recently announced the filing of a federal racketeering lawsuit against its crosstown rival Fiat Chrysler FCAU for bribing United Auto Workers (UAW) union officials. The lawsuit reveals how Fiat has been corrupting the bargaining process for several years in order to gain advantages, causing General Motors significant damages.

Per General Motors, "Fiat was the clear sponsor of pervasive malpractice and paying millions of dollars in bribes over time to gain advantages, concessions, and incentives in negotiating, enforcing, and administrating labor agreements".

Fiat has allegedly manipulated the collective bargaining agreements in 2009, 2011 and 2015. The corruption of these agreements resulted in unfair labor costs, and operational advantages for Fiat, costing General Motors billions of dollars.

This lawsuit is aimed at holding Fiat responsible for damaging the firm with its actions and to assure equal rights and opportunities in the future.

General Motors aspires to strengthen the bargaining process with this lawsuit, in order to eradicate fraud and corruption in the company. All damages recovered will be spent in the United States to create jobs as well as help General Motors workers.

Shares of General Motors have declined 5.3% in the past three months compared with the 19% fall recorded by the industry.

General Motors expects full-year 2019 capex to come in at $7.5 billion, lower than the prior projection of $8-$9 billion. Amid the UAW strike, the company has revised its full-year view. It now projects adjusted EPS at $4.50-$4.80 per share, lower than the previous guidance of $6.50-$7 per share. The company expects adjusted automotive free cash flow within $1 billion, suggesting a decline from the prior guidance of $4.5-$6 billion.

Zacks Rank & Stocks to Consider

Currently, General Motors carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Auto-Tires-Trucks sector are BRP Inc. DOOO and SPX Corporation SPXC, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BRP has a projected earnings growth rate of 18.9% for the current year. Its shares have gained around 38.8% over the past year.

SPX has an expected earnings growth rate of 23.2% for 2019. The company’s shares have appreciated 60.5% in the past year.

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General Motors Company (GM) : Free Stock Analysis Report
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