GM shares rise on Goldman Sachs upgrade

DETROIT (Reuters) - Shares of General Motors Corp. GM.N rose to a four-month high on Monday after Goldman Sachs raised its ratings on the No.1 U.S. automaker, citing the potential for sizable wage and benefit cuts during talks with the United Auto Workers for a new labor contract.

Goldman raised its ratings on the struggling automakers to “buy” from “neutral.” It also increased the 52-week price target on the stock to $42 from $29.

“GM can make a compelling case to UAW members that material wage and benefit cuts are needed,” Goldman Sachs analyst Robert Barry said in a research note. “And we suspect members and retirees are increasingly amenable to such cuts.”

Barry also said that the "UAW pattern bargaining implies positive read across for Ford (Motor Co.) F.N."

GM shares were up 3.2 percent, or $1.12, at $36.58 in early trading on the New York Stock Exchange after reaching a session high of $36.84. Ford shares were up 1.8 percent, or 16 cents, at $9.29.

Monday’s gains took GM’s stock its highest level since Feb 20. The stock has gained 23 percent in the last two weeks.

Detroit’s three automakers will begin negotiations in mid-July on a new labor contract to replace the current four-year deal that ends September 14.

GM on Friday concluded months of negotiations to reach a tentative deal with the UAW and former parts subsidiary Delphi Corp. DPHIQ.PK that, if ratified by UAW members, would clear the risk of supply disruption for the automaker. The deal is intended to allow the auto parts maker to cut wages and emerge from bankruptcy, which if filed for in October 2005.

The long-running impasse at Delphi that had been seen as a major risk to GM since any work stoppage at the parts maker had the potential to shut down production at the automaker.

GM, which spun off Delphi in 1999, has estimated its exposure to the Delphi restructuring at $7 billion and said it could take a charge of $1 billion this quarter for a settlement.