Berkshire Hathaway, the multinational conglomerate headed by billionaire investor Warren Buffett, has recently exited its stake in General Motors (GM). While the company did not provide a specific reason for this move in its regulatory filing, one analyst suggests that it may indicate challenges on the horizon for GM’s stock price.
The uncertainties surrounding the transition to electric vehicles (EVs) and the higher costs associated with a new agreement with the United Auto Workers (UAW) have raised concerns. GM UAW members are currently voting on a new contract, and dissent from several plants could potentially lead to further negotiations. This level of uncertainty is often not favored by Wall Street.
GM’s stock price closed at $28.20 on Tuesday, showing an increase of $1.30. Nevertheless, Wall Street analyst Dan Ives of WedBush Securities believes that Berkshire Hathaway’s exit from GM is an “ominous sign” of headwinds in the form of higher wages and a potentially challenging transition to EVs.
This event becomes even more significant when considering Berkshire Hathaway’s previous actions. The firm had already sold nearly half of its stake in GM in August. In June, they reported retaining 22 million shares, which amounted to $848 million at the end of the second quarter. However, the recent exit from GM indicates a further reduction in confidence.
GM has faced various challenges throughout the year, including a national rail car shortage that affected production at all automakers and troubles within its self-driving subsidiary, Cruise. Additionally, difficulties in ramping up production of EVs due to battery module availability issues have plagued the company.
It’s important to note that Berkshire Hathaway’s filing revealed a total equity portfolio of $318.6 billion as of September 30. While the firm has sold more stocks than it has bought this year, it still holds stock in numerous other businesses, including Apple, Coca Cola, Amazon, and Kroger.
The future of GM’s stock price remains uncertain, as the company continues to navigate the challenges posed by the transition to EVs and UAW negotiations.