Assume that General Motors (GM) announces on September 30, 2008 that it expects its EPS to be $4.50 for the year ending December 31, 2008. At the time of the announcement, financial analysts are forecasting GM’s annual EPS to be $5.00.

Required:
1. Would GM's earnings guidance announcement cause a change in its stock price on September 30? Explain why or why not.
2. Consider the following two scenarios:

a. The $0.50 difference between GM’s management forecast and analysts’ forecast is completely attributable to a previously reported month-long labor strike at one of GM's parts plants, a strike that disrupted production at most of the firm’s car manufacturing facilities.

b. The $0.50 difference between GM’s management forecast and analysts’ forecast is attributable to GM's (previously undisclosed) decision to discontinue production of its line of sports utility vehicles and small trucks.
Do you expect the magnitude of the stock price change to be more in case

(a) or case (b)? Why?