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UAW workers picket a Ford assembly plant in Wayne, Michigan.
Emily Elconen/Bloomberg
The UAW is threatening to expand its strike on Friday against the Big Three automakers
General Motors
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ford motor
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And parent company Chrysler
Stellantis
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Many observers assume that the matter has been reached. If the union disrupts highly profitable assembly plants or large-scale power generation plants, it means that the labor confrontation is entering a new difficult phase.
The UAW went on a limited strike, at one facility per automaker, on September 15. Union leadership says more workers will walk out on Friday if significant progress is not made in negotiations. “Expansion at this point seems almost certain,” says Wedbush analyst Dan Ives.
Benchmark analyst Mike Ward expects strikes to expand as well, but says investors should keep an eye on idle factories. He says it’s possible another plant could be created for each automaker. If the strike extends to larger plants with more workers and key products, it’s a sign that the union is unhappy and looking to inflict more financial pain on automakers.
Facilities like GM Fort Wayne, Indiana The plant that makes Chevrolet Silverados is the main one to keep an eye on. And also Stellantis Sterling Heights Assembly plant in Michigan that manufactures Dodge Rams trucks. Ford has a very profitable truck the plants In Dearborn, Michigan, and Kansas City, Missouri.
Stopping one of these plants would be a huge blow to automakers. However, if the union really wanted to hurt the automaker, it could strike the power plant that supplies several assembly plants and shut them all down.
The UAW did not respond to a request for comment about plans to expand the strike.
Analysts Ives and Ward believe expansion is inevitable in part because the two sides appear far apart and are talking tough. UAW President Shawn Fain has literally trashed the proposals from automakers. GM President Mark Reuss wrote Editorial In the Detroit Free Press on Wednesday, he said, “The flow of misinformation is not fair to anyone.”
In terms of actual bid and demand between the two sides, the UAW is demanding wage increases in the range of 40% over the life of the contract, along with a shorter work week, without pay reductions, as well as improvements in work. Rules and retirement benefits.
Auto companies currently offer pay increases of approximately 20% plus additional adjustments to increase the cost of living. There have also been some concessions on work rules and pension funding.
The difference between 20% and 40% seems large, but with cost of living adjustments, the difference may reach 2% per year on average. This seems less difficult and some of this could be met through enhanced profit sharing, suggests Ward.
Whether profit-sharing will solve the difficult problem and whether the two sides move closer is not the only thing at stake. The strike is a way for the union to “get everyone on the same page after a very dark time at Solidarity House,” says Nicholas Colas, co-founder of DataTrek and a former auto analyst.
The UAW, whose Detroit headquarters is called Solidarity House, reaches out to its members, not just the auto companies. The credit crunch, GM’s bankruptcy, and foreign competition took their toll on the industry. Wages, excluding profit-sharing, rose between 2009 and 2019 by about 1% a year on average, according to the Federal Reserve, while the US market share of the Big Three rose from about 45% to 40%.
Companies have been “chasing the ball down the hill,” says Ward. The lower quota meant the factories were closed, which angered the union. Ford and General Motors now plan to regain their share in electric vehicles, especially in the truck and commercial fleet markets.
Higher labor costs could impact their ability to win EV share, but headline wage gains don’t necessarily equal cost increases. Auto companies offered early retirement, which helped bring workers to the lower end of the wage scale.
Current negotiations are like a complex game of risk, containing tricks, distractions and tricks. Investors should not feel too desperate, or too hands-off, about this process. “There’s always an end, but in this case maybe not for a while,” Colas says.
Shares of Ford and General Motors have fallen about 19% and 15%, respectively, since the beginning of July, when labor issues began to affect investor sentiment. the
Standard & Poor’s 500
It fell about 2% over the same period. Stellantis stock is up about 10%, but Stellantis is still a cheaper stock. Stellantis shares trade at less than 4 times estimated 2024 earnings. Ford and GM stocks trade at less than 7 times and 5 times. respectively.
Write to Al Root at [email protected]