Shares of the big three Detroit automakers — General Motors Company (NYSE:GM), Ford Motor Company (NYSE:F) and Stellantis NV (NYSE:STLA, EPA:STLA) — significantly underperformed a big market rally Thursday with a United Auto Workers (UAW) strike looming at the end of the day.
Shares of GM were flat, Ford dropped 0.2% and Chrysler parent Stellantis declined 0.6%. For comparison, the S&P 500 gained 0.8%.
The UAW is planning a targeted strike, which would affect certain plants at each of the big three automakers, assuming no deal is reached by midnight Thursday when the union’s current contracts expire.
The strategy, which UAW president Shawn Fain is calling a “stand-up strike”, is to target specific plants at first, with additional UAW chapters being called upon to “stand up” and join the strike as bargaining continues.
“We are preparing to strike these companies in a way they’ve never seen before,” Fain said on Facebook Live Wednesday evening.
An all-out strike is also still a possibility, Fain said, adding that he understands the desire of some members to go that route. However, a targeted strike allows the union to maintain maximum flexibility, he said.
The UAW president plans to announce at 10 pm ET on another Facebook Live which local chapters will strike. Non-striking chapters will continue working until called upon.
A targeted strike saves the UAW money, which, theoretically, allows a strike to continue longer.
The UAW has an $825 million strike fund that pays $500 per week in strike pay to workers, which is enough for 11 weeks if everyone were to strike.
The UAW has called for a 40% increase in wages across the life of a new contract. Last week, GM offered a new contract that included a 10% increase in hourly wages, Ford offered a 9% general wage increase and Stellantis offered 14.5%.
EV implications
A strike has the potential to put a significant dent in the electric vehicle (EV) production of the Detroit automakers and therefore could be a win for rival EV producer Tesla, according to analysts at Wedbush.
"We believe a strike lasting longer than 4 weeks would be a body blow to the EV ambitions of GM and Ford in 1H24 and delay many aspects of this initial important EV push," the analysts wrote. "The clear winner in this Game of Thrones Battle between the UAW vs. GM/Ford is Tesla which sits in a non-union position and its biggest potential EV 313 competitors now face mounting costs/complexities in the years ahead depending on how this ultimately plays out."
"In this crucial period of EV execution, model roll-outs, distribution, marketing, with EV competition rising across the board the timing could not be worse."
Should a strike drag on, the automakers' EV production roadmap could be pushed back to 2024, the analysts noted. On the other hand, if GM and Ford agree to a 40% raise or close to it, that could be bad for shareholders too, as it would likely mean consumers paying more for EVs.
“The big issue for GM and Ford as well as investors is around if anywhere near a ~40% wage increase gets approved/agreed this will be a major headwind on the cost front and ultimately in some way be passed down to the consumer and thru EV prices," the analysts said. "The costs of EV vehicles out of Detroit is a major advantage going after mass adoption with any $3k, $5k, $7k, etc added to the slew of vehicles coming out would results in demand churn in our opinion."
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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