Ongoing Negotiations Bring Uncertainty
Amidst a week of intense developments, the labor standoff between General Motors (GM), Ford, Stellantis, and the United Auto Workers (UAW) continues to escalate in Detroit. With another strike deadline approaching on Friday, tension is running high.
The UAW has warned that if substantial progress isn’t made in talks with the Detroit Three, more workers will join the strike. At 10 a.m. Eastern on Friday, UAW President Shawn Fain will provide an update to union members, automakers, and investors.
While proposals have been submitted by both General Motors and Stellantis, ending the labor walkout that began on September 15 seemed to take a backseat this week. The presence of influential figures made headlines, with President Joe Biden showing his support for the union on the picket lines, while former President Donald Trump voiced concerns over Biden’s electric vehicle policies and their potential impact on the auto industry.
In a recorded message posted on X, Fain recently addressed reports of violence against picketers and condemned the role played by GM and Stellantis in enabling such incidents. In response, Stellantis expressed dismay at the characterization of events on the picket lines, emphasizing that companies are not adversaries and affirming their respect for employees’ right to peacefully picket. GM emphasized its commitment to safety and the well-being of its team members and the community.
Despite the heightened drama surrounding recent events, an imminent resolution to the negotiations seems unlikely. The two sides remain far apart in their positions.
“The outcome of these negotiations is uncertain,” remarked Deutsche Bank analyst Emmanuel Rosner. “The UAW is determined to secure their demands and is bracing for a protracted strike.”
This ongoing labor dispute presents significant challenges for all parties involved, creating an increasingly volatile situation in Detroit.
The UAW Strike: Key Details and Implications
The United Auto Workers (UAW) has strategically managed the number of workers participating in the strike, with approximately 15% of UAW workers picketing at the Detroit Three automakers. This approach has eased the burden on the UAW strike fund, allowing for a sustained and impactful strike.
The central demand of the union is a wage increase of around 30% over the lifespan of the contract. However, the automakers have put forward an offer closer to 20%. Additionally, the UAW aims to eliminate wage tiers, which were initially introduced during the 2008-2009 financial crisis as a cost-cutting measure by the automakers. These tiers establish lower wages for newly hired workers in specific job roles.
The UAW’s decision to expand the strike against certain companies serves as a significant indicator of progress or lack thereof in negotiations. Notably, Ford was exempted when the UAW expanded the strike to General Motors (GM) and Stellantis’ parts and distribution facilities on September 22.
According to analyst Mike Ward from Benchmark, the UAW’s recent announcement primarily revolves around Ford. If the union refrains from taking any further action against Ford, it suggests that a potential settlement with the company is on the horizon. However, recent developments have cast doubt on Ford’s exemption, as the company halted construction on a battery plant in Michigan for undisclosed reasons. Speculation suggests that cost considerations may have factored into this decision.
Another crucial aspect is where the UAW chooses to expand the strike. Targeting plants that manufacture pickup trucks would have a more profound impact on the automakers compared to locations currently affected by the strike. Pickup trucks are known to be high-profit vehicles for the Big Three automakers.
Since the labor issues came into prominence in July, Ford and GM shares have experienced declines of approximately 16% and 14% respectively. In contrast, the broader S&P 500 index has only dipped around 3% during the same period.
Conversely, Stellantis stock has seen a 10% increase. As a more globally diversified company with its headquarters in Europe, Stellantis presents a unique position in the market. Moreover, Stellantis’ stock valuation remains relatively inexpensive, trading at less than 4 times estimated 2024 earnings. In comparison, GM and Ford shares are valued at less than 5 times and 7 times, respectively.
While the UAW strike unfolds, these developments and market trends will continue to shape the negotiation landscape for both the union and the automakers involved.