The United Auto Workers expanded its strike to 38 General Motors and Stellantis parts-distribution facilities while keeping a more limited work outage at Ford, as the union begins to play the auto makers against each other publicly.
It could have been worse. Still, things are heating up and there isn’t an end in sight.
The new walkouts are in addition to the three
Ford Motor
(ticker: F), GM (GM), and Stellantis (STLA) plants in Missouri, Ohio, and Michigan already being struck. The UAW launched those limited strikes at one facility per auto maker on Sept. 15.
The expansion of the strike at two auto makers but not at Ford represents a new tactic in already groundbreaking 2023 labor negotiations. The UAW has never struck at all three auto makers at once before. While the union started out with a single plant at each auto maker, it is now dividing the Big Three by saying that Ford is offering a sweeter deal. This could signal an eventual return to the pattern bargaining the union has traditionally used with the Detroit auto makers.
UAW President Shawn Fain said the union was making progress with Ford and its facilities wouldn’t be targeted for strike expansion. The auto maker offered more concessions to the union, including enhanced cost of living adjustments and the right to strike over plant closures.
“Ford is working diligently with the UAW to reach a deal that rewards our workforce and enables Ford to invest in a vibrant and growing future,” said Ford in an emailed statement. “Although we are making progress in some areas, we still have significant gaps to close on the key economic issues. In the end, the issues are interconnected and must work within an overall agreement that supports our mutual success.”
GM said the strike expansion was “unnecessary” in an emailed statement and pointed out that they have made “five economic proposals that are historic.”
Stellantis added that following the strike expansion it questions “whether the union’s leadership has ever had an interest in reaching an agreement in a timely manner,” adding. “They seem more concerned about pursuing their own political agendas than negotiating in the best interests of our employees and the sustainability of our U.S. operations given the market’s fierce competition.”
Targeting GM and Stellantis aftermarket-parts distribution facilities likely means about 18,000 UAW members will be on strike, up from about 13,000 workers. Each parts and distribution facility employs from 75 to more than 1,000 workers.
The updated amount is still less than 15% of total UAW employment at the Big Three. Fewer workers on strike give the UAW the ability to lengthen the time of the strike. Workers on the picket lines get about $500 a week from the UAW’s strike fund.
Limiting the workers on strike also limits the financial pain for auto makers. Losing any part of the manufacturing system is problematic, but parts and distribution aren’t as significant as stoppages at highly profitable truck plants. The strikes have also led to layoffs at both Ford and GM.
Negotiations appear to be progressing based on the union’s targets. That could be why shares of the big three auto makers were higher after the announcement. Ford stock is up the most of the three, by about 2.3% to $12.48. GM shares were higher most of the day but are now down 0.5% at $32.55. Stellantis stock is up 0.1% at $19.36, while the
S&P 500
and
Dow Jones Industrial Average
are both down about 0.2%.
Shares of parts suppliers are mostly higher as well. “The form of the expanded strike versus expectations is driving a modest relief rally,” wrote Baird analyst Luke Junk in a Friday report. Assembly plants are still running.
Aptiv
(APTV) and
BorgWarner
(BWA) shares are up 0.3% and 1.7%, respectively.
Shutting down parts and distribution will hurt consumers and dealers in the short run. Longer term, it will also lead to more layoffs and shutdowns across North America as the parts supply dwindles, says Benchmark’s Ward.
The UAW could also strike at additional vehicle assembly or powertrain facilities in the future. “Holding off striking at vehicle, engine and components facilities ensures [UAW negotiators] still have leverage, while also inflicting economic difficulties for auto makers,” wrote S&P Global Mobility in a Friday report.
Any long strike inflicts pain on both side and there is plenty of tough talk on both sides. UAW President Fain has literally trashed proposals from the auto makers. GM President Mark Ruess wrote an op-ed in the Detroit Free Press Wednesday saying that the “flow of misinformation is not fair to anyone.”
What’s more, The Detroit News published messages between Union executives Thursday that said in part its strategy was to inflict “operational chaos” on the auto makers. The UAW didn’t immediately respond to a request for comment about the messages.
As far as the actual bid and ask between the two sides, the UAW is asking for wage increases in the range of 40% over the life of the contract, along with a shorter workweek, without a pay reduction, as well as enhancements to work rules and retirement benefits.
The auto companies are currently offering roughly 20% pay increases plus additional adjustments for cost of living increases. There have also been some concessions on work rules and retirement funding.
The difference between 20% and 40% seems large, but with cost of living adjustments, the difference might be 2% a year on average. That looks less daunting and some of that can be bridged with enhanced profit-sharing, suggests Ward.
Ford’s offer included enhanced profit-sharing that would have added about 13% to profit-sharing bonuses paid in 2022. That is another $1,000-plus per worker.
Whether profit-sharing will cut the Gordian knot and whether the two sides are getting closer isn’t 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 DataTrek co-founder and former auto analyst Nicholas Colas.
The UAW, whose Detroit headquarters are called Solidarity House, is communicating with its members, not just the auto companies. The credit crisis, GM bankruptcy, and foreign competition have been hard on the industry. Wages, excluding profit-sharing, between 2009 and 2019 rose at about 1% a year on average, according to the Federal Reserve, while U.S. market share of the Big Three went from roughly 45% to 40%.
The companies were “chasing a ball down the hill,” says Ward. Lower share meant plant closures that angered the union. Now Ford and GM are planning to take back share with 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. Car companies have offered early retirement, helping bring workers in at the lower end of the wage scale.
Current negotiations are like a complicated game of Risk with feints, distractions, and subterfuge. Investors shouldn’t get too despondent, or too laissez-faire, about the process. “There is always an end, but in this case maybe not for a while,” says Colas.
Coming into Friday trading, Ford and GM shares were down about 19% and 15%, respectively, since the start of July, when labor issues started to weigh on investor sentiment. The S&P 500 is down about 2% over the same span. Stellantis stock is up about 10%, but Stellantis is still a cheaper stock. Stellantis shares trade for less than 4 times estimated 2024 earnings. Ford and GM shares trade for less than 7 times and 5 times. respectively.
Write to Al Root at [email protected]
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