Dan Ives has made a name for himself on Wall Street covering the latest and greatest tech companies and trends, but amid the rise of electric vehicles and self-driving technology, he’s also begun to focus on the auto sector. While sky-high car prices have led profits to surge at many automakers in 2023, Ives thinks a worker strike could cripple the progress of some of the industry’s giants, and he’s not mincing words. “Let’s be clear: this is a potential nightmare situation for GM and Ford,” he wrote in a Wednesday note.

The United Auto Workers (UAW) union is pushing for a new contract that includes a 46% pay raise, a 32-hour week, the restoration of traditional pensions, and more. And if its demands aren’t met, union members plan to strike. In fact, some 97% of the 146,000 UAW union members at Ford, GM, and Stellantis (formerly Fiat Chrysler) have voted to walk out if they can’t agree to a new contract with their employers by September 14.

Ives said a strike is now “very likely” because UAW leadership is under pressure to “deliver a big win” after the Teamsters union reached a lucrative contract agreement with UPS in July that secured wage increases for 340,000 workers, including a highly publicized $170,000 average salary for full-time drivers. And with “EV competition rising across the board,” the analyst argued “the timing could not be worse.”

Ford, GM, and Stellantis are essentially stuck between a rock and hard place. If they can’t reach an agreement with the UAW union and workers strike, there will be production delays and their EV ambitions will be put on hold, according to Ives. But if negotiations take place and the automakers agree to a new contract with the UAW union that includes some or all of their demands, it will lead to “billions of incremental annual costs.”

If anything close to a 40% wage increase is approved or agreed to, Ives writes, it would be a “major headwind on the cost front and ultimately in some way be passed down to the consumer.” That will likely force Ford, GM, and Stellantis to raise EV prices, which could lead to demand issues amid rising competition. 

The UAW union’s moves have left automakers with a tough decision: either face a production-killing strike or risk a major increase in costs for the next decade. “We spent time in Detroit a few weeks ago and sense a ‘very nervous time’ across the auto industry as there is a lot riding on these negotiations,” Ives wrote of the situation.

Rising profits lead to ‘audacious demands’

The UAW union’s demands are certainly aggressive. Even President Shawn Fain, newly elected after a series of scandals at union leadership, has called them “audacious.” But Fain also believes automakers’ rising profits justify a move to give workers a bigger slice of the pie. “Our employers only value one thing, profit; they do not value us. And the only way the working class advances is if we stand together,” he said in a fiery Facebook Live Friday morning. “Record profits mean record contracts.”

To his point, Ford, General Motors and Stellantis made a combined $21 billion in profits in the first six months of 2023.

Stellantis, the Amsterdam headquartered global auto giant which sells under brands like Jeep, Fiat and Peugeot, turned in a record $12.1 billion net profit in the first six months of the year. Stellantis chief executive Carlos Tavares said the results were due to a “very strong focus” on profitability on the company’s earnings call.

At Ford, net income soared to $3.7 billion in the first half of this year compared to a loss of $2.4 billion in the same period a year ago. And GM also managed to increase its net income 56% to $2.6 billion in the second quarter, even after accounting for a $792 million charge related to a 2021 Chevy Bolt recall.

Will Daniel

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