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Analysts at Citi on Thursday dialed down their expectations for Tesla Inc.’s third-quarter deliveries and profit, saying they based their new numbers on China sales, global registration data and an implied production pace for the EV maker.
Tesla
TSLA,
and General Motors Co.
GM,
are scheduled to report third-quarter vehicle sales next week, while Ford Motor Co.
F,
and a few others are slated to report September sales.
Earlier this week, a Deutsche Bank analyst warned that there was “meaningful downside risk” to current 2024 Tesla projections due to limited volume growth, and cut his price target on Tesla stock.
J.D. Power on Thursday estimated another double-digit gain for U.S. new-car sales in September. GM, Ford and Stellantis NV
STLA,
are facing a strike affecting some of its assembly plants and, in the case of GM and Stellantis, auto-parts distribution centers.
The Citi analysts, led by Itay Michaeli, said they trimmed their Tesla quarterly sales estimates to 450,000 vehicles, from a previous expectation of 468,500 vehicles.
See also: Tesla sued for racial discrimination, retaliation by EEOC
They lowered their forecast for adjusted per-share earnings to 75 cents in the quarter, from a prior estimate of an adjusted EPS of 81 cents for the quarter.
The Citi’s expectations compare with FactSet consensus of Tesla deliveries of 462,000 vehicles in the quarter, and consensus around an adjusted EPS of 79 cents for the quarter.
“We will revisit our model post the [third-quarter] delivery report,” the Citi analysts said. They kept the equivalent of a hold rating on the stock.
The update on the sales estimates was based on recent weekly China data “in part reflecting the Model 3 refresh transition,” as the compact sedan in some parts of the world is getting a minor update; the latest available global Tesla registration data; and their observations on production rate and “inventory discounting, with our estimates assuming some [quarter-on-quarter] de-stocking,” the analysts said.
Given Tesla’s production pace and the Model 3 changes, “we see a greater range of delivery outcomes vs. typical quarters,” they said.
Tesla shares have doubled so far this year, compared with gains of around 12% for the S&P 500 index
SPX.
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Tesla Inc. was sued Thursday by the U.S. Equal Employment Opportunity Commission, which alleges the EV maker violated federal law by “tolerating widespread and ongoing racial harassment of its Black employees” at its Fremont, Calif., plant, and by retaliating against those opposing the harassment.
Black employees at the Fremont factory, Tesla’s
TSLA,
first assembly plant and for years its only vehicle-manufacturing facility in the U.S., “have routinely endured racial abuse, pervasive stereotyping and hostility” as well as having racial slurs hurled at them, the lawsuit alleges.
“Slurs were used casually and openly in high-traffic areas and at worker hubs,” the EEOC said. Black employees “regularly” saw graffiti with slurs, swastikas, threats and nooses throughout the facility, including on desks, in bathroom stalls and elevators, according to the suit.
Tesla, which disbanded its media relations team during the pandemic, did not immediately return a request for comment. In August, SpaceX, another one of Tesla’s Chief Executive Elon Musk’s companies, was sued by the Justice Department over its hiring practices.
Employees who spoke up against the racial hostility suffered retaliations that included being fired or transferred, the EEOC said.
The lawsuit was filed in the U.S. District Court for the Northern District of California after attempts at reaching a settlement before the litigation. It seeks compensatory and punitive damages as well as back pay for the affected workers. It also seeks changes to Tesla’s employment practices to prevent discrimination in the future, the EEOC said.
A Black Tesla employee was awarded $137 million in 2021 by a jury that agreed he was subjected to racial harassment at the Fremont factory, but in April 2022 a judge reduced the award to $15 million.
Shares of Tesla have doubled so far this year, compared with an advance of around 12% for the S&P 500 index
SPX.
The first Model S rolled out of the Fremont factory in 2012, and the plant now makes Model S, Model 3, Model X and Model Y vehicles, with capacity to make more than a million vehicles a year as well as energy products and battery cells.
Tesla opened up its second U.S. vehicle-making factory in the Austin, Texas, area in the spring of 2022.
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Ford Motor Co. said late Monday it has halted work on a $3.5 billion battery factory in Michigan, just days after the carmaker made concessions to its striking workers.
“We’re pausing work and limiting spending on construction on the [Marshall, Mich.] project until we’re confident about our ability to competitively operate the plant,” a Ford
F,
spokesperson said. “We haven’t made any final decision about the planned investment there.”
Ford said in February it was investing $3.5 billion to build the facility in Marshall, about 100 miles west of Detroit. The plant, which Ford called BlueOval Battery Park Michigan, is part of Ford’s “commitment to American manufacturing,” the company said then.
The plant was expected to employ about 2,500 workers at the start of production, scheduled for 2026. The $3.5 billion investment is part of Ford’s commitment to invest more than $50 billion in electric vehicles globally through that year.
Employees in some parts of a Michigan Ford plant making Broncos and Rangers have been on strike since Sept. 14, part of a first wave of United Auto Workers’ labor action also hitting one plant each of General Motors Co.
GM,
and Stellantis NV
STLA,
after the union’s contract expired without progress in the negotiations.
Read more: UAW strike: 5 things to know
The UAW on Friday expanded the strike to 38 GM and Stellantis distribution centers across 20 states, but didn’t extend the labor action at Ford because it said it had won some concessions for the automaker, such as a return of cost-of-living adjustments.
Ford was showing the UAW that it was “serious about reaching a deal,” union leadership said at the time.
The strike comes at a time the legacy automakers are stretched thin to make investments in EVs, with batteries an especially critical — and pricey — components.
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The United Auto Workers on Friday expanded its strike to 38 General Motors Co. and Stellantis NV auto-parts distribution centers in 20 states, hobbling the two carmakers’ repair networks.
UAW President Shawn Fain said that the union has made “some real progress” in negotiations with Ford Motor Co.
F,
which agreed to cost-of-living increases, some job protections and other concessions, and it won’t be striking at additional Ford plants.
“Ford is showing us they are serious about reaching a deal,” Fain said.
Nearly 13,000 UAW members have been on strike since last Friday at a Missouri GM plant making GMC Canyons and Colorados, an Ohio Stellantis plant making Jeep Wranglers and Gladiators, and portions of a Michigan Ford plant making Broncos and Rangers.
Joining them are 3,475 workers at 18 GM fulfillment centers and 2,150 workers at 20 Stellantis centers across the U.S. The workers at the auto-parts distribution centers started to walk off at noon Eastern on Friday.
GM said that the strike’s “escalation” was “unnecessary.”
“We have contingency plans for various scenarios and are prepared to do what is best for our business, our customers, and our dealers,” the company said in a statement Friday. “We will continue to bargain in good faith with the union to reach an agreement as quickly as possible.”
Don’t miss: Tesla may be the winner of the Big Three labor woes
Stellantis said later Friday that it made a “very competitive offer” on Thursday that included a pay raise of 21% over the four-year life of the contract for some of its full-time hourly workers and a “significant product allocation that allows for workforce stability through the end of the contract.”
“And yet, we still have not received a response to that offer. We look forward to the UAW leadership’s productive engagement so that we can bargain in good faith to reach an agreement that will protect the competitiveness of our company and our ability to continue providing good jobs,” said Stellantis, which was formed in 2021 with the merger of Fiat Chrysler and France’s Groupe PSA and is headquartered in the Netherlands.
Meanwhile, Wall Street seemed encouraged by the progress with Ford negotiations.
That was “encouraging,” suggesting that the Big Three could “perhaps reach a labor agreement sooner than some have been expecting,” measured in days and weeks and not months, Citi analyst Itay Michaeli said in a note Friday. The new strikes at auto-parts distribution facilities would likely immediately impact “a relatively smaller yet high-margin revenue stream” for GM, Michaeli said.
A potential parts shortage could add pressure on the carmakers to reach an agreement sooner, he said. Compared with the possibility of strike at full-size truck plants, at the heart of the automakers’ profits, however, “today’s update seems somewhat more encouraging.”
Wedbush analyst Dan Ives called the UAW action “an aggressive move that essentially goes at the hearts and lungs of auto operations for GM and Stellantis.”
A settlement with Ford is likely over the coming week, Ives said. “The UAW and GM/Stellantis now have crossed the invisible line and the UAW strike is about to get a lot nastier.”
Since the strike began, the union and the automakers have said they are engaging in constant talks as they try to reach a compromise on a new national contract.
The union is demanding wage increases, an end to tiers, the restoration of pensions and cost-of-living adjustments and other concessions. Although both the union and companies have claimed progress during talks, GM President Mark Reuss said in a recent opinion piece in the Detroit Free Press that the UAW’s demands are “untenable.” That’s in line with Ford President Jim Farley’s characterization of the union’s wage proposal as “unsustainable” for the company before the strike deadline.
Fain mentioned Reuss’s “untenable” comment in his update Friday via webcast. GM and Stellantis “are going to need some serious pushing” to meet union demands, he said.
See: 5 things to know about the UAW strike
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The United Auto Workers on Friday expanded its strike to 38 General Motors Co. and Stellantis NV auto-parts distribution centers in 20 states, hobbling the two carmakers’ repair networks.
UAW President Shawn Fain said that the union has made “some real progress” in negotiations with Ford Motor Co.
F,
which agreed to cost-of-living increases, some job protections and other concessions, and it won’t be striking at additional Ford plants.
“Ford is showing us they are serious about reaching a deal,” Fain said.
Nearly 13,000 UAW members have been on strike since last Friday at a Missouri GM plant making GMC Canyons and Colorados, an Ohio Stellantis plant making Jeep Wranglers and Gladiators, and portions of a Michigan Ford plant making Broncos and Rangers.
Joining them are 3,475 workers at 18 GM fulfillment centers and 2,150 workers at 20 Stellantis centers across the U.S. The workers at the auto-parts distribution centers started to walk off at noon Eastern on Friday.
GM said that the strike’s “escalation” was “unnecessary.”
“We have contingency plans for various scenarios and are prepared to do what is best for our business, our customers, and our dealers,” the company said in a statement Friday. “We will continue to bargain in good faith with the union to reach an agreement as quickly as possible.”
Don’t miss: Tesla may be the winner of the Big Three labor woes
Stellantis said later Friday that it made a “very competitive offer” on Thursday that included a pay raise of 21% over the four-year life of the contract for some of its full-time hourly workers and a “significant product allocation that allows for workforce stability through the end of the contract.”
“And yet, we still have not received a response to that offer. We look forward to the UAW leadership’s productive engagement so that we can bargain in good faith to reach an agreement that will protect the competitiveness of our company and our ability to continue providing good jobs,” said Stellantis, which was formed in 2021 with the merger of Fiat Chrysler and France’s Groupe PSA and is headquartered in the Netherlands.
Meanwhile, Wall Street seemed encouraged by the progress with Ford negotiations.
That was “encouraging,” suggesting that the Big Three could “perhaps reach a labor agreement sooner than some have been expecting,” measured in days and weeks and not months, Citi analyst Itay Michaeli said in a note Friday. The new strikes at auto-parts distribution facilities would likely immediately impact “a relatively smaller yet high-margin revenue stream” for GM, Michaeli said.
A potential parts shortage could add pressure on the carmakers to reach an agreement sooner, he said. Compared with the possibility of strike at full-size truck plants, at the heart of the automakers’ profits, however, “today’s update seems somewhat more encouraging.”
Wedbush analyst Dan Ives called the UAW action “an aggressive move that essentially goes at the hearts and lungs of auto operations for GM and Stellantis.”
A settlement with Ford is likely over the coming week, Ives said. “The UAW and GM/Stellantis now have crossed the invisible line and the UAW strike is about to get a lot nastier.”
Since the strike began, the union and the automakers have said they are engaging in constant talks as they try to reach a compromise on a new national contract.
The union is demanding wage increases, an end to tiers, the restoration of pensions and cost-of-living adjustments and other concessions. Although both the union and companies have claimed progress during talks, GM President Mark Reuss said in a recent opinion piece in the Detroit Free Press that the UAW’s demands are “untenable.” That’s in line with Ford President Jim Farley’s characterization of the union’s wage proposal as “unsustainable” for the company before the strike deadline.
Fain mentioned Reuss’s “untenable” comment in his update Friday via webcast. GM and Stellantis “are going to need some serious pushing” to meet union demands, he said.
See: 5 things to know about the UAW strike
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VinFast Auto Ltd. late Thursday reported a second-quarter loss of half a billion dollars, saying it delivered more than 9,000 electric vehicles globally for sales of about $315 million in the period.
Vietnamese EV maker VinFast VFS went public in August through a SPAC deal, and the stock more than tripled by the end of its first session, sending the company’s market valuation soaring to more than $200 billion.
VinFast’s…
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Photograph by Nick Schnelle
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Striking United Auto Workers want better wages, improved job security, retiree pay increases, and a 32-hour work week that could turbocharge broader acceptance of shorter work weeks.
Right now, nearly 13,000 UAW workers have walked off the job at Ford Motor Co.
F,
General Motors Co.
GM,
and Jeep and Chrysler parent Stellantis
STLA,
still considered the influential Big Three for car makers.
If the union gets a win from on its 32-hour work week demand, that could be a big deal for momentum behind the broader four-day work week movement, experts say.
Four days of work is “still in the early-adoption phase,” said Alex Soojung-Kim Pang, director at Four Day Week Global, where he advises companies considering how to implement a curtailed traditional work week.
A UAW win on the 32-hour demand “would help move the four-day week from being something you do if you have a bold leader and you want to stand out in your industry, to a mainstream aspiration for every worker and business owner,” said Soojung-Kim Pang.
“A lot more people can look at the four-day week and say if they are doing this in an auto factory, I absolutely can do it here in my small plant, or in my business,” he added.
Even if the 32-hour work week doesn’t make it to the final deal, it’s a “game changer” that the demand is there at all, he said. The demand could plant the idea in labor talks far beyond the UAW-company standoff.
A UAW win on the 32-hour week would cause a “massive reverberation,” said Cathy Creighton, of Cornell University’s School of Industrial and Labor Relations.
The demand’s presence is a sign of the COVID-19 pandemic’s lasting effects, said Creighton. While five days of in-person office attendance seems like a thing of the past, “we’ve had fundamental changes in how workers and employers view work life and work-life balance.”
Many factory workers may not be able to pull off remote work but they can press for a shortened week on the physically demanding work, she noted. Historically, the UAW was one of the first unions to deliver health benefits, vacation and pensions for its members, she noted.
“I think the labor movement has been playing it safe for a long time, and now they are not,” Creighton said. The UAW’s 32-hour work week demand is a prime example, she said. “The five-day work week is so ingrained in our psyche that to think of something different is like an earthquake.”
Some research indicates people are ready for a shake-up. Nearly six in 10 people who work five days say they would prefer four 10-hour days, according to an August poll in an ongoing look at worker attitudes run by academic researchers.
“We all know that living in a plant seven days a week, 12 hours a day, isn’t a living at all. We need real work-life balance. Auto workers deserve a life,” UAW president Shawn Fain told members in a video update days before the targeted strike.
Roughly 12,700 UAW members so far have walked off the job at a Ford Motor plant in Michigan, a GM plant in Missouri and an Ohio plant for Stellantis NV, the maker of brands like Dodge, Chrysler, Jeep and Ram Trucks.
Of course, there’s no guarantee how far the demand gets. The companies have counter proposals for the array of union asks, as a chart shows from researchers at Evercore ISI. They don’t yet have counters on the 32-hour work week.
Switching to a 32-hour week with a 40-hour pay rate would be a sharp labor cost on top of the wage increases the UAW is already seeking, a Stellantis spokeswoman said. It would require hiring at least 25% more workers to stick with current manufacturing schedules, she said.
“We are extremely disappointed by the UAW leadership’s refusal to engage in a responsible manner to reach a fair agreement in the best interest of our employees, their families and our customers,” the company said in a statement.
In a statement, GM said it was “disappointed by the UAW leadership’s actions, despite the unprecedented economic package GM put on the table, including historic wage increases and manufacturing commitments.”
Ford did not respond to a request for comment.
“It’s a big game of chess that Shawn Fain is playing. We’ll see how it turns out,” Creighton said.
“Even if they don’t get the four-day week this time, there are going to be other moves in this game in the future,” from the UAW and beyond, Soojung-Kim Pang said.
“Even if you have to give on the four-day week now, that doesn’t mean you give on the four-day week as an ideal or a goal.”
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Ford Motor Co.’s and General Motors Co.’s stocks were higher Friday as workers kicked off a strike, but their bonds have been under selling pressure for some time.
Nearly 13,000 U.S. auto workers went on strike early Friday after the three automakers and the UAW failed to reach an agreement before their national contract expired just before midnight.
The union has opted for targeted strikes, so workers at a Ford
F,
plant in Michigan and a GM
GM,
plant in Missouri were first to down tools, along with workers at a Stellantis N.V.
STLA,
plant in Ohio.
UAW President Shawn Fain has said others could join later and asked all 150,000 members to be ready if and when they’re called to strike.
The strike at all three U.S. carmakers is a break with tradition, as the union for many years has elected to center strike efforts at one company to protect its strike fund and picket-line firepower.
For more, read: UAW strike: 12,700 Ford, GM and Stellantis auto workers walk off the job
Ford’s stock was last up 0.5%, while GM was up 1.4%.
But as the following charts from data solutions company BondCliQ Media Services shows, the bonds have seen far more selling than buying over the last 10 days. Bondholders are often viewed as “smarter” than shareholders, because they tend to be laser-focused on a company’s financials and cash flows, to ensure they will be repaid their principal when bonds mature.
The next chart shows that Ford has seen more selling than GM.
Stellantis, meanwhile, was seeing strong buying of its U.S. dollar-denominated bonds. The company, the former Fiat Chrysler, has far less debt than Ford and GM.
Stellantis has about $26.5 billion of total debt, according to FactSet data, about $19.7 billion of which is in bonds.
Ford has $143 billion of debt and $124 billion of bonds. GM has $118 billion of debt, with about $107 billion in bonds, according to FactSet.
Fitch Ratings said earlier Friday the strike will have a limited financial impact on the auto makers, at least for now with just three plants striking.
“It seems likely the UAW will try to ratchet up pressure on the automakers over time by shifting the strike to more impactful plants and adding more plants to the strike,” Stephen Brown, a senior director at Fitch, said in emailed comments. “The impact on the automakers of striking individual plants could be similar to the semiconductor-induced disruptions that we saw over the past few years.”
See also: Big Three need to step up for the automotive workers who keep them profitable
Fitch had already incorporated the potential impact of strikes in its recent decision to upgrade its ratings of Ford and GM, he said. The agency moved Ford to BBB- from BB+, moving it back into investment trade from speculative, or “junk,” status.
“Ford, GM and Stellantis all have robust liquidity positions that will help them to withstand a potentially drawn-out period of production disruption. Based on June 30 figures, we estimate Ford has over $50 billion of cash and credit facility capacity, while GM has nearly $40 billion,” said Brown.
Stellantis stock was up 2.2% Friday and has gained 36% in the year to date, outperforming GM’s 1.2% gain and Ford’s 9.0% gain. The S&P 500
SPX
has gained 17% in the same time frame.
For live coverage of the UAW strikes, click here.
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President Joe Biden on Friday offered his support to the United Auto Workers, as he addressed their strike aimed at the Big Three auto makers.
Auto companies have seen record profits because of the “extraordinary skill and sacrifices” of UAW workers, Biden said in a brief speech at the White House.
“Those record profits have not been shared fairly, in my view, with those workers,” the president added.
“The companies have made some significant offers, but I believe they should go further to ensure record corporate profits mean record contracts for the UAW,” he also said.
Biden gave his remarks after about 12,700 workers went on strike early Friday as their union and the Big Three automakers failed to reach an agreement before a contract expired.
It’s a targeted strike at a Ford Motor
F,
plant in Michigan, a General Motors
GM,
plant in Missouri and a Stellantis NV
STLA,
plant in Ohio.
The UAW so far has not endorsed Biden’s re-election bid, even as the AFL-CIO and other big unions have lined up behind the Democratic incumbent.
The presidential race in 2024 could be a rematch of 2020’s contest between Biden and former President Donald Trump, who has won over some union households that historically have backed Democrats like Biden rather than Republicans.
See: Here are the Republicans running for president
Biden got more support than Trump from union households in the battleground states of Michigan and Wisconsin in 2020, but Trump got more support from such households in Ohio and Pennsylvania, according to Edison Research exit polls.
Trump has seized on concerns that the car industry’s shift toward electric vehicles
CARZ,
which the Biden administration has promoted, could hurt American workers. “The all Electric Car is a disaster for both the United Auto Workers and the American Consumer,” the former president said Friday in a post on his Truth Social platform.
On Friday, Biden said he hopes the UAW and car companies “can return to the negotiation table to forge a win-win agreement,” and he said he’s sending two administration officials to Detroit — Julie Su, the acting secretary of labor, and Gene Sperling, a senior adviser.
GM posted a 2022 net profit of $11.04 billion, up from $10.38 billion in 2021, while Ford recorded a 2022 net profit of $7.62 billion, up from $6.43 billion in the prior year. For Stellantis, the parent company for brands such as Chrysler, Dodge and Jeep, last year’s net profit was $17.83 billion, up from $15.12 billion.
UAW President Shawn Fain said in a statement after Biden’s speech that union members “agree with Joe Biden when he says ‘record profits mean record contracts.’”
Fain also said: “Working people are not afraid. You know who’s afraid? The corporate media is afraid. The White House is afraid. The companies are afraid.”
Now read: Tesla may be the winner of the Big Three labor woes
And see: Will the UAW strike push up car prices?
Plus: UAW strike to have limited impact on Big Three, Fitch says
Claudia Assis contributed.
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Jeff Kowalsky/Bloomberg
The labor contract between the United Auto Workers and the Detroit-Three automakers expired at midnight on Thursday. A deal isn’t done and the union will …
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Nearly 13,000 U.S. auto workers went on strike early Friday after the Big Three and the United Auto Workers failed to reach an agreement before their national contract expired just before midnight.
UAW President Shawn Fain called the targeted strike at a Ford Motor
F,
plant in Michigan, a General Motors
GM,
plant in Missouri and a Stellantis NV
STLA,
plant in Ohio. A strike at all three U.S. car makers is a break with tradition, as the union for many years has elected to center strike efforts at one company to protect its strike fund and picket-line firepower. Fain said the union could add more plants to strike as part of its strategy to keep the automakers guessing, and urged all 150,000 UAW members to be ready if and when they’re called to strike.
“This is our generation’s defining moment,” Fain said Thursday night as he addressed UAW workers by webcast two hours before the deadline. “The money is there. The cause is righteous.”
Fain said the union is committed to a contract that reflects the “incredible sacrifices and contributions” that its members have made for years. The union has said wages for auto workers who make the top rate have risen about 6% over the past four years, while the three automakers’ North American profits have increased about 65% during that time.
The union is asking for double-digit wage increases, an end to tiered wages and benefits, the restoration of pensions and cost-of-living adjustments, retiree pay increases and more.
A Stellantis spokesperson said the company is in contingency mode and sent the following statement: “We are extremely disappointed by the UAW leadership’s refusal to engage in a responsible manner to reach a fair agreement in the best interest of our employees, their families and our customers.”
A GM spokesperson said the company will continue to bargain with the union and that “we are disappointed by the UAW leadership’s actions, despite the unprecedented economic package GM put on the table, including historic wage increases and manufacturing commitments.”
Ford did not immediately comment after the strike began, but said in a statement earlier Thursday night that it was unhappy with the union’s counterproposal: “If implemented, the proposal would more than double Ford’s current UAW-related labor costs.”
GM’s Wentzville, Mo., plant, which the union said has about 3,600 UAW members, builds some of the car maker’s mid-size trucks and full-size vans, including the Chevy Colorado and the GMC Canyon. Ford’s plant in Wayne, Mich., makes Ford Broncos, and about 3,300 members who work in final assembly and paint would be striking. The Stellantis Toledo, Ohio, plant, which has about 5,800 UAW members, makes Jeep Gladiators and Wranglers.
UAW members join workers around the nation and across industries — such as Hollywood writers and actors, hotel staff and healthcare workers — who are on strike or are preparing to walk off their jobs. Fain reiterated to UAW members Thursday night that amid rising economic inequality, he looks at the auto workers’ strike as part of a larger battle between the haves and the have-nots.
Michelle Kaminski, associate professor in the School of HR and Labor Relations at Michigan State University, said in an interview with MarketWatch that “when the union president says this is a generational strike, I really agree with him.”
She added: “When I think about economic conditions, they are more favorable to the union now than [at any point] in the 30 years I’ve been in this field.” She said auto workers have “given up a lot” over the past couple of decades as the companies have needed both government help and worker concessions to survive.
Kaminski also cited the auto makers’ profit and financial position; the pandemic’s effect on the labor force and how workers’ commitments to their jobs have changed; and increasing inflation as factors in why she sees the timing as key. “The union’s window of opportunity is right now,” she said.
But CFRA analyst Garrett Nelson said in an interview with MarketWatch that the union “needs to be careful not to overplay their hand, as the balance sheets of the Detroit three are flush with cash and they can probably wait things out longer than the workers can.”
Automakers could weather a strike, although anything longer than about two weeks is viewed as more impactful and detrimental to the companies. GM has about $39 billion in cash and equivalents, while Ford has around $51 billion, according to a recent Moody’s Investors Service report. Stellantis’s cash and equivalent pile towers over the others, at $69 billion.
The union’s strike fund starts at $825 million, and striking workers will receive $500 a week. Fain said earlier this week that a targeted strike would help the union have flexibility and apply pressure to the companies as negotiations continue; analysts say it means the union wouldn’t deplete its strike fund so quickly.
See: Why United Auto Workers are fighting to end a two-tier system for wages and benefits
The effects of the strike could be far-reaching, both for the companies and workers who may not necessarily be on the picket lines.
Nelson said the union’s strategy of targeting specific plants could turn into a supply-chain “logistical nightmare” for the auto makers. They will have to adjust deliveries of specific parts to their assembly plants, and the average vehicle is made of more than 30,000 parts.
“The automotive supply chain is among the most complex of any industry,” Nelson said. “Not knowing which plants the UAW will target in advance could create a massive level of uncertainty and have a crippling impact on production. If the strike goes on for too long, we think auto suppliers could have to cut production and furlough workers at their plants, creating a ripple effect across the industry.”
Major suppliers’ balance sheets are not as strong, and GM, Ford and Stellantis together generally account for between 25% and 45% of their net sales, so the degradation of the supply chain is a major risk in the event of a prolonged strike.
The U.S. Chamber of Commerce this week warned about the potential widespread impact of a UAW strike. In a letter to President Joe Biden urging him to help the parties reach an agreement, the chamber said the “Detroit Three are critical to our economy.” More than 690,000 supplier jobs are tied to the auto makers, along with about 660,000 dealership jobs, the chamber said.
“A strike will quickly impact large segments of the economy, leading to layoffs and potentially even bankruptcies of U.S. businesses,” the chamber said.
See: Tesla may be the winner of Big Three-UAW labor talks
Also: Would a United Auto Workers strike push up used-car prices?
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