The United Auto Workers strike against the Detroit-Three auto makers has entered an intensified phase, posing increased uncertainty for investors. Furthermore, it highlights the significant gap between the auto makers and the union on key issues that remain unresolved.
In a strategic move aimed at exerting substantial financial pressure on the auto maker, UAW workers staged a walkout at Ford’s Kentucky Truck Plant on Tuesday evening. Notably, this facility happens to be Ford’s largest plant globally, employing nearly 9,000 workers. It is responsible for manufacturing the F-series super duty, a crucial revenue generator for Ford’s commercial business, Ford Pro. Additionally, the highly popular Lincoln Navigator and Ford Expedition models are also produced at this location. In aggregate, the Kentucky facility contributes around $25 billion in annual sales. As per FactSet data, Ford is projected to achieve $173 billion in sales by 2023.
Consequently, Ford’s stock experienced a 1% decrease in after-hours trading as a direct response to these developments.
At present, approximately 17,000 Ford workers are engaged in the strike, bringing the total number of striking employees across all three auto makers to approximately 33,000. The overall United Auto Workers employment at the Detroit-Three stands at approximately 145,000 workers.
While Ford contends that it has presented the most favorable economic offer among the three auto makers, it remained unwilling to offer any new terms during Wednesday’s negotiations.
The words of UAW President Shawn Fain further underscored the significance of this walkout: “Well, you’ve just lost Kentucky,” as reported by the company.
In conclusion, the latest developments in the United Auto Workers strike have introduced a new phase marked by heightened tension and potential consequences for investors. The large-scale walkouts and Ford’s refusal to provide fresh proposals highlight the substantial divide that persists between the auto makers and the union.
Ford Faces Challenges in UAW Strike
The UAW’s primary concern revolves around the treatment of battery employees. They believe that these workers should receive the same benefits and rights as assembly line workers. Although Ford has made considerable efforts to address this issue, it appears that there are still unresolved disagreements between the two parties.
The strike initially commenced on September 15th but has since witnessed two expansions on September 22nd and September 29th. This third expansion showcases the determination of UAW members to have their demands met.
Impact on Stocks
The strike has undoubtedly influenced the stock market. Ford and General Motors (GM) stocks have experienced a significant decline of approximately 20% over the past three months, whereas the broader S&P 500 index witnessed a comparatively minor decrease of about 1%. On the other hand, Stellantis, a more global automobile company with cheaper shares, has seen its stock rise by approximately 12%. Notably, Stellantis stock trades at less than 4 times its estimated earnings for 2024, while Ford and GM trade at less than 7 and 5 times respectively.
In conclusion, Ford’s attempt to improve the lives of its UAW-represented workers through a comprehensive offer faces challenges due to disagreements over the treatment of battery plant employees. The strike continues to impact the stock market, with Ford and GM witnessing substantial declines while Stellantis enjoys modest growth. The outcome of these negotiations remains uncertain, with both sides striving to reach an agreement.