The car industry is changing and that’s a big reason why the United Auto Workers are on strike.
Stellantis
(ticker: STLA) on Wednesday announced the location for a second battery plant in the U.S. it is a joint venture with
Samsung SDI
(006400.Korea). Who will represent those workers and how they will be paid is at the center of the current UAW labor struggle with the Detroit Three auto makers.
The plant will co-locate with another plant being constructed in Kokomo, Indiana. Combined, the two plants will put out about 67 gigawatt-hours of lithium-ion electric-vehicle batteries a year. That’s enough to power up to a million or so EVs a year. (Different EVs have different-sized battery packs depending on size and desired range.)
More battery plants are popping up in the U.S. as traditional auto makers, and EV makers including
Tesla
(TSLA), look to control the production of their batteries and battery packs just like they control engine and transmission manufacturing.
But auto makers are partnering with the people that have battery-making expertise, such as SDI or
LG Energy Solution
(373220.Korea). That introduces a wrinkle for labor. Some of the joint ventures are treated like suppliers by the auto makers. That means, in theory, that if workers at the joint venture voted for a union they would then have to negotiation a new contract with an auto supplier instead of being treated like an assembly line worker at an auto maker.
The union isn’t happy about that. It’s part of the reason they are on strike against
General Motors
(GM),
Ford Motor
(F), and
Stellantis.
UAW President Shawn Fain announced a big win for the union Friday when he said GM had agreed to treat battery plant workers like any other GM employee covered by a UAW labor contract.
That is only one battle in the war over battery plants. Ford recently paused production of a battery plant in Michigan. Part of the reason is uncertainty over the cost structure and whether the UAW will want those employees to work under the rules of the broader Ford-UAW labor deal.
Stellantis didn’t immediately respond to a Barron’s request for comment about its plans for UAW representation at its battery plants.
EVs are coming. Part of the reason is that electric cars are getting cheaper and better. Part of the reason is that’s what the auto makers are investing in. The new battery plant will cost Stellantis some $3.2 billion. That’s a lot of money and it’s why the auto makers want to keep costs known and low so they can build profitable EVs.
The battery union representation issue isn’t an easy one to resolve. That’s why there is a strike.
Coming into Wednesday’s trading, Stellantis stock is up about 12% over the past three months while Ford and GM shares are down about 19% and 18%, respectively. The
S&P 500
is down 1% over the past three months.
The strike has weighed on Ford and GM shares. Stellantis has been spared partly because it’s a more international company than Ford and GM and partly because its stock is cheaper. Stellantis shares trade for less than four times estimated 2024 earnings. GM and Ford shares trade for less than five and seven times, respectively.
Write to Al Root at [email protected]
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