Wall Street is increasingly eager for clues about how the strike against the Detroit Three auto makers might end, after a wild week that included a surprise walkout at a key Ford Motor assembly plant.
That puts the focus on an update scheduled for Friday from United Auto Workers President Shawn Fain about the state of the talks. He is scheduled to speak at about 10 a.m. Eastern time.
This year’s strike against Ford (ticker: F),
General Motors
(GM), and
Stellantis
(STLA) has been unlike any other in that the union decided to strike at all three companies at once, rather than targeting only one as it has in the past. The strategy, which Fain calls a “stand-up strike,” has succeeded in creating confusion, chaos, and financial pain for the auto makers.
The strike started out limited with some 12,000 workers walking out at three plants. But now, about 33,000 workers are on strike, and another 5,000 have been laid off because production has been disrupted. Those 38,000 people amount to a bit more than one-fourth of the 145,000 UAW members employed by the Big Three.
The latest sign of the strike’s impact came Wednesday evening, when Ford expressed surprise and dismay after Fain told the company that the strike was expanding to include its Kentucky Truck Plant. That is the company’s largest factory, generating some $25 billion in sales each year.
“It’s [been] a different approach,” Edward Jones analyst Jeff Windau said of the UAW strike strategy. “Inflicting maximum pain concerns me. These companies need to be competitive in their markets. There has to be a [drive] to come to a contract.”
In the current chess match, Fain has dominated the opening and middle games, but he needs an endgame to do the best for the membership. He has already won wage concessions, inflation protection, better retirement benefits, fewer worker classes, and the right to treat at least some new battery workers like all other UAW employees.
That is significant but all investors hear from Fain are remarks such as “it’s time for a fair contract” that suggest the union will demand more.
“You have to generate money to invest in your business,” added Windau. “There is some middle ground there…if you cut to the bone there is nothing to invest.”
The UAW declined to comment about its strategy.
“We see [the Kentucky] move from the UAW as concerning given that Ford gave the largest concessions to the union among the Detroit-Three,” wrote BofA Securities analyst John Murphy in a Thursday report. “It is possible, however, that since Ford has been the most accommodating, the UAW might believe it can obtain additional concessions by increasing the pressure.”
It’s possible but hard to know.
Fain might want to be careful in stirring up too much ire, or raising expectations too high, among UAW members. Workers at Mack Trucks just rejected a tentative agreement, with 73% of the membership voting no. Mack UAW employees appear to be convinced they can get more.
Murphy rates Ford stock at Buy, with a target of $23 for the price, nearly double the shares’ Thursday closing level of $12. Windau rates Ford and GM shares Hold, meaning he expects the stocks to perform in line with the market. He doesn’t have a target for their prices.
The negotiations are weighing on shares of Ford and GM. Coming into Friday trading, Ford and GM stocks were down about 20% and 24%, respectively, over the past three months, while the
S&P 500
was down about 3%.
Stellantis
shares are up about 7%, but Stellantis is a more global company and its shares are cheaper than the other two stocks. Stellantis stock trades for less than four times estimated 2024 earnings. Ford and GM shares trade for less than seven and five times, respectively.
The big winner from the strike looks to be
Toyota Motor
(TM). None of its U.S.-based workers are on strike. Its shares are up about 14% over the past three months.
Write to Al Root at [email protected]
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