As the UAW contract deadline approaches, CFRA is warning investors to prepare for a “potentially lengthy UAW strike”.
Given the impending expiration of the four-year labor agreement, which covers around 150,000 UAW members, on September 14 at midnight, and considering the substantial differences between the two parties in wage negotiations and various other matters, coupled with the UAW's overwhelming approval of strike authorization (with a 97 percent vote, as widely anticipated), CFRA believes that the likelihood of a strike is extremely high. In fact, they are of the opinion that the strike could potentially endure for several weeks due to the high stakes involved and the apparent absence of significant progress in the ongoing negotiations.
Analysts estimate a strike could cost the auto industry roughly $3.5 billion and negatively impact North American auto production by 150,000 units per week.
According to them, a strike would hurt General Motors (NYSE:GM) the most, followed by Ford (NYSE:F) and Stellantis (NYSE:STLA).
“Clearly, the UAW entered negotiations with a chip on its shoulder,” write the analysts in a note. “Inflation has had a major adverse impact on workers’ real wages in the face of a Covid-19 recovery, which resulted in record profits and executive pay increases for the industry, which far outpaced worker compensation hikes.”
The UAW's worry in the current negotiation cycle also extends to the industry's more aggressive transition towards EV manufacturing. This shift demands fewer workers on the assembly line and necessitates different skill sets, posing another significant concern for the union.
Typically, the UAW selects a particular automaker as the primary focus of its negotiations and resorts to a strike against that company if an agreement cannot be reached. Based on the UAW's recent actions, it seems that STLA is the designated target company for negotiations this year, whereas in 2019, GM held that role.
Unless something totally unexpected happens in the negotiations, it is anticipated that a strike will begin on September 15. The UAW has a strike fund of $825 million, and have significantly increased the compensation for employees participating in the strike, raising it from $275 per week last year to $500 per week.
Shares of GM and F are down 0.72% and 0.91% in morning trading on Wednesday. Shares of STLA are up 0.03%.