The United Auto Workers (UAW) union initiated a strike against Ford (NYSE:F), General Motors (NYSE:GM), and Stellantis (NYSE:STLA) on Friday, involving 13,000 of its members. This move has heightened concerns of a prolonged labor dispute due to the union's new 'Stand Up' strike strategy, which involves targeted plant walkouts. The development is seen as a significant shift in the history of automotive industry strikes.
The UAW is demanding a 40% wage increase. In response, Ford and GM proposed a 20% pay hike, while Stellantis suggested a 17.5% increase. These counteroffers were rejected by the union, which is also seeking an end to the two-tier wage system and the restoration of benefit pensions for all workers.
The strike began at GM's Wentzville plant in Missouri, Ford's Michigan Truck plant in Wayne, and Stellantis' Toledo Assembly complex in Ohio. The UAW's new strike strategy allows for an escalation to a national work stoppage if necessary, implying that the strikes could potentially have long-term effects on the automakers' financial performance.
Prior to the strike action, shares in Ford, GM, and Stellantis dipped across the board. The wider automotive infrastructure also felt the impact with auto part suppliers like Aptiv (NYSE:APTV), Lear (NYSE:LEA) Corp, and Magna witnessing declines in their share prices.
This labor dispute comes at a time when the Detroit Three has been experiencing significant financial success. Ford reported a YoY revenue increase of 12% to $45 billion in Q2 with net income at $1.9 billion. GM surpassed revenue expectations with $44.75 billion compared to an anticipated $42.64 billion, marking a 25% YoY increase. Stellantis also recorded a 12% YoY jump in net revenues along with a 37% climb in net profit for H1 2023.
Another point of contention between the union and the automakers is the shift toward electric vehicles (EVs). While the Biden administration's push for EVs has benefited the automakers, the UAW is concerned about potential job losses due to fewer parts required in EV assembly. The union seeks agreements that would allow it to represent hourly workers at joint-venture EV battery plants planned by any of the three automakers.
The ongoing labor dispute comes at a time when demand for both gas and EV vehicles is on the rise. If no accord is reached soon, the work stoppages could extend for months, impacting Ford, GM, and Stellantis significantly. Consequently, investors are closely monitoring the developments.
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