A strike affecting one or all of the Big Three automakers “seems inevitable,” say Wall Street analysts and auto industry observers, with the market’s best hope for the companies focused on a short strike offset by rising supplies.
“Let me put it this way: At this point, it would be more of a surprise if a strike didn’t happen than if it did,” said Sam Fiorani, vice president of Global Vehicle Forecasting at AutoForecast Solutions.
A strike “seems inevitable” given the gap between company proposals and union demands, said Karl Brauer, an analyst at iSeeCars.com.
General Motors Co. GM,
Ford Motor Co. F,
and Stellantis NV STLA,
have proposed increases in the low to mid-double-digit percentage range. The Union’s demands include a 46% pay increase spread over the term of the new contract, as well as a shorter working week and the end of differentiated wages and benefits.
“As with previous UAW strikes, the duration of any work stoppage will determine how impactful this strike will be on domestic automakers and the larger automotive landscape,” Brauer said.
The autoworkers’ four-year contract expires at midnight Thursday. A strike vote could be called soon, perhaps even before the contract expires. Workers immediately put down their tools after a strike vote, and the assembly lines came to a halt. UAW workers are unlikely to cross the picket line.
Also see: GM and Ford’s bonds already reflect concerns about a possible strike
This year, UAW President Shawn Fain raised the possibility of attacking all three companies.
But the Associated Press reported late Tuesday that UAW leadership is considering a strategy of targeted attacks on a limited number of plants, which could be less costly to the union than a widespread strike.
Traditionally, the UAW chooses one company to strike at, in part to preserve its strike fund and picket line resources. Fain, who has cultivated an incendiary personality, said last week that the union could strike at all three companies if necessary.
The 2019 GM strike, involving about 50,000 auto workers, lasted nearly six weeks. It led to an adjusted loss of about $3.6 billion for the company, and GM North America cut revenue estimates as it delivered nearly 300,000 fewer vehicles.
Also see: How much would a strike cost the Big Three automakers? Wall Street thinks it has an answer.
Analysts have played with loss scenarios depending on the length of the strike, with most calculating losses at just over $1 billion for the affected company in the event of a strike lasting a few weeks.
The strike could come at a time when inventories, while still not back to pre-pandemic levels, have increased. Cox Automotive estimated that new car inventories in the US have topped 2 million, a level not seen since April 2021.
Inventories stood at 2.06 million units in early September, compared to a revised 1.96 million in early August, Cox said. “Most domestic brands [are] flush with supply” ahead of the potential strike, with GM’s Cadillac brand having the lowest inventory, with about 46 days’ supply.
Related: Buying a new car? Don’t expect a bargain, even if there are more vehicles on the dealer’s lots.
While a strike may seem like a foregone conclusion, Bloomberg Intelligence analyst Kevin Tynan said there are “enough forces pushing manufacturers, UAW and governments that any strike could be significantly shorter than the six weeks” that GM and the UAW agreed to in 2019 have endured.
In retrospect, the strike should have been interpreted as the foregone conclusion it should have been, Fiorani said.
Fain, who narrowly won his post in the spring’s runoff election, “needs to make sure he looks tough for the members” because his predecessors were thought to be too cozy with management, Fiorani said, adding that it was striking for all three car manufacturers. would certainly be a major break with tradition.
The strike would also hit U.S. automakers at the heart of their profits: their high-margin trucks and SUVs.
Most pickup trucks, including the Ford F-150 pickup, the best-selling vehicle in the U.S. for decades, are made in American factories.
An exception for Ford is the Maverick compact truck, which is made in Mexico. Most of GM’s SUV lineup is also made in the US, and some GM trucks are made in Canada or Mexico.
The strike will also affect auto parts suppliers, as most companies have their operations spread across North America. It is not easy to transfer a highly specialized product line to another factory in one go.
“To the extent that companies are affected, there won’t be any part of the value chain” that won’t feel the economic impact of the labor action, Bloomberg Intelligence’s Tynan said.
“Markets may view non-unified foreign manufacturers or producers that produce only electric vehicles as potential winners, although the supply chain disruption will ripple through any company trying to produce cars in the US and even North America,” he said.
About half of the vehicles on U.S. roads today are built by nonunion workers, either brought in as imports or made in the U.S. in nonunion factories.
Tesla Inc. TSLA,
has fended off efforts to organize its factories for years, and earlier this year the National Labor Relations Board ordered the electric vehicle maker to reinstate a worker fired in connection with labor organizing, and CEO Elon Musk said he would three year old boy had to remove. social media posts urging unionization.
Ford shares are up 7% so far this year, contrasting with a 0.5% loss for GM shares over the same period. Year to date, the S&P 500 SPX is up about 16%.