UAW’s Strike Fund Shouldn’t Outlast Automaker Liquidity, but Will Firms Use Their Funds?

The United Auto Workers strike against General Motors GM, Ford Motor F, and Stellantis STLA is a month old, and the union escalated on Oct. 11 by striking at Ford’s Kentucky truck plant. The UAW is now hitting facilities for full-size SUVs and pickup trucks, the most profitable vehicles. Per Ford, the Kentucky truck plant generates $25 billion in annual revenue—contributing roughly $5 billion in operating profit, by our estimate. We expect GM’s only SUV plant (which is in Arlington, Texas) and Stellantis’ Warren, Michigan plant (which makes the Grand Wagoneer) will be on strike any day.

We’ve read predictions that striking the most lucrative vehicles will cause the strike to end soon. But we don’t think that will happen unless the automakers are willing to give in to further wage increases above what’s already been offered (as much as 23%), as well as capitulate on reopening pensions and retiree healthcare to current workers—something we don’t think they can afford. The union is not happy with Ford’s offer, but the company said at an Oct. 12 press conference that it has reached the limit of what it can do without hurting its ability to reinvest. That doesn’t sound like a strike that is about to end.

GM reports third-quarter earnings on Oct. 24, while Ford reports on Oct. 26. We expect both firms to lower or withdraw guidance given at second-quarter earnings, but we will wait to see what happens before making any valuation decisions. For now, the UAW appears to be winning because striking has automakers raising their offers, but we don’t believe the math is on the union’s side if the strike keeps increasing in headcount and duration. We believe the question of which side will give in first will be decided by whether the automakers are willing to take on debt to wait out the union’s strike fund.

With GM and Ford’s liquidity including credit lines of about $45 billion and $51 billion, respectively, we see the companies outlasting the UAW’s strike fund, should the union keep adding to the nearly 40,000 striking or idled workers, who each receive $500 per week in taxable strike pay. The union said in May that its strike fund had about $825 million, and based on that we estimate the balance is now about $775 million. So far, the automakers are still paying striking workers’ health insurance. If that continues and there are no new strikes, we estimate the UAW’s strike fund would fully deplete in about 8.5 months.

This timing will shrink quickly as the number of striking workers grows. For example, we calculate that adding 10,000 more workers would bring the timeline to just under seven months, or only about four months if the union has to pay workers’ health insurance. We estimate the fund would only last 2.5 months if the UAW had all Detroit Three workers strike while the automakers paid health insurance.

As for GM and Ford, based on assumptions for the minimum cash levels needed to run the business and a daily cash burn rate, we estimate that GM could wait out the union for nearly seven months, while Ford could wait for just over 10 months. If our math is correct, the UAW’s fund is already not going to outlast Ford’s liquidity, and it won’t take many new strikers to fall under GM’s liquidity timeline either. We’ve read that the UAW also pays Thanksgiving and Christmas bonuses to strikers, but our calculations do not account for those payouts.