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UAW Strike Likely at Stellantis, and Striking All the Detroit Three at Once Is Possible

We are more concerned since we see some of the union’s demands as unfeasible.

Illustration of a black truck outlined in dark blue and half of a red truck outlined in black in front of a blue background depicting the auto manufacturers industry

On Aug. 25, United Auto Workers announced 97% member approval for a strike against General Motors GM, Ford Motor F, and Stellantis STLA, affecting almost 150,000 hourly workers. This does not guarantee a strike will happen. Such a vote is procedural, done at every negotiation so the UAW can immediately strike if it chooses to once its contract with each firm expires at 11:59 p.m. Eastern time on Sept. 14. We continue to think a strike against Stellantis is the most likely outcome, but UAW president Shawn Fain has made it clear that a simultaneous strike against all three companies is possible. This has never occurred before.

We are more concerned about this year’s talks than we’d normally be because we think some of the UAW’s demands are not economically possible if the automakers want to remain competitive. We believe all three firms can afford something in the range of 40%-plus pay increases over the new contract’s term with a 20% raise at ratification, as reported by Automotive News on Aug. 3. We see other UAW demands as unfeasible, particularly a 32-hour workweek, continuing to pay workers if plants are closed, and reopening pension plans and retiree healthcare. Funding retirees alone would likely cost many tens of billions—GM and Ford’s hourly pension plans have been closed to most new hourly hires since the fall of 2007.

On Aug. 8, Bloomberg reported estimates from sources that the union’s demands would increase costs by over $80 billion at each of the three firms, which in our view is not how the Detroit Three can remain competitive against foreign automakers and Tesla TSLA. Bloomberg reported that the all-in hourly labor cost at each firm (which includes healthcare and other benefits) is about $64, versus about $55 at foreign automakers with U.S. plants and $45-$50 at Tesla. Under the union’s demanded changes, this labor cost would exceed $150 at GM and Ford, which in our view would put them at a cost disadvantage they could not recover from.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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David Whiston

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007.

Before Morningstar, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner. In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011.

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