The United Auto Workers (UAW) negotiations in 2019 have been nothing short of extraordinary. As the process nears its conclusion, it is worth reflecting on past experiences to gain insight into when we can expect a resolution.
On September 15th, the UAW initiated a strike against the Detroit Three auto makers. Initially, approximately 12,000 workers from three plants participated in the strike. Today, around 45,000 workers are standing united on the picket lines, with the UAW targeting the most profitable factories of the auto makers.
It is important to highlight that the decision to strike all three auto makers simultaneously is unconventional. Traditionally, the UAW would engage with one auto maker, reaching a satisfactory agreement, and then use that deal as a blueprint for negotiations with the other two.
During the 2019 negotiation, General Motors (GM) took the lead. Following a 40-day strike, a four-year deal was eventually signed by the UAW. The strike commenced on September 15th, and although a tentative agreement was reached on October 16th, workers remained on strike until the final deal was inked on October 25th.
Subsequently, it took nine days for the UAW membership to ratify the agreement. Based on this timeline, it is anticipated that Ford Motor (F) will complete their ratification process by Friday, November 3rd. Recently, Ford and the UAW announced a tentative agreement on Wednesday.
However, it is worth noting that ratification is not guaranteed. Workers have high expectations due to the impact of high inflation over the past four years. Ultimately, it falls to the UAW leadership to persuade their members that this deal represents the best possible outcome.
Comparatively, Ford reached a tentative agreement just five days after the GM deal was signed in 2019. The ratification process took approximately two weeks. In the case of Stellantis (STLA), their deal was not signed until December 11th, a staggering 47 days after the GM strike concluded.
The End of the Auto Worker Strike: What to Expect
Things aren’t likely to drag on as long this time. Unlike in 2019 when negotiations continued with other auto makers after the GM strike, there has been no additional strike in 2023. Both GM and Stellantis will be eager to resume production while Ford is back making vehicles.
It’s reasonable to expect that tentative agreements for GM and Stellantis will be reached early next week, with the strike completely wrapped up by either November 8 or November 10. If these agreements are not reached, it could indicate the emergence of new sticking points. Wage increases, which are in the range of 25% over the four-year deal, no longer seem to be a major point of contention. However, issues such as the right to strike over plant closures and representing battery workers have the potential to derail the entire process.
Investors will breathe a sigh of relief once the strike is resolved, as they tend to shy away from auto maker stocks during strikes. Since labor issues took center stage in July, Ford and GM shares have dropped by 27% and 29% respectively, while the S&P 500 has fallen about 7%. In contrast, shares of Stellantis, a more global company, have seen a modest increase of about 4%.
However, it’s important to note that not all of the decline in Ford and GM shares can be attributed to the UAW-related strike. Ford reported disappointing third-quarter results on Thursday, which further impacted investor confidence.
Ford Chief Financial Officer John Lawler mentioned on a media call that the new labor deal could potentially add hundreds of dollars per unit. It is now up to Ford’s management to find ways to offset the increased labor costs.
In conclusion, the end of the auto worker strike is eagerly anticipated by investors who have been wary of auto maker stocks during this period of uncertainty. Once the strike is resolved and the labor agreements are in place, it will be possible to assess and evaluate the performance of auto maker stocks more accurately.
Written by Al Root