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UAW Strike Escalates: Who Stands to Gain and Lose?
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The U.S. auto industry is experiencing turbulence as the United Auto Workers (UAW) strike is intensifying. The strike, which began on Sep 15, at three plants has now expanded its reach to 38 parts and distribution centers across 20 states. With billions of dollars at stake, the ripple effects are vast, and both winners and losers are emerging from the ongoing tumult.
Background: The Strike's Genesis
The UAW initiated an unprecedented simultaneous strike against the Detroit 3 automakers — General Motors (GM - Free Report) , Ford (F - Free Report) and Stellantis (STLA - Free Report) — after the contract expired on Sep 14 at midnight. The initial plants affected by the strike included GM's Wentzville Assembly plant in Missouri, Ford's Michigan Assembly plant in Wayne and Stellantis' Toledo Assembly Complex in Ohio.Approximately 13,000 hourly workers, representing about 9% of UAW's Detroit 3 membership, went on strike.
Central to this dispute is the wide gap between union demands and automaker offers. The UAW’s demands include a 40% increase in hourly wages, a reduced workweek and a return to traditional pension systems. Additionally, they seek the removal of compensation tiers and the reintroduction of cost-of-living adjustments, along with other demands. While automakers made record offers, they fell short of UAW’s exacting standards.
Strike Escalates for GM & STLA, F in a Different Lane
A week has passed without a new labor contract in place, prompting UAW to extend strikes to 38 parts and distribution centers across 20 states, primarily focusing on General Motors and Stellantis. The ongoing strikes at GM and STLA will further involve approximately 5,600 autoworkers, of which around 3,500 are GM employees.
GM's facilities impacted by the strike encompass 18 plants spread across 13 states, namely Michigan, Ohio, Colorado, Wisconsin, Illinois, Nevada, California, Texas, West Virginia, Mississippi, North Carolina, Tennessee and Pennsylvania. On the other hand, Stellantis faces disruptions at 20 of its facilities located in 14 states — Michigan, Ohio, Wisconsin, Minnesota, Colorado, Illinois, California, Oregon, Georgia, Virginia, Florida, Texas, New York and Massachusetts.
Targeting the parts and distribution centers is an astute and calculated move. These strikes might not hinder vehicle manufacturing immediately but they can quickly disrupt vehicle repairs. With supply chain issues already causing headaches, prolonged strikes could result in increased wait times for repairs, deeply affecting the consumer experience.
Quoting UAW president Shawn Fain, “This will impact GM and STLA repairs. The way to fix the frustrating customer experience is for the companies to end price gauging [sic]. Invest these record profits into stable jobs and stable wages and benefits.”
As the strike gains momentum, GM considers the intensified actions led by UAW's leadership unwarranted. Stellantis expressed skepticism, questioning if the union's leadership genuinely prioritized a prompt agreement.
Interestingly, Ford seems to be inching closer to a resolution. Fain's recent statements reflect optimism toward reaching an agreement with Ford, acknowledging the company's commitment to bridging the gaps. Ford’s willingness to address issues like wage tiers, reinstatement of cost-of-living adjustments and profit-sharing has placed it in a favorable light compared to its counterparts.
Analyzing the Winners and Losers of the Strike
While legacy automakers grapple with the strike's implications, others might find opportunities amid the chaos.
Tesla (TSLA - Free Report) might emerge as a big beneficiary. Elon Musk’s electric vehicle (EV) juggernaut is far ahead of its competitors in terms of pricing power and margins because it is not unionized. As U.S. automakers are saddled with increased operational costs due to wage hikes, Tesla’s existing cost advantage in the EV market could grow.
Non-unionized manufacturers, including Toyota and Honda, could seize the opportunity to capture more market share, especially if they can ramp up production swiftly to meet the potential demand spike. So, their success not just hinges on the duration and scope of the UAW strikes at their competitors but also their capability to meet increased demand without disruptions. If HMC and TM manage to navigate these challenges effectively, they could emerge winners.
As for vehicle prices, consumers are not likely to feel the heat of the strike just yet. In the short term, inventory levels might cushion the impact on consumer prices. But if the strike balloons and drags on, the effects on vehicle supplies and prices could be significant. In that case, used car dealers like Carvana and CarMax stand to gain amid high used vehicle prices.
Meanwhile, Detroit 3 automakers will face near-term challenges. The ongoing strike also poses significant challenges for auto suppliers as their financial prospects are closely intertwined with the operations of these manufacturing giants. In fact, BorgWarner (BWA - Free Report) has forewarned that its sales to GM, STLA and F will be roughly $250 million per month on average in 2023. While the initial phase of the strike might only moderately dent BorgWarner's sales due to its targeted nature, prolonged strike actions or an escalation affecting broader manufacturing processes, such as engine and transmission plants, could severely undercut the supplier's revenues.
The steel industry isn't immune either. Steel demand is plummeting, with U.S. Steel's Granite City Works being the first casualty. Historical strikes have resulted in plunging steel prices, raising concerns about the current strike's long-term effects.
The intricate network of supply chains means that disruptions at the top can have cascading effects, and pivotal links in this chain may face substantial economic strain in the wake of such industry upheavals.
The ramifications of this strike are financially massive. With losses over $1.6 billion in the first week alone, as estimated by Anderson Economic Group LLC, the expanded strikes threaten to strain the industry's already stretched supplier networks.
Last Word
The outcomes of these negotiations are crucial, not just for the parties directly involved but also for the entire automotive ecosystem as well as the broader economy. As negotiations progress, the industry waits with bated breath. The strike's resolution will reshape the automotive and related industries, marking winners and losers in its wake.
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UAW Strike Escalates: Who Stands to Gain and Lose?
The U.S. auto industry is experiencing turbulence as the United Auto Workers (UAW) strike is intensifying. The strike, which began on Sep 15, at three plants has now expanded its reach to 38 parts and distribution centers across 20 states. With billions of dollars at stake, the ripple effects are vast, and both winners and losers are emerging from the ongoing tumult.
Background: The Strike's Genesis
The UAW initiated an unprecedented simultaneous strike against the Detroit 3 automakers — General Motors (GM - Free Report) , Ford (F - Free Report) and Stellantis (STLA - Free Report) — after the contract expired on Sep 14 at midnight. The initial plants affected by the strike included GM's Wentzville Assembly plant in Missouri, Ford's Michigan Assembly plant in Wayne and Stellantis' Toledo Assembly Complex in Ohio.Approximately 13,000 hourly workers, representing about 9% of UAW's Detroit 3 membership, went on strike.
Central to this dispute is the wide gap between union demands and automaker offers. The UAW’s demands include a 40% increase in hourly wages, a reduced workweek and a return to traditional pension systems. Additionally, they seek the removal of compensation tiers and the reintroduction of cost-of-living adjustments, along with other demands. While automakers made record offers, they fell short of UAW’s exacting standards.
Strike Escalates for GM & STLA, F in a Different Lane
A week has passed without a new labor contract in place, prompting UAW to extend strikes to 38 parts and distribution centers across 20 states, primarily focusing on General Motors and Stellantis. The ongoing strikes at GM and STLA will further involve approximately 5,600 autoworkers, of which around 3,500 are GM employees.
GM's facilities impacted by the strike encompass 18 plants spread across 13 states, namely Michigan, Ohio, Colorado, Wisconsin, Illinois, Nevada, California, Texas, West Virginia, Mississippi, North Carolina, Tennessee and Pennsylvania. On the other hand, Stellantis faces disruptions at 20 of its facilities located in 14 states — Michigan, Ohio, Wisconsin, Minnesota, Colorado, Illinois, California, Oregon, Georgia, Virginia, Florida, Texas, New York and Massachusetts.
Targeting the parts and distribution centers is an astute and calculated move. These strikes might not hinder vehicle manufacturing immediately but they can quickly disrupt vehicle repairs. With supply chain issues already causing headaches, prolonged strikes could result in increased wait times for repairs, deeply affecting the consumer experience.
Quoting UAW president Shawn Fain, “This will impact GM and STLA repairs. The way to fix the frustrating customer experience is for the companies to end price gauging [sic]. Invest these record profits into stable jobs and stable wages and benefits.”
As the strike gains momentum, GM considers the intensified actions led by UAW's leadership unwarranted. Stellantis expressed skepticism, questioning if the union's leadership genuinely prioritized a prompt agreement.
Interestingly, Ford seems to be inching closer to a resolution. Fain's recent statements reflect optimism toward reaching an agreement with Ford, acknowledging the company's commitment to bridging the gaps. Ford’s willingness to address issues like wage tiers, reinstatement of cost-of-living adjustments and profit-sharing has placed it in a favorable light compared to its counterparts.
Analyzing the Winners and Losers of the Strike
While legacy automakers grapple with the strike's implications, others might find opportunities amid the chaos.
Tesla (TSLA - Free Report) might emerge as a big beneficiary. Elon Musk’s electric vehicle (EV) juggernaut is far ahead of its competitors in terms of pricing power and margins because it is not unionized. As U.S. automakers are saddled with increased operational costs due to wage hikes, Tesla’s existing cost advantage in the EV market could grow.
Tesla currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Non-unionized manufacturers, including Toyota and Honda, could seize the opportunity to capture more market share, especially if they can ramp up production swiftly to meet the potential demand spike. So, their success not just hinges on the duration and scope of the UAW strikes at their competitors but also their capability to meet increased demand without disruptions. If HMC and TM manage to navigate these challenges effectively, they could emerge winners.
As for vehicle prices, consumers are not likely to feel the heat of the strike just yet. In the short term, inventory levels might cushion the impact on consumer prices. But if the strike balloons and drags on, the effects on vehicle supplies and prices could be significant. In that case, used car dealers like Carvana and CarMax stand to gain amid high used vehicle prices.
Meanwhile, Detroit 3 automakers will face near-term challenges. The ongoing strike also poses significant challenges for auto suppliers as their financial prospects are closely intertwined with the operations of these manufacturing giants. In fact, BorgWarner (BWA - Free Report) has forewarned that its sales to GM, STLA and F will be roughly $250 million per month on average in 2023. While the initial phase of the strike might only moderately dent BorgWarner's sales due to its targeted nature, prolonged strike actions or an escalation affecting broader manufacturing processes, such as engine and transmission plants, could severely undercut the supplier's revenues.
The steel industry isn't immune either. Steel demand is plummeting, with U.S. Steel's Granite City Works being the first casualty. Historical strikes have resulted in plunging steel prices, raising concerns about the current strike's long-term effects.
The intricate network of supply chains means that disruptions at the top can have cascading effects, and pivotal links in this chain may face substantial economic strain in the wake of such industry upheavals.
The ramifications of this strike are financially massive. With losses over $1.6 billion in the first week alone, as estimated by Anderson Economic Group LLC, the expanded strikes threaten to strain the industry's already stretched supplier networks.
Last Word
The outcomes of these negotiations are crucial, not just for the parties directly involved but also for the entire automotive ecosystem as well as the broader economy. As negotiations progress, the industry waits with bated breath. The strike's resolution will reshape the automotive and related industries, marking winners and losers in its wake.