General Motors (NYSE:GM), Ford (NYSE:F), and Stellantis (NYSE:STLA) are in trouble, as workers represented by the United Auto Workers (UAW) union went on strike last night. All three Detroit car companies were unable to reach an agreement with the union before Thursday night.
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The strike impacted three factories – GM’s plant in Wentzville, Missouri; Ford’s plant in Wayne, Michigan; and Stellantis’ plant in Toledo, Ohio. Approximately 12,700 workers, in total, went on strike at these plants.
This marks the first time in the UAW’s 88-year history that it has gone on strike simultaneously at all three Detroit car companies. Furthermore, UAW President Shawn Fain warned that if negotiations continue to stall, workers at more plants may go on strike.
Fain has targeted factories that would impact production and potentially disrupt the operations of other plants due to parts shortages. This approach allowed the UAW to avoid a complete strike involving the 146,000 workers.
It is worth mentioning that the companies made efforts to avert the strike by proposing wage increases of 17.5% to 20% spread over more than four years. However, the offers fell short of the UAW’s expectations of nearly a 40% increase. Some additional demands from the union included a reduced 32-hour workweek, reinstatement of cost-of-living adjustments, and improved retiree benefits.
No-Win Situation for Carmakers and the Economy
The Big Three automakers find themselves in a challenging situation. If negotiations succeed and the automakers meet the demands for higher wages and additional benefits, it could affect their bottom lines. Conversely, prolonged strikes would disrupt the production and distribution of new cars, impacting their revenue and market share.
Moreover, the consequences are anticipated to have macro-level implications, as a supply shortage could result in higher car prices. This could pose a challenge for the Federal Reserve, which has been working to curb inflation.
In the meantime, let’s assess the expected performance of the three stocks using the TipRanks Stock Comparison tool. Of the three companies, Stellantis boasts a Strong Buy consensus rating on TipRanks along with a ”Perfect 10” Smart Score. This suggests that STLA stock has the potential to outperform the broader market over the long term.
