Ford Motor has presented its seventh offer in an attempt to bring an end to the ongoing United Auto Workers (UAW) strikes at its factories, while General Motors (GM) has announced a temporary layoff of additional workers. With this latest proposal, both investors and the union must delve deeper into the details to assess whether it is sufficient to address their concerns.
While Ford has not disclosed the precise financial terms of the new offer, it has emphasized that it represents an “unprecedented” improvement in wages, positioning its employees among the top 25% in terms of compensation across all U.S. jobs. According to Ford, permanent employees would receive a total pay raise exceeding 20%, whereas temporary employees would witness a 26% salary increase and become eligible for profit sharing for the first time.
Moreover, Ford has proposed the elimination of worker tiers, which was previously accepted by the Union during the 2008-09 financial crisis. This move ensures that all employees have the opportunity to reach maximum wage rates over time.
Ford CEO Jim Farley commented on the offer, stating, “We’ve put an offer on the table that will be costly for the company, especially given our large American footprint and UAW workforce, but one that we believe still allows Ford to invest in the future.”
However, negotiations appear to have hit a roadblock as the union takes a firm stance on battery plants. The UAW aims to include new battery factories in the master agreement eventually reached with Ford.
In premarket trading, Ford shares experienced a slight decline of 0.1%, reaching $12.06. Meanwhile, GM shares saw a modest increase of 0.2% to $31.44, and Stellantis (STLA) shares dipped by 0.3% to $18.65. The S&P 500 and Dow Jones Industrial Average futures remained relatively stable.
Since the start of July, when the strikes began gaining momentum in the eyes of investors, GM and Ford shares have dropped by approximately 18% and 19%, respectively, while the S&P 500 has experienced a decline of about 5%.
Stellantis Emerges as a Global Competitor in the Auto Industry
Stellantis, the parent company of Chrysler, has seen a significant increase in its shares, experiencing a rise of approximately 7%. Unlike its U.S.-focused counterparts, Stellantis has a more global presence, which has helped mitigate the impact of operations in the United States. Moreover, Stellantis offers investors an attractive option with its relatively lower stock price.
Comparing the price-to-earnings ratios of major auto manufacturers, it becomes evident that Stellantis stands out. As of now, Stellantis shares trade at around 3.4 times the estimated earnings for 2024, while GM and Ford shares are valued at 4.6 times and 6.6 times their respective estimated earnings.
A Standoff Continues with the UAW
Despite Ford’s latest offer, the United Auto Workers (UAW) has yet to respond publicly. Striking employees from all three Detroit-based automakers total around 25,000 workers. These walkouts began in mid-September but represent less than 20% of the overall UAW workforce at the “Big Three.”
General Motors recently announced the temporary layoff of an additional 163 workers in Ohio due to the UAW strikes. The previous day, both Ford and General Motors had laid off a combined total of 500 workers.
According to Baird analyst Luke June, the strikes might result in a loss of between 175,000 and 250,000 units of North American auto production in the fourth quarter alone. This would correspond to roughly 5% of total capacity.
A Shift in Strike Dynamics
June expects the strike to last longer than the General Motors strike of 2019 due to its broad and prolonged nature. He anticipates, however, that the cumulative loss in unit production will be relatively limited compared to 2019, mainly due to the strike’s milder impact in its early stages. In 2019, all UAW workers at General Motors walked out on the first day of the strike, whereas in 2023, the UAW took a smaller initiating step.
The potential loss in units is predicted to reduce overall U.S. auto production by 1% this year when compared to 2022. This decline will inevitably affect some auto parts manufacturers as well. Despite this, June has only made a marginal adjustment of 1% to his fourth-quarter projections for the companies he covers.