A crucial negotiation involving automotive giants General Motors and Stellantis, and the United Auto Workers union is set to transpire this Thursday. The purpose of the meeting is to establish whether a contract similar to the one recently agreed upon with Ford could be materialized.
Ford struck a deal resulting in approximately 17,000 workers abandoning their strikes and preparing for a swift return to work. However, a staggering number of 57,000 personnel are yet to vote on the tentative pact.
The pending agreement has set an influential precedent that the other two automakers, GM and Stellantis, may have to follow. The alternative could result in UAW President Shawn Fain implementing partial strikes at their factories – a notable predicament initiated on Sept. 15.
Fain doesn’t appear as someone who would be inclined to make any concessions to the other two automakers, indicating that he is adamant about maintaining the pattern set by Ford. Any deviations from this pattern could lead to extended strikes, which could prove costly for these companies.
GM and Stellantis are feeling the financial heat from the ongoing strikes, and an amicable end to them may be on their agenda despite the uncertainty of ratifications by Ford’s workforce. It is estimated that GM’s losses are around $200 million per week due to the strikes, with one crucial factory in Texas that manufactures large truck-based SUVs, such as the Chevrolet Tahoe, significantly affected.
Tomorrow could see the ratification of Ford’s deal, which promises an enticing 25% wage rise for its assembly workers over the contract’s duration. This contract, if passed, will see several improvements for the workers, including wage increases, a quicker route to secure full-time employment for temporary workers, an end to some wage tiers, improved pensions, and increased contributions to 401(k) plans.
GM appears to be positioned as the next automotive powerhouse to settle, given that it has shown willingness to pull new electric vehicle battery factories into UAW’s national contract, essentially unionizing them. This move is a nod towards the future of the auto industry as it rapidly evolves from internal combustion engines to battery power.
In this transformative industry landscape, it’s unclear exactly what Ford has agreed to in terms of fostering battery factories. Ford had previously voiced concerns about the potential difficulties of unionizing workers at plants that have yet to be constructed.
The three behemoths of the auto industry have made it clear that they’re wary of high labor costs which could potentially inflate the prices of their vehicles, making them less competitive against non-union companies like Tesla and Toyota.
In a recent earnings conference call, Ford CFO John Lawler disclosed the financial impact of the strike, reducing pretax earnings by $100 million for the quarter. The six-week-long strike obliterated the production of 80,000 vehicles, projected to slash full-year pretax earnings by a sizable $1.3 billion. The new UAW agreement is expected to add significantly to labor costs per vehicle.
In the light of the ongoing negotiations, Ford has temporarily retracted its previous financial guidance for 2023, acknowledging the impact and uncertainty wreaked by the strikes among parts suppliers and the process of resuming production at temporarily closed factories.
According to CFRA analyst Garrett Nelson, the costs of the new contract could significantly affect the company’s profit margins and competitiveness compared to non-union automakers. A recent study by Moody’s Investor Service projects an increase in annual labor costs for Stellantis, GM, and Ford in the final year of the contract due to a projected 20% increase in hourly labor costs.
Despite these looming financial burdens, the corporations, which generate billions in profits, are reputedly capable of handling the increased labor costs, which are estimated to form 6% to 8% of a vehicle’s cost.
