
Thursday will witness a crucial negotiation between automotive giants General Motors, Stellantis and United Auto Workers (UAW) union, aimed at reaching an aligned contract agreement similar to the one recently signed with Ford, their cross-town competitor.
This fundamental agreement led nearly 17,000 striking Ford workers to withdraw their demonstrations and return to work. However, it is noteworthy to mention that a majority of about 57,000 Ford employees are yet to vote on this provisional agreement.
In adherence to the blueprint set out by Ford, both GM and Stellantis will be required to solidify their agreement, else risking additional strikes steered by the UAW President Shawn Fain. Any deviations from this pattern are less likely to find favor with Fain, impacting the automakers negatively, as indicated by Art Wheaton, a Cornell University labor studies expert.
A failure to comply may see GM and Stellantis vulnerable to painful reverberations from additional strikes, with GM facing potential shutdowns of its profitable pickup truck plants located in Fort Wayne, Indiana, and Flint, Michigan. Both GM and Stellantis, already losing money due to the ongoing strikes, will be keen on achieving closure, despite the uncertainty over the ratification of the contract by Ford’s workforce.
The proposed Ford deal, pending approval from local union leaders and ratification by members, promises to offer top-scale assembly plant workers a 25% wage hike over the contract’s lifespan. The inclusion of cost-of-living raises would ultimately result in over a 30% pay increase, averaging to over $40 an hour by the contract’s expiration in late April 2028.
The next to likely settle appears to be GM, given their acquiescence to integrate newly constructed electric vehicle battery factories into their national UAW contract. The UAW views these new plants as the future of the auto industry, providing jobs for those transitioning from making gasoline engines and transmissions as these plants phase out.
However, Ford’s commitment to battery factories remains unclear, with the company expressing the challenges of unionizing employees at facilities that are yet to be constructed. Ford had previously unveiled plans to construct battery factories in Kentucky, Tennessee, and Michigan, though the Michigan plant is currently on hold.
All three automakers have expressed concerns over the high labor costs potentially compelling them to raise their vehicle prices, making them less competitive than non-union companies such as Tesla and Toyota.
While Ford’s CFO, John Lawler, confirmed the negative impact of the third-quarter strike on the company’s earning, the company’s future financial strategies remain uncertain until the contract is ratified by the union. These increasing costs will undoubtedly impact the profitability and competitiveness of these automakers as mirrored by CFRA analyst Garrett Nelson’s comments.
As per a recent study by Moody’s Investor Service, the annual labor costs for GM, Stellantis, and Ford are predicted to rise by $1.1 billion, $1.2 billion, and $1.4 billion respectively, assuming a 20% increase in hourly labor costs. Despite the significant surge, Wheaton believes these profitable companies can comfortably accommodate the escalated labor costs, which he estimates to be 6% to 8% of a vehicle’s cost.