June 20, 2024

Brighton Journal

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UAW contract negotiations resume. Ford, GM stocks fluctuate.

UAW contract negotiations resume.  Ford, GM stocks fluctuate.

Shares of Ford and General Motors fell early Monday after negotiations between the “Big Three” automakers and the United Auto Workers resumed over the weekend.

The UAW strike began in the early hours of Friday morning with the union striking at three facilities, one at each automaker. Workers are on strike at General Motors’ (ticker: GM) Jeep Wentzville Assembly Complex in Stellantis, Missouri (STLA), and in select departments at the Ford (F) Assembly Plant near Detroit.

Union confirmed to Baron It resumed discussions with Ford over the weekend and said the talks had been “reasonably productive,” but did not provide details.

GM stock, which rose 0.9% on Friday, signaled a 0.4% rise in premarket trading, while Ford stock, which fell 0.1% on Friday, fell 0.2%, erasing earlier gains. Stellantis shares fell 1.3% before the open, after rising 2.2% on Friday.

Aside from the resumption of talks, investors were digesting several other developments early Monday.

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Perhaps most notably, UAW President Sean Fine rejected Stellantis’ offer of a 21% pay raise, in an interview on CBS. Facing the nation Sunday. The Jeep maker made its offer to the public on Saturday, but Fine said it “certainly cannot be accepted.”

Automakers also responded to the strikes by temporarily laying off workers. Ford announced Friday that it has temporarily laid off about 600 non-striking workers at its Michigan plant. General Motors said about 2,000 workers at its Fairfax Assembly Plant in Kansas may be out of work this week until production resumes.

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Fine said the layoffs were intended to “pressure our members to accept a lower amount.” Share on X, previously Twitter, Saturday. He added that the automakers’ plan “will not work.”

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Benchmark analyst Michael Ward said the impact of the strikes on the industry had been “minimal so far” going into the fourth day. However, he noted that parts shortages are expected to force the closure of GM’s Fairfax plant and that the UAW may ask other facilities to join the strike.

Ward estimated that the strikes targeting the three facilities would cost the companies a combined $15 million in Ebit (earnings before interest and taxes) per day.

This relatively small effect is one reason why stocks haven’t moved much since the strikes began. Another factor may be that markets are “fully aware that labor relations are among the least of automakers’ long-term concerns,” says Nicholas Colas.
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The co-founder of DataTrek Research said in a note Monday.

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Stocks are cheap. Stellantis trades at 3.4 times 2024 earnings, General Motors at 4.9 times, and Ford at 6.6 times, according to FactSet data.

“The market believes their future is highly uncertain as the global auto industry transitions to electric vehicles and eventually self-driving cars. This assessment in my view is completely fair,” Colas added.

Write to Callum Keown at [email protected]