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The probability of a major strike of U.S auto workers continues to increase after the United Auto Workers rejected separate contract offers from General Motors (NYSE:GM), Ford (NYSE:F), and Stellantis (NYSE:STLA). The UAW said the offers were far from their demands and has filed complaints with the National Labor Relations Board accusing General Motors (GM) and Stellantis (STLA) of not bargaining in good faith and in a timely fashion.
The current UAW contract will expire at 11:59 p.m. on September 14 and could lead to an immediate strike by the union at one or more automakers. The UAW recently increased strike pay to $500 per week for each member and has built up a $850M fund to pay auto workers if they go on strike. The UAW could order a strike at select automakers or even just a few plants, instead of a full strike of all 146K workers. For reference, the UAW strike in 2019 lasted 40 days before a new contract was reached. Of note for investors, auto stocks and auto supplier stocks have quickly regained most of their strike period losses following the settlement of the last three UAW contracts. This time around, options trading in the auto sector is above normal activity, which means there could be some volatility around strike headlines.
Stronger profitability at the Detroit automakers has sparked the union to ask for a 46% pay raise, a 32-hour work week, and pension benefits for new hires. However, the Detroit automakers could struggle to ramp up their electric vehicle initiatives if labor costs soar under the terms of a new five-year contract.
Analysts think that the impact on the broad auto market could be limited in the near term, with major players such as Tesla (TSLA), Toyota (TM), and Honda Motor (HMC) ready to take up the demand slack. In addition, some GM (GM) and Ford (F) dealers have reportedly stocked up of many of their popular UAW-produced models in anticipation of a production stoppage. Economists warn that a strike that lasted longer than the 2019 UAW walkout could have a negative impact on the broad U.S. economy.
