While the United Auto Workers' (UAW) strike against Ford, General Motors and Chrysler-Jeep parent Stellantis continued over the weekend, EV giant Tesla announced it had produced its 5 millionth vehicle, demonstrating how the nonunion TSLA is continuing operations as its top U.S. rivals sit in limbo.
As the UAW and the three auto giants continue negotiating new labor contracts, strike action is widely expected to drag on and hurt production. The longer the walkouts last, the more they provide Elon Musk's Tesla and other nonunion automakers, including Toyota and Honda, possible advantages.
Tesla stock fell 3.3% to 265.20 Monday during market trade. Ford stock, GM stock and Stellantis also all dropped.
Nelson Lichtenstein, a history professor at the University of California, Santa Barbara, told IBD he expects the auto strike to "get bigger with each turn or turn down of the negotiations." Lichtenstein added he suspects the standoff will last around a month and require that the Biden Administration put pressure on the companies in order to get the deals done.
"A real issue for the union is the nonunion character of Tesla, both at Fremont and its battery plant in Reno," Lichtenstein said. "Given Musk's money and drive and certain popularity, Tesla might well remain a very large EV low-labor-cost competitor with which the old Big Three have to compete."
The Auto Strike And Negotiations
United Auto Workers members walked off the job and began to protest a GM plant in Wentzville, Missouri; a Stellantis plant in Toledo, Ohio; and a Ford plant in Wayne, Michigan. The plants only make a few models of vehicles, mostly high-value trucks and SUVs, including Ford Broncos and Rangers, Jeep Wranglers, Chevrolet mid-size pickups and GMC vans.
In response, Ford announced it was temporarily laying off 600 nonstriking employees at the plant Friday.
The two sides remained far apart on new labor deals as the contracts expired at 11:59 p.m. on Sept. 14. UAW, which represents 150,000 autoworkers, announced Thursday night the walk-off would begin as targeted initiatives vs. a complete shutdown.
UAW resumed negotiations with Ford, GM and Stellantis on Saturday with discussions expected to continue Monday. Stellantis reportedly increased its offer to pay raises of 20% over a four-and-a-half-year contract term, including an immediate 10% hike. In late February, Stellantis indefinitely shut an Illinois plant, citing rising costs of electric vehicle production.
The Stellantis proposal matches offers on the table from Ford and GM. However, it is well below the around 40% hourly pay increase the UAW has pushed for. Early last week, news reports emerged the union cut its pay raise request to the mid-30% range.
UAW also has around $825 million in its strike fund and newly increased strike pay, making it and its members more financially able to handle a longer auto strike, according to analysts. Citi has estimated a potential two-week auto strike could hit GM profits by $1.3 billion. The firm predicts Ford could take a $1.6 billion hit to its bottom line.
Auto Stocks Expected To Be 'Sensitive'
GM, Ford and STLA all edged higher Friday. Ahead of the auto strike, the 35 stocks in the IBD Auto Manufacturers industry group have collectively advanced 55% in 2023. Most of that advance owes to Tesla, with Ford stock up just 8% and GM trading effectively flat so far this year.
The auto group ranks a strong No. 4 out of the 197 industries tracked by IBD, according to MarketSmith.
Morgan Stanley analyst Adam Jonas wrote Friday the firm expects all three stocks "to be sensitive to UAW news flow, especially as it relates to the potential duration of industrial action."
Tesla Stock The Big Winner
Wedbush analyst Dan Ives, a big TSLA stock bull, wrote Friday that the research firm worries this could be a "long and nasty" auto strike. He added it could be an "absolute debacle for the Detroit Three." However, Ives sees Tesla as the "clear winner" in the situation with its top U.S. EV competition facing production shutdowns.
"In this crucial period of EV execution, model rollouts, distribution, marketing, with EV competition rising across the board the timing could not be worse," Ives wrote, referring to GM and Ford.
CFRA analysts Garrett Nelson added Friday that Ford, GM and Stellantis are the "losers in what is more likely to become a prolonged standoff as the two sides become more entrenched."
Nelson said Tesla along with non-U.S. automakers could "benefit from both a rising auto price environment and widening labor cost advantage."
Tesla stock has a 98 Composite Rating out of 99. TSLA also has an 92 Relative Strength Rating. Tesla stock's EPS Rating is 93 out of 99.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
YOU MAY ALSO LIKE:
Get An Edge In The Stock Market With IBD Digital
Labor Unions Keep The Heat On Starbucks And Amazon
Learning How To Pick Great Stocks? Read Investor's Corner
5 Stocks Near Buy Points With Earnings Set To Surge Up To 7,800%
