The United Auto Workers (UAW) union is planning targeted strikes at the plants of the Big Three automakers – General Motors (NYSE:GM), Ford (NYSE:F), and Stellantis (NYSE:STLA), if a new labor contract is not signed by Thursday. September 14 is the deadline for the old contract expiration, with fears of a strike fast approaching. Any negotiations until now have not been fruitful.
Targeted strikes involve stopping work only at certain important plants or assembly lines, which will ultimately impact the broader functioning of the carmakers. The UAW has not disclosed which plants will go on strike, but historically, targeted strikes involved engine and transmission plants. As per a Wall Street Journal report, UAW President Shawn Fain will release the list of plants going on strike at 5 p.m. on September 14, just hours before the contract expires.
Automakers and UAW’s Long-Standing Fight
The Big Three automakers have been in the crosshairs of the UAW union since July this year. Multiple contracts have been exchanged between the parties but to no avail. The UAW has undertaken such targeted strikes before at General Motors’ plants.
A targeted strike will also benefit the union since it will limit the number of workers going on strike. The UAW has $825 million set aside as a strike fund, which can be used to pay workers during strikes. The UAW has a policy to pay $500 a week for workers on strikes.
On their part, the Big Three carmakers have tried to maintain as much inventory as possible ahead of a potential strike. As of August end, Stellantis had 74 days of unsold inventory, Ford had 64 days’ worth of supply, while GM had only 50 days’ worth of supply. A revised labor contract with at least a mid-30% wage raise over the four-year term will essentially increase the labor costs for the carmakers, thus impacting margins.
With these points in the background, let’s see where the Big Three stocks stand based on the TipRanks Stock Comparison tool. Notably, Stellantis is the only carmaker to command a Strong Buy consensus rating and earn a TipRanks Smart Score of 9, which implies that STLA stock can outperform the broader market over the long term. However, General Motors has the highest upside potential (51%) on the average price target among the three stocks.
