U.S. auto workers strike, analysts say Tesla will be the biggest winner

@huoadig Sep 15, 2023 2143 views tesla investment car

On the eve of the U.S. auto workers' strike: 150,000 people failed to get a salary increase, and the market value of the three giants lost hundreds of billions

Recently, the United Automobile Workers (hereinafter referred to as the UAW) has entered into contract negotiations with the three major auto companies - General Motors, Ford Motor and Stellantis Group, seeking substantial wage increases and other rights for auto workers. If the union and the car companies cannot reach an agreement on a new labor contract, a large-scale strike may occur after the existing contract expires on September 14, local time.

Demands of UAW

Previously, UAW union president Shawn Fain publicly criticized the double standards adopted by the above-mentioned car companies: management benefits are good, but workers’ rights and interests are not protected; most union members still do not have pensions, and the level of medical insurance is also poor. not to standard. Up to 97% of union members have agreed to authorize a strike.

Affected by factors such as the economic downturn, the number of large-scale strikes in the United States has increased. Statistics from Cornell University show that between September 1 last year and August 31 this year, there were a total of 70 strikes involving more than 100 people and lasting more than one week, an increase of 40% from the previous year.

The UAW is one of the largest workers' associations in the United States, with as many as 146,000 members in the "Detroit Big Three" -- General Motors, Ford, and Stellantis Group, accounting for approximately 56% of all workers in the U.S. auto manufacturing industry.

Disagreements between the two parties

In the first half of this year, Ford Motor, General Motors and Stellantis Group made profits of approximately US$3.7 billion, US$5 billion and US$11.9 billion respectively. Harry Katz, a professor of industrial relations at Cornell University, said the huge profit performance of the "Big Three" has strengthened the UAW's confidence.

However, some people believe that the U.S. auto industry is currently in the throes of electric vehicle transformation and is facing increasingly fierce market competition and high costs. If the "Big Three" agree to the UAW's demands, they will end their own lives.

Take Ford Motor as an example. In the second quarter of this year, its Ford Model e business unit, which focuses on electric vehicles and innovative technologies, achieved a 39% revenue growth, but the total was only US$1.8 billion, while its operating loss during the same period was as high as US$1.09 billion; this year In the first half of the year, Ford's electric vehicle business lost $1.8 billion. Affected by the electric vehicle pricing environment, investment in next-generation products and production capacity, and other costs, Ford expects its electric vehicle business losses to expand to $4.5 billion this year, 50% higher than previously expected.

It is precisely based on this that there are still major differences in the negotiations between the "Big Three" and the UAW. Stellantis North America chief operating officer Mark Stewart said the UAW's request is "outrageous" and could result in workers losing their jobs. Stellantis also threatened to move the production of some of its models from Detroit in the United States to Mexico.

In a recent statement, Ford proposed a 9% wage increase, which could be paid as a one-time payment. This plan would increase workers' income by 15% over the four-year contract period, but it is far from the UAW's request. Shawn Fain said the one-time payment will help solve workers' short-term difficulties, but it will be difficult to increase workers' income in the long term.

Currently, the UAW has filed a lawsuit with the National Labor Relations Board, accusing GM and Stellantis of not negotiating in good faith.

Huge losses

The vast majority of respondents (96%) expect the strike to last more than a week, with more than a third (34%) expecting it to last more than a month, the survey showed. According to an analysis by Anderson Economic Group (AEG), the strike by nearly 150,000 UAW members at General Motors, Ford and Stellantis will cause economic losses of up to $5.6 billion in 10 days.

"Considering that the UAW strike has sufficient funds, the intensity of this strike may not be lower than that in 2019, and the strike losses of the struck automakers will also be greater. Even if the strike passes, both parties have made certain compromises. Under the new wage agreement, the three major manufacturers in North America will The labor costs of car manufacturers are also expected to rise significantly in the next four years compared with the current level." CITIC Securities believes that we should continue to pay attention to the marginal changes in companies with relevant supply chain exposure risks in North America. Among OEMs, the three major North American OEMs led by General Motors are at greater risk. If OEMs go on strike and suspend production for a long time, related parts and components companies will also face the risk of no demand and joint production shutdowns.

Presidential mediation

U.S. President Biden has stepped in to mediate conflicts between the UAW and companies. On August 14, local time, Biden urged a fair agreement between unions and automakers in a statement. He emphasized that the transition to a clean energy economy needs to provide win-win opportunities for automakers and union workers. Biden called on the three major companies to take all possible measures to avoid the closure of traditional automobile factories and consider restructuring, rebuilding and rehiring employees within the company when job transition is needed, giving priority to providing existing employees with opportunities to fill job vacancies.

External threats

The United States has always been an important global automobile industry market. If calculated according to the 1-2 month strike cycle predicted by the industry, the trinity industrial chain of the United States, Canada, and Mexico will be shaken in the short term. In the long term, the global automobile industry Chains can also take a hit.

Moreover, the strike will also dampen the enthusiasm of upstream and downstream suppliers and lead to weak prices of key commodities, especially steel and tires. The vicious cycle will also continue to put pressure on the US auto giants, which are already in a critical period of transformation.

At the same time, the U.S. market has also ignored one company-Tesla. The suspension of the three giants will put Tesla in a favorable position and benefit from the suspension of competitors.

Of course, this strike will further weaken the international competitiveness of these American automobile giants, disrupt the pace of America's "re-industrialization", and provide opportunities for the rise of leading automobile companies in emerging markets.

For example, Chinese car companies' overseas expansion will be beneficial to a certain extent. Workers' strikes will inevitably affect the production and supply of North American cars, which will provide other non-U.S. car companies with an opportunity to break through.

Have you ever thought about the possibility that it is precisely because of the rapid development of Chinese car companies that they have squeezed out the market of American car giants, making them unable to maintain high welfare benefits, which became the trigger for this strike.

Compared with Tesla and Chinese electric car brands that are at their peak, as well as German automakers that are making steady progress, there is not much time left for American car companies.

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