For auto investors, this weekend hasn’t been dull. And it stayed interesting Sunday night.
United Auto Workers President Shawn Fain and Vice President and Director of Ford Department Chuck Browning spoke on Sunday, addressing members about the details of a recently negotiated contract with
Ford Motor
(ticker: F)
Even though Fain and Browing were talking to Ford employees, they had a message for the entire industry.
“One of our biggest goals coming out of this historic contract victory is to organize like we’ve never organized before,” said Fain. “When we return to the bargaining table in 2028, it won’t just be with the Big-Three, but with the Big-Five or Big-Six.”
That puts auto makers such as
Toyota Motor
(TM) and
Hyundai Motor
(005380.Korea) on notice.
The UAW leaders also said the Ford council voted to send the deal reached on Oct. 25 with the company to membership, who will then vote on the deal.
The deal, if ratified, will run through April 2028 and includes base wage increases of about 25% over the contract’s life, plus cost of living adjustments, and shorter progressions to higher wage tiers. The top wage rate for assembly line workers by 2028 will be about $42 an hour, up from about $32 an hour. The top rate for skilled trades will be north of almost $51 an hour, up from about $37 an hour.
There is also enhanced profit sharing that will include profits earned at Ford Credit. And a pathway for workers at EV battery plants to be treated like other Ford employees.
It sounds like a solid deal, but this has been a volatile labor negotiating season. Nothing should be taken for granted. UAW workers at Mack Trucks voted down a tentative agreement on Oct. 9 and are still on strike.
It seems likely that the members will ratify the new deal. Browning called on Ford workers to return to work while the ratification process was ongoing, a sign that leadership thinks the deal is attractive enough to members. Ford says the process of restarting plants is underway. Almost 17,000 UAW employees at Ford are on strike, with several thousand more laid off because of production disruptions.
Ratification could happen later this week after local unions meet with members to discuss the deal.
For Ford, Deutsche Bank analyst Emmanuel Rosner estimated the deal will add about $6 billion in annual cost by the end of the contract. That’s a significant amount of money. Ford generated 2022 operating profit from North American operations of about $9.2 billion. Now it’s management’s job to offset cost increases with productivity, new products, and price enhancements.
Overall, about 49,000 workers were on strike at Ford,
General Motors
(GM), and
Stellantis
(STLA), or roughly 30% of the total UAW employee population at the three companies. Several plants have been shut down, including plants that make profitable trucks and SUVs.
The UAW announced a tentative agreement with Stellantis on Saturday. The deal included wage increases similar to Ford. Rich Boyer, the union vice president in charge of Stellantis, said in a Saturday address that the UAW also won a commitment to add 1,000 EV-related battery manufacturing jobs at an idled plant in Belvidere, Ill.
After the Ford agreement, Wall Street expected Stellantis and GM agreements to follow shortly after. That’s what has happened in the past. “With Ford getting a deal done, we expect the other dominoes to fall with GM and Stellantis this week,” said Wedbush analyst Dan Ives shortly after the Ford deal was announced.
He was right about Stellantis. But GM is still not settled. The UAW ordered a strike expansion at GM with workers walking out at the Spring Hill, Tenn., facility, which makes several Cadillac and GMC products on Saturday.
GM and the UAW didn’t immediately respond to a request for comment about whether negotiations continued on Sunday, or what led to the strike expansion.
Specific sticking points aren’t known. It’s unlikely GM workers will get substantially more or less than Ford and Stellantis workers. UAW’s Fain announced earlier in October that GM agreed to make battery workers part of the union’s master contract with the company, which essentially means those future workers will be treated like workers making gasoline engines and traditional transmissions today.
There were no clues for investors from Fain or Browing about GM on Sunday night. One barrier to getting a deal done might have been the Ford meetings. UAW leadership is getting busier as the 2023 labor negotiations start to wrap up.
Investors will be glad to see the strike end. It has weighed heavily on the stocks. Through the end of Friday’s trading, Ford and GM shares were down about 34% and 29%, respectively, since the start of July when contract issues came to the forefront. The
S&P 500
is down about 7% over the same span.
Shares of Stellantis, a more global company, are up about 3% over that time.
The drop in share price can’t be blamed entirely on the strike. Ford stock dropped 12% on Friday after the company reported disappointing third-quarter earnings.
Write to Al Root at allen.root@dowjones.com
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