BofA Warns Clients Detroit Auto “Strike Almost Guaranteed”

The United Auto Workers are nearing the top of their negotiations with Detroit’s “Big Three” automakers – General Motors, Ford, and Stellantis, the producer of Chrysler – regarding a brand new four-year labor settlement for roughly 146,000 staff. The present labor contract expires subsequent Thursday because the union has made calls for that even the UAW’s personal president calls “audacious.” 

General Motors and Ford have already despatched their proposal contracts to UAW earlier this week and final — solely to get rapidly rejected. On Friday, Stellantis made its first proposal on wages of round 14.5% — nonetheless nicely below UAW President Shawn Fain’s demand of 46% over 4 years. 

The automakers’ underwhelming presents put President Biden in a troublesome spot forward of subsequent week. “Union Joe,” whereas stress-free at his seaside home in liberal white-elitest Rehoboth Beach final week, mentioned he ‘wasn’t too frightened about potential strikes.’ 

Fain has described the labor speak discussions with Detroit’s Big Three as a battle between billionaires and the working class. As the deadline looms, not one of the proposals have met the union’s calls for, which has led John Murphy, a senior auto analyst at Bank of America Securities, to warn purchasers on Friday: “Strike almost guaranteed” subsequent week. 

Murphy expects negotiations will end in a 25-30% improve in labor prices over the following 4 years with “sizable cash signing bonuses and adjustments to other benefits” as soon as contracts are finalized. 

He mentioned the phrase on the road is “UAW may offer a counter-proposal to the OEM offers shortly” however warned, “We continue to believe a strike is very likely after the Master Agreement expires next Thursday, September 14.” 

Murphy defined if a strike was to happen subsequent Thur., then adverse headlines might crush automaker shares: 

Should this happen, it might drive some headline-related downwards motion to the shares, however our discussions with traders and the valuations for GM and Ford (with the shares down – 15% and – 9%, respectively since 7/31 vs. – 3% for S&P 500) recommend the shares largely replicate the dangers of a fabric strike. The UAW’s strike with GM in 2019 lasted 6 weeks and a one – to two-month strike seems to be the seemingly end result right here, in our view.

When BofA’s word was printed, Stellantis had not disclosed their proposal to the union. Below is a complete overview of the presents from Ford and GM and the way they match up with UAW’s calls for.

Everyone is eagerly awaiting UAW’s counter-offer earlier than the deadline subsequent Thursday. Union Joe might care a little bit extra this weekend.