Detroit auto giants face tough labor decisions while Tesla cruises ahead

Chalffy

The threat of a major automobile worker strike continues to increase as negotiations remain stalled ahead of the September 14 deadline. The union fight has crossed the border, with Canada's Unifor joining the UAW in authorizing strikes against General Motors (NYSE:GM), Ford Motor (NYSE:F), and Stellantis (STLA). UAW President Shawn Fain has openly declared "war" on the Detroit Three automakers, with contract demands for +40% pay increases, shorter work weeks, improved pension benefits, and concessions with electric vehicle plants. Those demands are tied in part to the recent streak of higher profitability at the auto giants. The view on the Street is that there is no good option with enduring a crippling strike or inking painful labor wage concessions as the two options on the table.

Wedbush Securities analyst Dan Ives called the situation a potential nightmare situation for General Motors (GM) and Ford Motor (F) as both are in the early stages of a massive EV transformation path for the next decade that is expected to define future success. "In this crucial period of EV execution, model roll-outs, distribution, marketing, with EV competition rising across the board the timing could not be worse," he noted. Ives said his visit to Detroit last week indicated that it was a "very nervous time" across the broad auto industry.

Ives reminded that Tesla (NASDAQ:TSLA) will not face similar labor issues as the Detroit automakers. A major concession on labor wages could eliminate any of cost advantages of EV vehicles coming out of Detroit on a large scale and boost the advantage Tesla (TSLA) has on pricing. Despite the near-term headwind, Wedbush remained bullish on Outperform-rated GM to navigate through the period, although the UAW overhang is expected to hold back shares in the near term.

Over the last month, General Motors (GM) has dropped 11.3%, Ford (F) has shed 7.5%, and Stellantis (STLA) has peeled off 8.7%. Tesla (TSLA) is down 3.5% over the same period. On a year-to-date basis, Tesla (TSLA) has crushed the returns of the Detroit automaker stocks.

More on auto stocks

• Unleashing Tesla's Potential: Strong Execution Yet To Find Its Full Value
• Ford: 3 Headwinds Keep Me From Buying
• Ford: EV Warning Light Flashing
• Summer of strikes: Why is labor rising across the U.S.?
• Auto stocks are in the spotlight with potential roadblocks ahead
• Labor talks between the UAW and Detroit automakers include EV battery plants

Comments

[D. Rockefeller]

It's not the unions it's the "Petrodollar" system going back to 1973 when Bretton Woods ended.-Nixon. Hey they got rid of the F-4 Phantom's too and they went Mach 2.57 in 1959 while the F-18 only goes Mach 1.8. 73 "oil crisis", Yom Kippur "war", gas lines, odd or even, and much higher prices per gallon. Kissinger & the boys set up the deal with the Saudis and later GCC so they only sold their oil for US dollars while we agreed to protect them from any "enemies" with the US military. US oil production peaked in 1970-conventional just as predicted by Shell etc. and they needed a higher price to make the North Sea "economical" to develop. The dollar became tied to oil and the middle east and US military. Today US manufacturing is tied to "defense spending" and selling weapons more than commercial retail products but it always was as WW2 sure boosted us out of the "Depression". The Petrodollar ensured outsourcing of manufacturing since China. etc. had to acquire dollars to buy oil and to get those dollars they had to produce at rock bottom prices crushing US costs across the board. Thousands of factories closed, steel mills, auto plants, plywood plants, electronics, etc. Didn't matter if they were union or not and with globalization and the Free Trade Agreements it just accelerated they whole thing. Hey Lockheed and GE just made a deal with India though but it's not much-souped up F-16's to be made in India with Technology transfers and GE engines to be made over there too but they have lots of planes of all kinds from the Russians, EU, and US already and make their own. Ukraine is keeping some stuff going which is a steady business-monkey business.
I wish the US would ramp up Hydrogen technologies which is the long term answer for energy security globally. We could take the lead and make vehicles with no range anxiety like BEV's and use it for jets, heavy trucks, trains, steel making, plastics, heating, etc. and enjoy no emissions. Well it's is happening but too slow for me because in 200 years??? Why not think ahead a little instead of just to the next quarter? Biden looks like he has a brain worm like that women in Australia or the old fossil Republican sure had a brain cramp or something which is probably why the US isn't doing so well lately.

[D. Rockefeller]

Is it possible they could close in the USA and Canada and simply operate in Mexico, China, Thailand etc.? I mean everything else went due to costs mostly due to the creation of the US Saudi "Petrodollar" scheme going back to Nixon and ending Bretton Woods. Australia shut down all auto manufacturing despite govt. attempts to prop it up. GM, Ford, Toyota gone to Asia. The two Ford plants down in Kentucky and Tennessee? US tax suckers funding that and every time I've seen this it doesn't end well. Costs are costs and US costs are much higher than Mexico, China, Vietnam, Africa or Brazil and Ford closed all plants in Brazil???? China moved in. Ford had their most advanced assembly plant down in Bahia and if theft couldn't make any money down there? Hmnn...... Ford quality was always an issue forever too I mean they couldn't make a hood latch that didn't fail after over 100 years??? My '63 Ford Galaxy hood popped on the Trans Canada and my son's Fusion's hood latch failed when it was brand new. The old Ford GT40 was cool though. I miss my '77 Olds Delta 88 Royale Brougham Coupe! side beam protection a ride you wouldn't believe and red velvet cushiony seats! What a comfy car and a tank.

[Josh Borenstein]

$STLA looks like a smart buy once it goes down with the inevitable UAW strike. I’m hoping an auto chip supplier like $NXPI or $MCHP also gets crushed - so I can buy the dip.

[Willy C]

There are no reasons unions are needed in the United States in this day and age. Yes unions made sense in the 20th century but now not so much as there are ample legislation and regulation in place so workers are protected. Corporations need to eliminate unions so they can flourish and compete competitively globally as well.

[wboz]

Ford announced today they're cancelling the Edge, Escape and Transit Connect as they pivot more to EVs.

Just digging your hole deeper, guys. They couldn't make a decent compact SUV (the Edge was widely seen as uncompetitive when it came out), so they think they're going to be able to make a better SUV with more expensive parts going into it .... ?

[swarfer]

Sins of the Big Three are numerous and long standing. Outside commercial vehicles, pickups and niche models, they have really have nothing competitive. Ford does have half of Mazda, but their own models have long been eclipsed. And this is just the ICE market. This is the result of both bad management decisions and high labor costs compared to the rest of the world. In the last 50 years, every established unionized manufacturing industry in the US has either disappeared, dramatically downsized, merged with foreign entities or out sources. When your country practices inflationary economics, no longer rules the world and squanders trade advantages and goodwill, eventually it has to pay a price. Few will benefit from the result of UAW negotiations when the dust settles except for foreign manufacturers and workers. The trend continues.

[daviry2367]

@swarfer well said. Ford and other U.S car manufacturers have had death spiral leadership for decades. If it wasn't for the Chicken tax the "big three" would be totally dead and not on life support as they are today.

[gametv]

@swarfer unionization is NOT the way to increase worker pay. how about stopping the flood of illegal immigrants across the border Biden?

[solucky]

@gametv

" NOT the way to increase worker pay. how about stopping the flood of illegal immigrants across the border Biden?"

Guess its nothing in relation to europe...the bigger problem might be that todays consumers simple want consume as much as possible = pay low.

How many illegal immigrants do you have in the US / year ?

[cuzin GJ]

As my economics professor “Dickie” Dean at Kettering ( GMI ) stated in early 70’s: what does the UAW want ? “ more now”. After 35 years in Detroit auto industry I can assure you the new union top dog starts with outlandish list of desires, and negotiations will fine tune the demands. He is salivating after UPS deal with Teamsters. With the huge costs associated with forced move to EVs, and reluctance of customers to buy them ( infrastructure no where ready for mass appeal, and battery concerns, etc ) the US Big 3 face a challenging decade. My guess says select Stellantis sites get initial strikes. GM will be next target where big profit SUVs are produced. GMs Mary Barra is sharp, but how will she fare in this crucial negotiation ? Ford’s Farley hurts the stock price whenever he spouts verbiage. The Biden administration and EPA are putting the squeeze on ICE vehicles. Best to avoid automakers as investments these days. Enuff rant from me !

[HPBunker]

@cuzin GJ

A good rule of thumb is to avoid all companies with heavily unionized work forces. Even if you're a union member yourself, when you buy stock, you're an owner, and should think like one.

[clcellve]

@HPBunker John Deere is a UAW labor company, and Deere seems to do pretty well.

[scr00ge22]

In foreign countries the unions would go after the imports to cripple them!! The Domestic manufacturers would get an advantage. Here we do the opposite!!

[solucky]

@scr00ge22

" Here we do the opposite!!"

With an brain you buy local...a reason why Tesla dont dominate in europe or asia

[nicolaskritzinger1]

@solucky you sure Tesla dont dominate in europe or asia??

[solucky]

@nicolaskritzinger1

" you sure Tesla dont dominate in europe or asia??"

2% is not really dominating...
And even in the government created BEV market 12-20% here.

For Germany some subsidies run out in september = declining sales untill the end of 2023

[katmandu100]

Interesting info.

[Rocco million]

I mean labor has made all the sacrifices since the bankruptcies and restructuring. Legacy Auto has been eliminating base models and cutting back on production to induce scarcity and high prices. They offshore jobs and screw over their workers and still prices are unreasonably high contributing to our cost of living crisis. Only Tesla is ramping and innovating to really drive costs and prices down, thus delivering more value to end consumers. But legacy auto acts like it's labor that's being unreasonable, and they suggest the union is going to hurt consumers as if consumers are happy now. Smh. It's a mess.

[d0d0ramefasolated0]

@Rocco million Roçco you are correct it's not the unions that will take the big3 down. The epa incompetent mgmt and foreign competitors will. The union will just give them a little push to speed the inevitable along. Some grievances are valid (not 32hr week) but in the end what they win will slide away in a few years. Most can't afford the product now so how to sell?? No one wins as it is. If you get the epa to get out of the business then you may has a chance , it politically. I the pols can keep out the vehicle made in slave camps you may have a chance. But they won't. So try your best and if you lose in a couple of years it should not be a surprise to have no American vehicles made in the usa.

[Rocco million]

@d0d0ramefasolated0 people like to say the consumer should choose, but we don't let consumers choose cocaine for example and I don't hear capitalist bitching about that. It's our govts job to provide for the COMMON defense and GENERAL welfare so America can exist in perpetuity, per artical 1 section 8 of our constitution. Basing our economy on obsolete and toxic fossil fuels is the opposite of that. EVs and Renewables are better in every way. If companies do the right thing like Tesla and Byd, they will not only survive but they will be more successful. Even without the EPA the biggest markets in the world are going EV and it's costing legacy auto market share.

[MikeJ 47]

@d0d0ramefasolated0 Tesla is an American vehicle.... with huge and growing production facilities.

[sam026]

OK all you pro Tesla folk, you honestly think Tesla employees won't be asking for their wages to match whatever the final UAW settlement comes out in the end?

Don't forget that no company or magic product can continue to grow exponentially forever. Once Tesla and/or EVs reaches their proper market level Wall Street will fall out of love and it could get ugly.

[NopeNutGunnaHapN]

@sam026 Tesla employees across the board make more than UAW workers.

[J2568]

@NopeNutGunnaHapN you get your own opinions, but you don’t get your own facts….

Today, Ford Motor Co., General Motors and Stellantis spend at least $64 per hour on each worker's wages and benefits. That's more than the roughly $55-per-hour cost at the transplant automakers that use nonunion labor. Hourly labor costs for Tesla Inc. are believed to be even lower, between $45 and $50 per hour.

[wilderness]

@NopeNutGunnaHapN That is not surprising. That was the way it was back in my manufacturing days. The non-union plant worker got paid more and out produced the union plants. Over time the unionized plants were closed, not because of pay levels, but because of lower productivity resulting in higher product cost. The only place unions thrive is ones that work for the government where there are no competitive pressures, no concern about going out of business, and an unholy alliance between politicians and unions (higher pay and benefits in exchange for getting elected).

[Colorado Oilman]

If GM had the same TSLA fan boys - a 60PE would put it at over $360.
I won't buy GM to help UAW folks have guaranteed pensions - when everyone else except for govt workers - do not.
No pension return should ever be guaranteed. Taxpayers wind up paying.
UAW workers should be treated the same as retail, fast food, grocery store workers.
They have the same education and work just as hard or harder IMHO.

[Rocco million]

@Colorado Oilman GM don't get Tesla fans because they don't compare to Tesla. Lol

[High Yield FIREVestor]

Unions have made it hard for these legacy auto makers to transition. They're sucking the lifeblood outta F. GM, etc. Unfair advantage to TSLA. Vultures, Biden unions are.

[porky11]

@FirstFIREWealth_P01135809 History Lesson: Unions were around before the current administration.

[solucky]

@FirstFIREWealth_P01135809

" Unfair advantage to TSLA"

At least for Germany and slavery wages...

Today you save money...tomorrow you dont get talents...and next week you lost some " social " cunsumers.

Tesla is just attacked here for non legal union attacks...seems free speech is exclusive for mighty Elon.

Sure Elon will loose any case and talenst will think twice if they want work in such an enviroment.

german:

www.anwalt.de/...

[vooch]

@solucky

Elon learned how to treat workers from his Father who owned a Emerald mine during the worst Apartheid days in South Africa

[Who Dat?]

The winners are Toyota/Lexus and Hyundai/Kia. They have the most diversified portfolios (BEVs, Hybrids, PHEs, FCEV) with mfg plants worldwide.

[d0d0ramefasolated0]

@Who Dat? Can't be Toyota as they won't produce vehicles

[scr00ge22]

@Who Dat? And NO unions!

[eeeW]

#UnionStrong. More power to the newly energized and member direct, member powered United Auto Workers union locals and their 154,000 members in the USA factories.
It is about time they share MORE of the immense wealth that Ford, GM, and Stellantis have raked in over the last 10 years.
Also great praise to the UAW researchers who have pointed out the huge profits, the BILLIONS squandered on stock buybacks, and the huge payments to CEOs over the same time periods.
Good pensions, a balance of home and work life, a uniform pay scale for equal work, and a shortened work week should be goals not just for the UAW members but for ALL Americans.

[WillLong]

@eeeW Shortened work weak, a lower paid weaker CEO, thinking that buybacks are a bad idea.... will surely lead to bankruptcy. My only hope is that my tax dollars dont bail them out and they are allowed to die. I don't mind unions, but they need to compete with non unions shops and prove they can do as well...

[Wapiti19]

@eeeW That’s funny.

[manassehgroup]

@eeeW I remember the UAW shutting down the economy in Michigan multiple times when I was a kid growing up there. Seems like nothing has changed. I don't see Tesla or Hyundai having problems.

[MrAwesometown]

I have invested in GM, off and on again since 1995. The only way to make money in GM is to buy it when its low and sell it in 6-18 months when the price pops. I sold 2/3 of my position in late July at 39, wish it was 100% now. I may buy SOME of it back after the strike starts and drops the price down to or below $30. I plan to put the other portion in SPY, VOO or IVV.

[Ramon_13]

Detroit auto continues to flounder in its poor management & inefficiency.

[ble373]

TSLA is not a regular auto manufacturing company IMHO.

[eeeW]

@ble373 so sick of the played-out BS over and over. Yeah, so what?

[ble373]

@ble373 That being said, TSLA has returned 50% in a short time for me while holding Ford losses the whole time. So I keep one share each of GM and Ford with limit order reentry for starter positions at the 52 week lows.
When they hit I'll build positions. Until then I reenter and add to TSLA at 265 or better every time with limit orders. Take profit at 302.
TSLA is at a full position right now cost averaged $243. A money pump.
Ford & GM are pure car EV plays waiting in the wings. They won't take off until they build their best seller EVs, and they will, along with Toyota and Honda.
Never bet against Uncle Sam. You loose every time. Ford makes the best Quality Autos in the US . It goes to show it ain't the worker's, it's the employing company's management which determines product suitability (quality vs price).

[EBIX EBUCKS]

@ble373 Ford has not only the worst quality but probably the worst management as well. They shoot themselves in the foot on what seems to be a monthly basis.

[Finding Your Retirement]

this is why I advocate moving all US manufacturing jobs to mexico. Instead of buying everything from china, make it in mexico. This would alleviate border crossing, create a new partner in trade, and lower cost overall.

It's really a failure on GM and F for doing their job correctly.

[wboz]

@Finding Your Retirement then, acquire mexico!
:P

[Who Dat?]

@Finding Your Retirement
Ross Perot would have your nuts for suggesting it.

[Cut2theChase]

@Finding Your Retirement
They tried that, then came the boogeyman on doing business in Mexico and US jobs. Recall Trump rewriting of Mex-Canada-US trade agreement, and detailed disclosing of content percentage regulations?

[jack kreg]

Big Labor's collusion with the Detroit auto monopoly sent more jobs overseas than any other factor over last 4 decades.
We are talking millions of manufacturing jobs!