Stocks for the Detroit Three auto makers inched higher on Friday, despite a partial strike by the United Auto Workers after the union and the companies failed agree on a new contract.
General Motors
(GM) rose 0.8% to $33.94 and
Stellantis
(STLA) advanced 2.1% to $19.24.
Ford
shares (ticker: F) were flat, closing at $12.62.
The stocks had initially declined in premarket trading, but Wall Street appeared to take the strike in stride.
The contract between the UAW and three auto makers expired at 11:59 p.m. Eastern on Thursday, and the union called workers off the job at three auto plants: a Ford plant in Wayne, Mich.; a GM facility in Wentzville, Mo.; and a Stellantis assembly complex in Toledo, Ohio.
UAW President Shawn Fain said the partial strike was designed to give the union maximum flexibility at the bargaining table.
The UAW has pressed for a 40% pay increase, spread out over a four-year contract, among other demands. Ford and GM have said their companies have made generous offers, and Stellantis said its bargaining team approached “each discussion with…a commitment to reaching a fair agreement….”
On CNBC, GM Chief Executive Mary Barra said she believes the strike could be resolved “very quickly.”
Expectations for only a short-term strike helped push the stocks higher, Wedbush analyst Dan Ives told Barron’s. He said he was hopeful the strike would last no more than two to three weeks.
“The fear, if it’s longer than four weeks, is this could push out some EV initiatives in 2024 by three to six months,” Ives said. “And if this goes six to eight weeks, it would be a body blow ‘Nightmare on Elm Street.’”
Morningstar
analyst David Whiston noted markets may like that the strike is targeted to only three plants for now.
“I think many, including myself, were expecting initial strikes at powertrain plants but instead they are first targeting assembly,” Whiston wrote. “Maybe the UAW wants to give them one more chance before they go after powertrain or stamping facilities.”
Wells Fargo
analyst Colin Langan agreed, and told Barron’s the strike started much smaller than expected.
Fitch Ratings Senior Director Stephen Brown told Barron’s that the strikes would have a limited financial impact on the three major auto makers, with only one of each of their plants impacted for now. However, pressure could intensify over time if the union shifts to plants with more of an impact or adds more plants to the strike.
And at least one analyst saw some upside to the situation.
The UAW walked 12,700 workers from a Ford plant in Michigan that makes Broncos, a GM plant in Missouri that makes Chevrolet Colorado pickups and a Jeep plant in Ohio that makes Wrangler SUVs, wrote Navellier & Associates founder Louis Navellier.
“There is currently an excess inventory of these vehicles on dealer lots, so the UAW strike will help the Big 3 get their inventories under control,” Navellier wrote.
Still, investors shouldn’t expect much calm for auto stocks in the near future.
Langan said he expects a tremendous amount of volatility ahead, as positive news of progress could drive stocks higher, and negative news of more plants getting involved or deals not being made could bring stocks down.
Write to Angela Palumbo at [email protected]
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