Shares of American automotive titans Ford Motor and General Motors (GM) saw a 1% decline in early Monday trading, following a cautionary note sounded by the United Auto Workers (UAW) union. UAW President Shawn Fain hinted on Friday that an accord had been reached with the automakers on a substantial 23% wage increase. However, he also conveyed to union members that there remained additional objectives on the horizon. Chief among these is the UAW’s push for inclusion of electric vehicle (EV) battery plant workers under union contracts, alongside the restoration of defined benefit pensions for all laborers.
In the initial stages of negotiations that commenced in mid-July, the UAW had initially put forth a proposal for a staggering 40% wage surge. While an impending deal appears within reach, financial analysts are expressing reservations about the potential economic ramifications linked with the union’s demands. Wells Fargo analyst Colin Langan cautioned that concessions on pension plans could potentially exert a detrimental impact on the profitability of both automakers. He further observed that while Fain’s remarks indicate imminent closure, “most of the update was concerning as Fain interprets increased offers as a sign there is more to get.”
The protracted standoff and contract discussions between the UAW and the automakers have inflicted a substantial toll on the shares of both Ford and GM. General Motors’ share price, for instance, has receded by approximately 27% since the commencement of negotiations in mid-July, while Ford’s stocks have experienced a 23% decrease. Notably, the market valuations of both companies lag significantly behind the S&P 500, with Ford and GM trading at 11.34 and 4.14 times their respective forward earnings estimates.
On Monday, defense contractor General Dynamics reported the formalization of a tentative agreement with the union, securing labor terms for hundreds of its employees. Against this backdrop, the financial and reputational pressures exerted on U.S. auto giants by the UAW’s protracted negotiations and strikes appear poised to continue influencing stock performance in the immediate future.
Charts: Trading View