Despite a partial strike by the United Auto Workers (UAW) and the failure to reach a new contract agreement, the stocks of the Detroit Three auto makers have shown resilience, inching higher on Friday.
Stock Performance
In afternoon trading, Ford shares (ticker: F) experienced a 0.1% increase. General Motors (GM) saw a rise of 1.1%, while Stellantis (STLA) advanced by 2.1%.
Market Reaction
Although the stocks initially declined in premarket trading, Wall Street seems to have taken the strike in stride. Analysts suggest that the expectation of only a short-term strike has helped fuel the increase in stock prices.
Wedbush analyst Dan Ives stated his optimism that the strike will last no longer than two to three weeks. GM's Chief Executive Mary Barra echoed this sentiment on CNBC, expressing her belief that the strike could be resolved "very quickly."
Potential Impact on EV Initiatives
However, if the strike extends beyond four weeks, there may be repercussions for electric vehicle (EV) initiatives. Ives warns that a longer strike could delay EV efforts in 2024 by three to six months. If the strike continues for six to eight weeks, it would be a significant setback for the industry.
Limited Impact on Three Specific Plants
Morningstar analyst David Whiston notes that markets may find solace in the fact that the strike is currently limited to three plants only. The targeted plants include a Ford plant in Wayne, Mich.; a GM facility in Wentzville, Mo.; and a Stellantis assembly complex in Toledo, Ohio.
Whiston speculates that the UAW may be strategically giving these companies one more chance by first targeting assembly plants before potentially escalating to powertrain or stamping facilities.
Despite the ongoing strike, investors remain cautiously optimistic about the future of the Detroit Three auto makers.
UAW Strike Affects Automakers and Investors
Analysts and experts continue to weigh in on the United Automobile Workers (UAW) strike and its impact on automakers and the stock market.
Strike's Start and Financial Impact
According to Wells Fargo analyst Colin Langan, the UAW strike began on a smaller scale than anticipated. Fitch Ratings Senior Director Stephen Brown believes that the financial impact on major automakers will be limited, as only one plant from each of the three manufacturers has been affected so far. However, if the union targets plants with a larger impact or expands the strike to more facilities, the pressure could intensify over time.
Potential Upside for the Big 3
Despite the disruption caused by the strike, Louis Navellier, founder of Navellier & Associates, sees a silver lining. The UAW strike has resulted in 12,700 workers being walked out of Ford, GM, and Jeep plants. Navellier points out that there is currently an excess inventory of vehicles produced at these affected plants. Hence, the strike will actually help the Big 3 automakers bring their inventory levels under control.
Volatility Ahead for Auto Stocks
Investors should brace themselves for volatility in the coming weeks. Langan predicts a "tremendous" amount of volatility as positive news regarding progress in negotiations could drive stock prices higher, while negative developments such as more plants joining the strike or failed deals could lead to a decline in stock prices.
In summary, while the UAW strike presents challenges for automakers, it also carries some potential benefits in terms of inventory management. Investors should closely monitor the situation and prepare for volatile market conditions.
