UAW strike deadline looms as Ford, GM come up short on pay demands

The United Auto Workers' Union looks set to strike for the first time in four years Thursday after failing to reach a pay deal with the so-called Big Three U.S. carmakers just hours ahead of its midnight deadline.

UAW president Shawn Fain has vowed to orchestrate a series of work stoppages over the coming days, with plans to target individual plants of Ford Motor  (F) - Get Free Report, General Motors  (GM) - Get Free Report and Chrysler owner Stellantis  (STLA) - Get Free Report after describing their latest pay deal proposals "deeply inadequate".

A coordinated stoppage at all three automakers would mark the first simultaneous strike in UAW history 

Fain, who had originally backed a 46% pay increase for his 146,000 UAW members, spread over the next four and a half years, has retreated to a demand of around 40%, but that sill falls well ahead of the 20% increase offered earlier this week by Ford. GM's offer was pegged at 18% and Stellantis at 17.5%.

President Joe Biden was said to be "very much engaged" in the talks, according to White House economic adviser Jared Bernstein, and has had direct talks with the CEOs of all three automakers, as well as an Oval Office meeting with Fain earlier this year.

"If they’ve got money for Wall Street they sure as hell have money for the workers making the product," Fain said in a Facebook video late Wednesday. "They pretend the sky will fall if we get our fair share of the quarter of a trillion dollars the Big Three have made over the past decade. "It’s the billionaire economy - that's what they are worried about."

Ford shares were marked 0.32% higher in pre-market trading Thursday to indicate an opening bell price of $12.68 each. GM shares, meanwhile, rose 0.4% to $33.79 each. 

Garrett Nelson, vice president and senior equity analyst at CFRA Research, thinks GM's offer could reflect the fact that it faces higher risks to its business from a prolonged strike. 

"Dealer inventories of GM’s brands stand at significantly lower levels than its competitors," he said. "Therefore, in the event of a strike, we think GM’s inventories could deplete much more quickly."

Shoggi Ezeizat of Third Bridge, however, thinks Ford is the most-vulnerable to any extended work stoppage, owing to its "high concentration in key production facilities and significant dependence on high-margin models" as the F-150 Lightening. 

“Our experts caution that a prolonged strike could trigger far-reaching disruptions in the supply chain and lead to a long-term erosion of market share, in line with historical trends," Ezeizat said. "A closer examination of average days of supply for critical models, coupled with the size of the UAW's allocated strike fund, has raised several red flags for industry observers.”

Anderson Economic Group, a Lansing, Mich., consultancy, published a report last weekend suggesting that even a 10-day strike could cost the U.S. economy around $5.6 billion and tip the economy of the state of Michigan itself into recession.

“If we were to have a long strike in 2023, the state of Michigan and parts of the Midwest would go into a recession,” said CEO Patrick Anderson. “When GM workers went on strike in 2019, you saw gross state product drop in Michigan in the fourth quarter, while in the rest of the country it was largely unaffected."

"That won’t be the case this time if the UAW goes through on its threat to strike all three companies.” he added.

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