© Reuters. FILE PHOTO: United Auto Workers cheer on their union colleagues as they walk off their jobs at the Ford Michigan assembly plant in Wayne, Michigan, U.S., September 14, 2023. REUTERS/Eric Cox/File Photo/File Photo

By Abhijith Ganapavaram and Nathan Gomes

(Reuters) – The U.S. auto workers’ strike hit shares of Ford Motor (NYSE:), General Motors (NYSE:) and their suppliers on Friday amid fears that industrial action at factories that make some of the most profitable vehicles that could affect profits.

The strikes will halt production at three factories owned by the “Detroit Three” automakers, which make the Ford Bronco, Jeep Wrangler and Chevrolet Colorado pickup truck, among other popular models.

Ford and General Motors fell 1% in early trading before reversing course, while U.S.-listed shares of Stellantis (NYSE:) rose 0.5%, as hourly workers represented by the United Auto Workers union (UAW ), began their most ambitious US labor protest in decades.

The escalation came as talks between the UAW and the Detroit Three have yet to result in an agreement, although executives said the talks had made some progress.

Analysts said any deal could be costly and hamper automakers’ investments in electric vehicles.

The UAW chose to lay off workers at some plants rather than all to give its hardline President Shawn Fain some leverage in talks in the next few days while limiting union costs in the form of strike pay, which comes from an $825 million -Dollar funds are paid.

About 3,600 UAW members work at the General Motors assembly plant in Wentzville, Missouri, which produces vehicles such as the Chevrolet Colorado, GMC Canyon and Savanna.

“If everything else remains constant (including the potential for other segments to make up for lost production volume), a Wentzville strike through September would negatively impact our third quarter and fourth quarter GM EBIT by approximately 13%,” said Citi analyst Itay Michaeli wrote in a note.

For Ford, the Michigan plant that makes the Ford Ranger and Bronco models, Michaeli said, “We estimate the monthly impact of the strike in Michigan to be approximately 15,000 units, or approximately $140 million in EBIT (all else being equal).”

The targeted strike could also cause “maximum pain” to automakers given the profitability of SUVs and pickup trucks, Evercore ISI said. But they can increase production to make up for lost sales if the stalemate is short-lived.

The standoff has also become a political issue as President Joe Biden, who faces re-election next year, calls for a deal.

The union has not endorsed Biden’s re-election. His administration is investing billions in federal grants to expand electric vehicle sales, but electric vehicles require fewer jobs.

Some analysts see Stellantis in a better position to deal with the strikes because it is “the most profitable company” among the Big Three.

“It could benefit from a lower break-even point as well as higher inventory days than GM and Ford,” said Monica Bosio, analyst at Intesa Sanpaolo (OTC:).

Since contract negotiations began in mid-July, U.S.-listed shares of Stellantis have risen about 2%, while shares of Ford and GM have each fallen about 17%.

Meanwhile, shares of auto suppliers that supply one or all of the Detroit Three automakers also fell. American Axle (NYSE:) & Manufacturing, Dana Inc and Adient (NYSE:) each fell about 1% before recouping losses.

Supplier Magna International (NYSE:) said on Friday it was monitoring the situation and was prepared to temporarily cut production if necessary.

Source : www.investing.com

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