SPAC king Chamath Palihapitiya has commented on the ongoing strike by the United Auto Workers union, which has paralyzed operations at the Big Three factories in Detroit, viz Ford Motor Co. F, General Motors Corp. GM and Stellantis NV STLA.

What happened: “The unions have decided to cut off their noses to spite themselves,” Palihapitiya said in one post on X on Friday.

If the labor agreement goes through, it will “destroy the legacy OEM automakers,” he said. The options before automakers are to automate unionized humans and replace them with robots or to dismantle the unions, he said, adding: “[neither] Are possible.”

Should the plan go ahead, Palihapitiya said he expected automakers to “bleed money,” adding that such an event would represent the “tipping point toward structural long-term insolvency.” Capital markets likely won’t allow automakers to raise long-term capital unless the automakers pay exorbitant interest rates, he said.

Also Read: The 10 Big 3 Auto Suppliers to Watch as the UAW Strikes

“Furthermore, the demand risk for these OEMs is that hyper-automated/non-union competitors like $TSLA may now run away from the auto market entirely because they can aggressively drive down prices,” the venture capitalist and founder of Social Capital said.

“Ford, Stellantis, etc. will be forced to increase prices to finance this labor agreement,” he added.

Why it matters: The UAW’s demands include:

  • A 40% increase in hourly wages over four years
  • Reduced 4-day, 32-hour week
  • Faster route to top pay
  • Switch back to defined benefit pensions
  • Cost of Living Adjustments
  • More than five weeks of vacation
  • More paid vacation
  • Extended parental leave

Ford said it would have lost $14.4 billion over the past four years if current demands had taken effect, instead of posting a profit of nearly $30 billion Charlie Billello, Chief Market Strategist at Creative Planning.

Deepwater Asset Management Gene Munster said that even if automakers agreed to a 25% wage increase, production labor costs for the Big Three would be 40-45% higher than Tesla’s, putting them at a significant disadvantage.

Read more: Amid UAW strike, Biden says shift to electric vehicles should benefit both workers and automakers

Photo: Shutterstock

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