A surprise UAW strike at Ford boosts the Detroit Three’s stock

Detroit, Oct. 12 (Reuters) – A surprise strike by the United Auto Workers (UAW) on Wednesday at Ford’s biggest and most profitable factory is raising pressure on Stellandis NV and General Motors as negotiators resume contract talks on Thursday.

UAW negotiators are turning their attention to talks with Chrysler-parent Stellandis ( STLAM.MI ) on Thursday, union president Shawn Fine confirmed a Reuters report.

“Hopefully, today’s talks at Stellandis will be as fruitful as yesterday’s Ford,” Fine wrote on social media. Stellandis was not immediately available for comment.

The Kentucky walkout is a warning to Stellandis and General Motors ( GM.N ), whose wages and benefits are lower than Ford’s, according to briefs released by the automakers and the UAW.

Some analysts saw Fan’s decision to close Ford’s Kentucky truck plant, which makes Super Duty pickups and Lincoln Navigator SUVs, a sign that the endgame would begin for the Detroit Three’s nearly month-long combined walkouts.

“The pressure was always needed to force a deal,” Evercore ISI analyst Chris McNally wrote in a note Thursday.

Shares of Ford fell 2.2% to $11.98 in premarket trading.

Last Friday, Fein said the UAW would strike the GM assembly plant in Arlington, Texas, if necessary. GM’s Flint heavy-duty truck assembly plant is another potential strike target. Fine plans a video address on Friday at 10 a.m. ET. In past weeks, Fein has used Friday’s addresses to order additional walkouts or announce progress in negotiations.

Among the most profitable targets at Stellandis are the automaker’s Ram pickup truck plants in Sterling Heights and Warren, Michigan, and two Jeep SUV plants in Detroit.

“It makes everyone pay attention,” said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions. “If they don’t bring anything new to the table from last week, GM and Stellantis should be worried.”

Analysts at Wells Fargo estimated that the Kentucky plant strike would cost Ford about $150 million a week in core profits.

“We think this increase is an indication that the UAW will be closer to a contract proposal with Ford in the next 1-2 weeks,” Wells Fargo analyst Colin Langen said in a note.

The automakers have more than doubled initial wage increases, agreed to raise wages in line with inflation and improved pay for temporary workers, but the union still wants higher wages, an end to the two-tier wage system and expansion of unions to battery plants.

The UAW has room to expand its walkouts and increase pressure on the Detroit Three to offer bigger wage gains, richer pension packages and more guarantees that new electric vehicle battery plants will be unionized.

While 8,700 workers at Ford’s Kentucky Truck plant are now on strike, less than a quarter of the 150,000 UAW workers at the Detroit Three automakers are on strike. However, thousands of people have been out of a job since the non-strike action because the walkouts made their jobs redundant, automakers said.

Ford warned Wednesday that workers at a dozen other factories could be sent home because of the truck plant walkout.

Its Kentucky truck plant, the company’s most profitable operation, generates $25 billion in annual sales, about one-sixth of Ford’s global vehicle revenue.

“There are very expensive items here that can be very profitable,” Fiorani said. “With super duty at this plant, it’s Ford’s largest plant. They’re on target to build 400,000 vehicles this year.”

Fine and other UAW officials called a meeting with Ford for Wednesday at 5:30 p.m. ET (21:30 GMT) and demanded a new offer that Ford did not have, a Ford official said.

“You’ve just lost Kentucky Truck,” said Fine, according to a Ford official and a union source, who spoke on condition of anonymity because the talks were not public.

“Is that all you have for us? Our members’ lives and my handshakes are worth more,” Fine added, according to a union source.

Ford said the decision was “grossly irresponsible, but based on an alleged strategy by union leadership that hurt the Detroit 3 for months through ‘reputational damage’ and ‘industrial chaos’.”

Fine has said his aim is to keep automakers off balance by taking targeted action rather than a total strike on all measures.

“We won’t wait forever,” he said on social media platform X on Wednesday evening. “If Ford can’t get it after a four-week strike, these 8,700 workers closing their biggest plant will help them figure it out.”

Detroit automakers will report third-quarter financial results between Oct. 24 and 31, and the UAW can use what’s expected to be strong profits to press its case for a richer contract.

Before Ford’s announcement on Wednesday, the union had ordered walkouts at five assembly plants, including two Ford assembly plants at three companies and 38 parts depots operated by GM and Stellantis.

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