The UAW is playing with fire. Ford could be forced to flip the script

The UAW strike entered its fourth day on Monday, with both sides still far apart on the issue of wage increases. Jim Cramer said Monday that Ford, the club with the largest UAW membership of the Detroit Three automakers (D3), has made little progress toward a new labor deal over the weekend. , the club may have to sort things out on its own. protocol. Jim said that by attacking Ford, the UAW was “playing with fire.” He said the automaker may be tired of trying to appease union demands and is simply locking workers out. Ford on Friday temporarily laid off nearly 600 workers at its Wayne, Michigan, assembly plant, which makes the Bronco SUV and Ranger pickup truck. Departments at the facility were also targeted by the strike. These layoffs were not a lockout but the result of these employees being unable to complete their jobs due to the knock-on effect of other striking workers. In addition to Ford’s Michigan assembly plant, the UAW is also halting work at the General Motors (GM) plant in Wentzville, Missouri, and the Stellantis (STLA) center in Toledo, Ohio. About 12,700 UAW workers at the three locations went on strike last week after the union’s old labor agreement with the automaker expired at 11:59 p.m. Thursday. Chrysler parent company Stellantis over the weekend increased its proposal to raise wages for UAW members by 20% over the past 4.5 years, starting immediately with a 10% increase. This offer is comparable to what we’ve already seen from Ford and General Motors, which were also rejected. The UAW initially asked for 40%, but later lowered the requirement to 36%, plus pension rebates and cost-of-living adjustments. The UAW may hope to increase the pressure with more strikes, but D3 is not powerless. We may see them threaten to move some U.S. operations to Mexico if they believe these demands are simply impossible to achieve and that meeting them would put their business at risk. Such drastic measures would be painful for both sides and could take three years to get more plants up and running in Mexico. However, if it had to do so, D3 would likely outlast the UAW, which has limited strike funds and cannot pay unemployed workers. With just three factories out of the way, the union could raise enough money. Ford CEO Jim Farley told CNBC last week that the UAW’s demands would bankrupt the company. The auto strike comes as industry incumbents such as Ford, General Motors and Stellantis are trying to increase production of electric vehicles, but the vehicles are locked in a price war. Goldman Sachs on Monday cut its outlook for electric vehicle leader Tesla ( TSLA ), largely due to lower average selling prices (ASPs). We highlight this research report because Tesla is pretty much the price setter in the electric vehicle market. Therefore, any decline in its average selling price will put pressure on the price of electric vehicles sold by other companies, including D3, which are now facing potential revenue headwinds as they work to expand their EV market share. Sales pressure makes it more difficult for D3 to meet demand from the UAW, which targets D3’s profitable internal combustion engine (ICE) business. However, this dynamic may provide more incentive for D3 to hold its own and consider other production locations. Ford has made electric vehicles central to the company’s future. However, its Model e unit is still losing money. In addition to top-line pressure on the electric vehicle unit and companywide cost pressures from the UAW strike, Ford also needs to work hard to complete the transition from high-margin internal combustion engine vehicles to currently loss-making electric vehicles. GM and Stranis face the same type of challenges. Washington also needs to proceed with caution. President Joe Biden did come out in support of the United Auto Workers on Friday and said automakers needed to share record profits with the workers who make it all possible. However, we don’t know if Biden will be too harsh on D3. Yes, he has to side with the unions — after all, he has repeatedly touted himself as “the most pro-union president ever.” He will no doubt hope to boost that image if he signs a bill to stop a nationwide rail strike in December 2022, as he worries about what it will mean for the U.S. economy. Now that we’re heading into an election, keeping the economy stable and out of recession is more important than ever, especially for the incumbent in the White House. Biden can’t support an auto deal that would bankrupt D3, or a labor deal that would send U.S. auto jobs to Mexico. The president is in a tough spot, as are the UAW and the automakers. And, as we wrote on Friday, many manufacturing workers are watching the strike in hopes that the UAW’s demands won’t accelerate the continued push to automate factory functions, especially now that companies are starting to understand how artificial intelligence can automate things. Run it all. (Jim Cramer’s Charitable Trust is Long F, see here for the full list of stocks.) As a subscriber to Jim Cramer’s CNBC Investing Club, you’ll be on top of Jim Cramer’s CNBC Investing Club (Jim Cramer) Receive trade alerts before making a trade. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. The investment club information above is subject to our Terms and Conditions and Privacy Policy and our Disclaimer. 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UAW President Shawn Fain marches with UAW members in downtown Detroit on September 15, 2023, after UAW members marched in Detroit, Michigan A rally in support of the strike by members of the United Auto Workers union.

Bill Pugliano | Getty Images

The UAW strike entered its fourth day on Monday, with both sides still far apart on the issue of wage increases.Club name Ford Jim Cramer said Monday that the Detroit Three, which has the largest UAW membership among the Big Three automakers, may have to take matters into its own hands after little progress was made toward a new labor deal over the weekend. .

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