It’s a pivotal time for workers rights as multiple strikes unfold across the United States. As of this week, negotiations appear to be at a standstill between the Alliance of Motion Picture and Television Producers and the striking groups of actors and writers. Meanwhile, tensions are rising in Motor City as a United Auto Workers (UAW) strike looms.
Contracts between the large union’s workers and the Big Three automakers are set to expire tonight. If the negotiating parties can’t reach a new deal before midnight, a strike will likely ensue. That would mean trouble for Ford (NYSE:F), General Motors (NYSE:GM) and Stellantis (NYSE:STLA), likely pushing auto stocks down further as a result.
How should investors proceed as the future of the U.S. auto industry hangs in the balance? Let’s take a closer.
What’s Happening With Auto Stocks?
Commonly known as the “Big Three” of the automotive sector, Ford, General Motors and Stellantis have a lot at stake. All three leading auto stocks are struggling today as momentum for the potential strike rises. Since the pending strike casts considerable uncertainty over the sector, this is to be expected.
It’s clear that the UAW means business if automakers don’t meet their demands. UAW President Shawn Fain has said that if a new contract isn’t reached before midnight, workers will engage in a strategic “stand up strike” at certain auto plants. Fain sees this as a way to help “turbocharge the power” of the UAW’s negotiators, as it would directly and quickly impact all three companies. As NPR reports:
“Under the plan disclosed by Fain on Facebook Live on Wednesday, UAW union members would be instructed to strike suddenly at strategic, targeted auto plants — and additional locations would follow at a moment’s notice, unless the automakers agree to new contracts before the current ones expire just before midnight on Thursday.”
Fain’s logic makes a lot of sense. And while auto stocks are struggling today, it wouldn’t necessarily harm the Big Three further if they were to reach a contract settlement with the UAW. If anything, it could prove beneficial in both the long and short term.
When Amazon (NASDAQ:AMZN) faced off against unionization efforts in 2021, InvestorPlace found sufficient evidence to suggest that worker unionization can also be good for share prices. A detailed study from 2019 demonstrated that unionization can help lower the risk of a stock price crashing, too.
Further Incentive to Settle
The potential benefit for investors isn’t the only reason why settling with UAW is a prudent course of action. While auto stocks have been falling today, their peers in the electric vehicle (EV) space have actually risen. Tesla (NASDAQ:TSLA) is rising steadily today, as are popular EV rivals Lucid (NASDAQ:LCID) and Rivian (NASDAQ:RIVN). While strikes drag on, surging gas prices have helped fuel demand for EVs.
This also makes it a highly inopportune time for companies heavily invested in EV production to experience any setbacks. That description applies to the Big Three automakers as well, who could face a company-wide strike as early as tomorrow. Unless they want trendy peers to gain an even bigger share of the EV market, these companies should take the necessary steps to avoid any further production disruptions. That means reaching a contact agreement before the clock strikes midnight.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.