The United Auto Workers (UAW) union is showing Motor City that it isn’t messing around. Since the workers launched their historic organizing effort last month, their reach and influence has grown significantly. Now, the union is gearing up to hit Ford (NYSE:F) — and F stock — where it may hurt the most.
The UAW has told workers to begin striking at the Ford Kentucky Truck Plant, a large-scale production hub at the core of the company’s operations. According to Reuters, this plant is Ford’s most profitable operation and is responsible for roughly $25 billion in sales on an annual basis. Halting operations could significantly set the company’s production goals back. F stock is struggling today as a result of this news and this volatility is likely to continue.
Does this mean that investors should also be worried about the other companies that make up the “Big Three” of Detroit? Let’s take a closer look at the strike’s recent developments and what they mean for Ford, General Motors (NYSE:GM) and Stellantis (NYSE:STLA).
What’s Happening With F Stock?
Despite the ongoing strike, all three auto stocks have managed to rise this week. However, this momentum appears to have mostly run out today. STLA, GM and F stock are all down almost 2% on the news after some volatility this morning. None of the “Big Three” auto stocks look primed for a comeback, either. This is likely because the UAW has made it clear it has no intention of backing down until demands are met.
Experts like InvestorPlace contributor Paul R. La Monica have speculated that the UAW strike could ultimately end up boosting stocks. La Monica cites that demand for vehicles isn’t subsiding, implying that these companies could quickly rebound. But there’s no denying that the strike reaching the Kentucky Truck Plant is bad news for Ford. This factory is where it builds many popular vehicles, including its Super Duty and Expedition models. Detroit Free Press reports:
“Now Ford stands to lose roughly $30 million per day in profit with the truck plant on strike, Todd Dunn, the president of UAW Local 862 who led his members to the picket line, told the Louisville Courier-Journal. By taking out the Kentucky Truck Plant, Ford could see the Louisville Assembly Plant and the Ohio Assembly Plant fold within one to two days since they rely on the truck plant for stamping, among other things, Dunn said.”
Every new set of factory workers that joins the fight demonstrates that workers are willing to shoulder financial burden for the sake of labor rights. Indeed, workers are showing a clear commitment to bringing about change in their industry. The fact that F stock is struggling in response to the news is a further indication that Ford would be better served to take the necessary steps in negotiations to end the strike.
The Road Ahead
Despite the undeniable need for the “Big Three” automakers to meet the UAW’s demands, these companies don’t seem close to a compromise yet. Until they do reach a deal, though, all three stocks will likely continue to struggle.
After a difficult two quarters, F stock needed a catalyst to push it forward. Instead, has gotten a historic labor movement that could significantly set back production goals. Looking forward, investors should approach all three of these stocks with caution until their respective companies indicate they are closer to reaching an agreement with the union.
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.
