After winning an important victory for employees of Detroit’s “Big Three” automakers, the United Auto Workers (UAW) union isn’t slowing down. The union successfully secured new contracts for workers at Ford (NYSE:F), General Motors (NYSE:GM) and Stellantis (NYSE:STLA). Now, the UAW is focused on doing the same for employees at automakers without unionized workforces.
One logical target for the UAW is Tesla (NASDAQ:TSLA), which has a history of anti-union policies. Indeed, the electric vehicle (EV) maker’s workers have spoken out before about Tesla’s track record of shutting down pro-union activity. Now, though, a group of U.S. senators has signed a letter urging CEO Elon Musk and other auto industry leaders not to interfere with union talks. While this may sound like bad news for EV stocks, it doesn’t have to be.
According to recent reports, the coalition of senators includes Gary Peters (D-MI), Ron Wyden (D-OR) and Patty Murray (D-WA), among others. This group sent a letter to Musk as well as the leaders of other automakers, including Toyota (NYSE:TM), Hyundai (OTCMKTS:HYMTF) and Rivian (NASDAQ:RIVN). As Reuters reports, the group firmly believes that when the UAW comes knocking, management should remain neutral and not employ union-busting tactics.
What This Means for EV Stocks
EV stocks are down today, but that likely isn’t due to this news. On the contrary, working with the UAW rather than fighting it could prove beneficial to the remaining non-unionized automakers.
That doesn’t mean all CEOs will comply easily, though. Musk has made it clear how he feels about unions. When the UAW announced plans to help the workers of all non-unionized automakers organize, he stated, “I disagree with the idea of unions.” The CEO added that he believes unions “naturally try to create negativity in a company.”
Known for his stubborn nature and willingness to dismiss any workers or colleagues who disagree with him, Musk is likely to ignore the senators’ advice. On top of that, he has a history of levying criticisms at Democrat politicians, such as Elizabeth Warren and Bernie Sanders. Musk’s response to the recent letter will probably be along similar lines. However, doing so might be to Tesla’s detriment.
When the UAW reached a settlement with all three automakers, ending the strike of 2023, I wrote that it made all three auto stocks “screaming buys.” Why? Because unionized workers can help a company grow and thrive. A 2021 study published in the Journal of Corporate Finance provides the following context:
“We find that the effect of unionization on crash risk is stronger among firms with greater risk-taking, more overinvestment, and higher opacity. These results suggest that unionization reduces stock price crash risk by limiting risk-taking, constraining overinvestment, and improving information flow.”
The Road Ahead
The popular consensus among the financial community often is that unionizing is bad for a company. However, as InvestorPlace contributor Will Ashworth has noted before, companies with pro-labor policies can actually thrive. Examples that Ashworth cites include UPS (NYSE:UPS) and Caterpillar (NYSE:CAT). There’s no reason EV stocks can’t enjoy the same type of strength and growth.
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.
