Labor Deals in the Car Business: Closer Than Expected


Labor deals in the car business seem to be within reach, particularly when it comes to a deal between the United Auto Workers (UAW) and the Detroit-Three auto makers. Surprisingly, the key to this progress lies just north of the border.

Recently, Ford Motor (ticker: F) made an announcement indicating a positive step forward. The Canadian union, Unifor, which represents some of Ford’s employees, has ratified a three-year labor deal that negotiators agreed upon on September 19th. This agreement includes attractive benefits such as a C$10,000 signing bonus for full-time employees and annual wage increases of 15% throughout the contract’s duration.

While the 15% figure might sound impressive, it’s worth noting that it translates to an average annual increase of about 4.8%. However, there are additional cost-of-living adjustments mentioned in the news release that provide “significant inflation protection.” Although Ford hasn’t provided further clarification, when combined with the base wage increase, it is estimated that the average annual increase would fall within the range of 5% to 6%.

Bev Goodman, CEO of Ford of Canada, expressed her appreciation for the contributions of the Unifor-represented autoworkers, stating that this contract invests in their talented and dedicated employees. It ensures that Ford’s Canadian operations will continue to thrive by equipping them with the necessary skills, knowledge, and processes to remain competitive and successful.

The success with Unifor has now shifted the focus to reaching an agreement with the United Auto Workers (UAW) union consisting of Ford, General Motors (GM), and Stellantis (STLA). Unfortunately, the UAW expanded its strike against these three auto makers on Friday. In solidarity, workers at GM and Stellantis parts and distribution facilities have joined the picket lines, bolstering the current strength of protests to approximately 13,000 workers.

While UAW workers have been striking at Ford’s Detroit Manufacturing Complex, it’s worth noting that no additional Ford facilities have been impacted. This strategic decision reflects the progress made during negotiations, suggesting that a resolution might be imminent. As negotiations continue, the industry eagerly awaits the outcome of these labor deals—a development that investors have been closely monitoring.

Unifor Negotiations and the Outlook for U.S. Auto Companies

The recent Unifor negotiations, although receiving less attention from investors, carry significant implications for the auto industry. While negotiations in the United States have been characterized by heated debates and clashes between UAW President Shawn Fain and automakers, the Canadian deal offers a glimmer of hope. It suggests that a favorable outcome for U.S. workers may not be too far off.

Comparable to what auto makers are offering American workers, the Canadian deal includes a 15% wage increase with inflation protection. However, it remains uncertain whether the UAW will settle for a similar agreement. Initially, the UAW requested wage increases exceeding 40% coupled with reduced working hours.

At present, no immediate resolution is in sight. Ford stated in an email on Sunday that negotiations are ongoing, but there are still significant gaps to be bridged regarding key economic issues. Ford emphasized the interconnected nature of these issues, stressing the need for an overall agreement that fosters mutual success.

The UAW has been on strike for approximately 10 days, with the most notable strike occurring against GM in 2019 lasting 40 days.

The market response to these developments is telling. In premarket trading, Ford stock declined by 0.2%, while both S&P 500 and Dow Jones Industrial Average futures dropped by 0.1%. Similarly, GM and Stellantis shares experienced a decline of 0.3% and 0.6%, respectively.

Putting these recent events into perspective, both Ford and GM shares have witnessed a decline of about 17% and 15%, respectively, since July when labor rhetoric began escalating. In contrast, the S&P 500 has experienced a decline of roughly 3% over the same period.

In contrast to their American counterparts, Stellantis stands out as a more global company with significantly lower stock valuation. Trading at less than 4 times estimated 2024 earnings, Stellantis stock is considerably cheaper compared to Ford (trading at less than 7 times) and GM (trading at less than 5).

In conclusion, while the Unifor negotiations have largely flown under the radar, they carry substantial implications for the U.S. auto industry. Investors closely monitor these developments as they await potential breakthroughs in labor negotiations, which could significantly impact the market value of major auto companies.

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