Both General Motors Co. (GM) and Ford Motor Co. (F) could experience significant stock market pressure this week if U.S. auto workers follow through with their plans to go on strike. However, the selling pressure has already impacted both companies' bonds over the past 10 days, as indicated by charts from data solutions company BondCliQ Media Services.
Bond Market Trends
The most-active bonds of both GM and Ford have witnessed a higher volume of selling compared to buying during this period, according to the provided charts. This trend has contributed to the overall decline in bond prices for these companies.
The following table displays the trading volumes for these companies' bonds. The green color represents customer buying, red indicates customer selling, and blue represents dealer activity.
GM faces a more significant challenge with upcoming refinancing needs, as illustrated in the chart showcasing each company's outstanding maturities. This highlights the importance of addressing these requirements effectively in the coming year.
Around 146,000 U.S. auto workers are expected to initiate a strike this week if GM, Ford, and Stellantis fail to meet their demands. These demands include substantial pay raises and the reinstatement of previous concessions made by the workers during the companies' financial hardships. The United Auto Workers union president, Shawn Fain, has emphasized that any company failing to reach an agreement before their union contract expires will face a strike.
Progress and Potential Disruptions
Negotiations between both sides have commenced with discussions surrounding wages and benefits. Although some progress has been made, there is a possibility that a final agreement will not be reached in time to prevent walkouts at multiple factories across different states. Any potential strike is expected to cause significant disruptions to auto production within the U.S.
Opinion: It is crucial for the Big Three automakers to prioritize the well-being of the workers who play a key role in their profitability.
Union Demands and Negotiations
The union is currently seeking substantial raises in general pay for a four-year period. If their demands are met, the per-hour pay for top-scale assembly plant workers would increase from $32 to approximately $47.
Wage Tiers and Working Hours
In addition to pay raises, the UAW is pushing for an end to varying tiers of wages for factory jobs. They are also requesting a reduced working week of 32 hours, while maintaining full pay for 40 hours of work. Furthermore, the union is advocating for the restoration of traditional defined-benefit pensions for new hires, who are currently only offered 401(k)-style retirement plans. Additionally, they are requesting the reinstatement of cost-of-living pay raises as part of their benefits package.
Representation at EV Battery Factories
One of the union's key priorities is representing workers at 10 electric-vehicle (EV) battery factories. Many of these factories are being established through joint ventures between automakers and South Korean battery manufacturers. The UAW wants these plants to offer top UAW wages. This is particularly important as the auto industry continues its transition towards EVs, and workers who currently produce components for internal combustion engines will need new employment opportunities.
General Motors (GM) and Ford have responded to the union's demands by offering 10% pay raises over the course of four years, along with lump-sum payments. Stellantis, formerly known as Fiat Chrysler, has proposed a higher wage increase of 14.5% over the same period, excluding lump sums.
The possibility of a strike has impacted the stock performance of GM and Ford. Over the past three months, their stocks have declined by approximately 9%. In contrast, Tesla Inc., which does not have a unionized workforce, has seen an approximate 8% increase in stock value during the same period.
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