Factory workers and UAW union members form a picket line outside the Ford Kentucky Truck Plant.
Luke Sharrett/Getty Images
The United Auto Workers shocked investors, and
Ford Motor,
on Wednesday, by walking out of Ford’s huge Kentucky Truck Plant after the company tried to hold fast on what it called the best economic offer out the amount of the Detroit-Three auto makers.
The union’s move appears to signal a new phase in the battle with the UAW looking to inflict more financial pain on Ford (ticker: F), General Motors (GM), and Stellantis (STLA). Investors will have to brace themselves for UAW President Shawn Fain to declare strikes at more-significant plants.
The UAW strike began on Sept. 15 with workers walking out at one plant at each auto maker. Products include the Ford Bronco, Chevy Colorado, and Jeep Wrangler. All products matter, but those aren’t the most important ones at either company.
The strike expanded on Sept. 22 with parts and distribution facilities at GM and Stellantis walking out. It expanded on Sept. 29 to plants making Ford Explorers and Chevy Traverses. Explorer is a big seller accounting for roughly 10% of U.S. volume. Traverse and the similar Buick Enclave account for about 7% of GM’s U.S. volume.
Kentucky Truck is something else altogether. It makes Ford super duty trucks and generates about $25 billion in annual sales, roughly 14% of total sales for the company. BofA Securities analyst John Murphy called the walkout a “serious blow” in a recent report. Each week the Kentucky plant is offline costs Ford 5 cents in earnings per share, according to his estimates. The consensus call for Ford’s fourth-quarter earnings is currently 28 cents a share.
Murphy rates Ford stock at Buy with a $23 price target. Analysts can still have Buy ratings despite all the turmoil because eventually a deal will get done.
Benchmark analyst Mike Ward says that investors should watch out for light-duty truck plants going on strike. Pickup trucks are big profit makers for the Detroit-Three auto makers. In addition to Kentucky, there are plants in Dearborn, Mich., and Kansas City, Mo., for Ford that both build F-150 trucks, Ford’s best-selling product.
GM builds Chevy Silverados and GMC Sierras at plants in Fort Wayne, Ind., and Flint, Mich. Stellantis builds Dodge Ram trucks at its plant in Sterling Heights, Mich.
Any of those plants going on strike means bigger hits to earnings for each company.
The strike is now 27 days old with no end in sight. The UAW’s Fain is scheduled to speak at 10 a.m. on Friday. UAW members, and auto investors, will have to tune in to see how negotiations are advancing, if they are at all.
As of early Thursday, GM and Ford shares are down about 24% and 21%, respectively, over the past three months. The
S&P 500
is down about 3% over the same span. while Stellantis stock is up about 8%.
Stellantis is a more global company than the other two, and the U.S. strike impacts it less, relatively speaking. It’s also a cheaper stock. Stellantis stock trades for less than four times estimated 2024 earnings. Ford and GM shares trade for less than seven times and five times, respectively.
Write to Al Root at [email protected]
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