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What a Big Three Strike Means for Auto Stocks: An Update on the UAW Strike in 2023

Workers' rights are at a turning point as numerous strikes take place across the country. As of this week, talks between the Alliance ...

Update on the UAW Strike in 2023

Workers' rights are at a turning point as numerous strikes take place across the country. As of this week, talks between the Alliance of Motion Picture and Television Producers and the striking actors' and writers' unions appear to be at a standstill. A United Auto Workers (UAW) strike is imminent, and in the meanwhile, emotions are building in Motor City.


Tonight is the deadline for the Big Three automakers and the big union's contracts to be renewed. A strike will probably happen if the parties involved in the negotiations can't come to an agreement before midnight. That would be problematic for Ford (NYSE:F), General Motors (NYSE:GM), and Stellantis (NYSE:STLA), which would likely drive the price of car stocks even lower.


How should investors proceed given that the U.S. auto industry's future is uncertain? Let's get a closer look.


What's Going On With Automotive Stocks?

Ford, General Motors, and Stellantis, collectively referred to as the "Big Three" of the automotive industry, have a lot on the line. As the likelihood of a strike increases, all three of the top auto stocks are currently experiencing difficulties. This is to be expected given how unsettled the sector is as a result of the impending strike.

If automakers don't agree to the UAW's demands, it will be obvious that they mean business. According to UAW President Shawn Fain, employees at several auto factories would strategically go on strike if a new deal isn't negotiated by midnight. Fain believes that since it would immediately and directly affect all three businesses, it may "turbocharge the power" of the UAW's negotiators. NPR notes that


If the automakers do not agree to new contracts before the current ones expire just before midnight on Thursday, UAW union members would be instructed to strike immediately at strategic, targeted auto plants. Additional locations would follow at a moment's notice.


Fain's reasoning is really sound. Even though auto stocks are already in trouble, a contract resolution with the UAW wouldn't necessarily hurt the Big Three more. If anything, it might turn out to be advantageous over the long and short terms.


InvestorPlace discovered adequate proof that worker unionization can potentially benefit stock prices when Amazon (NASDAQ:AMZN) fought against unionization initiatives in 2021. A thorough 2019 analysis found that unionization can also reduce the likelihood of a stock price drop.


Additional Motivation to Agree

Not only is reaching a settlement with UAW a wise move, but it may also help investors. In contrast to their colleagues in the electric vehicle (EV) sector, auto stocks have been declining today. Today, both Tesla (NASDAQ:TSLA) and well-known EV rivals Lucid (NASDAQ:LCID) and Rivian (NASDAQ:RIVN) are rapidly gaining. Increased petrol costs have fueled demand for EVs as strikes continue.

Additionally, this makes it a very bad moment for businesses with significant investments in EV production to encounter any difficulties. The Big Three automakers fit that description as well; they may go on a company-wide strike as soon as tomorrow. These businesses should take the appropriate measures to prevent any more production interruptions unless they want their trendy competitors to grab an even greater portion of the EV market. That requires settling on a contract before the clock strikes twelve.


Samuel O'Brient had no stakes (direct or indirect) in any of the securities referenced in this article as of the date of publishing. The Publishing Guidelines apply to the author's opinions as expressed in this post.


For more than three years, Samuel O'Brient has covered financial markets and examined economic policy. His specialties include green energy, NFTs, and stocks for electric vehicle (EV) manufacturers. O'Brient delights in assisting everyone in comprehending the intricacies of economics. According to TipRanks, he is among the top 15% stock pickers.


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