The labor negotiations between the United Auto Workers (UAW) and the Detroit Three automakers are on the verge of completion, much to the relief of investors. A recent announcement from the UAW confirmed that Union Local 900 has overwhelmingly voted in favor of the new labor deal, with an impressive 82% of members supporting the agreement.
The First Step in Ford’s Assembly Plant
Union Local 900 represents workers at Ford Motor’s Michigan Assembly Plant, and it was this local union that initiated the strike at Ford on September 15. The UAW simultaneously struck all three automakers, causing workers to leave one facility each at Ford, General Motors (GM), and Chrysler parent Stellantis (STLA).
Ford Leading the Way
As Ford was the first automaker to reach a tentative agreement with the UAW, it is expected that Ford’s UAW workers will be the first to conclude the voting process for the new deal. Early positive voting outcomes provide a glimmer of hope for investors, indicating a high likelihood of ratification.
Key Details of the New Deal
If ratified, the contract will remain in effect until April 2028 and entails significant improvements for workers. General wage increases of approximately 25% over the contract’s duration, along with adjustments for inflation, will be granted. Additionally, workers will enjoy an immediate 11% increase in pay upon ratification.
The end of these labor negotiations signals a positive development for both the UAW and the Detroit Three automakers, as they move forward with a sense of stability and assurance. Investors can now breathe a sigh of relief, as it appears that no further surprises lie in wait.
A Look at the Ford-UAW Contract and Stock Performance
The UAW recently announced that the average wage increase for Ford workers will be 35% over the course of their contract. However, this is just an average, and some workers can expect even greater increases. In fact, the lowest-paid Ford workers will receive a remarkable 150% raise throughout the lifespan of the contract, while others will see an immediate 85% bump once the agreement is ratified.
Various factors have contributed to these significant gains. For example, the new contract reduces the time it takes for employees to reach higher wage rates. Additionally, it eliminates wage scales that placed newer hires on a different pay progression with lower maximums.
The negotiation process typically lasts a few weeks, as a tentative agreement transforms into a finalized deal. The UAW Stellantis National Council convened in Detroit on Thursday, with the UAW GM Council scheduled to meet on Friday. These council meetings serve as important steps before sending the deals to members for a vote.
It’s worth noting that each company has its own labor contract and membership vote, although the contracts do have striking similarities and union workers generally receive comparable pay and benefits.
Looking at Ford’s stock performance, it has experienced a downward trend recently. Since July, when labor issues started impacting investor sentiment, Ford stock has fallen by approximately 32%. In contrast, the S&P 500 has only declined by about 3% over the same period.
Furthermore, Ford shares dropped an additional 12% following the announcement of the tentative agreement. However, it is crucial to remember that this contract did not directly cause the decline. Instead, Ford’s disappointing third-quarter earnings report on October 26th was the catalyst for the drop.
While labor issues do play a role in Ford’s stock performance, it is important to recognize that economic factors have an even greater impact.
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