UAW makes history with strike against Big 3 Automakers

Auto workers officially went on strike after failing to reach a new contract agreement with Big Three automakers Ford (F), General Motors (GM), and Stellantis (STLA), before the Thursday deadline.The United Auto Workers union conducted a stand-up style strike, simultaneously picketing at three different plants: General Motors' Wentzville, Missouri facility; Ford's Michigan Final Assembly & Paint Plant; and the Stellantis Assembly Plant in Toledo, Ohio. Approximately 13,000 workers are reportedly taking part in this strike that analysts predict could go on for over a month.Yahoo Finance's Pras Subramanian and Rick Newman discuss how this strike could impact the automotive industry, dynamics among non-unionized auto workers, and its potential effects on auto parts suppliers and used car retailers.

Video Transcript

DIANE KING HALL: The United Auto Workers makes history as the union goes on strike simultaneously against the big three automakers. The strike initially targeting specific plants of GM, Ford, and Stellantis in order to, quote, "cause confusion," as said by UAW President Shawn Fain. Here to break this all down for us is Yahoo Finance's Pras Subramanian and Rick Newman. So Pras, we want to-- hi, Rick. Let's start with you about what's the latest. We knew this was a possibility coming into this, and the clock was ticking yesterday right up until this morning. So what's the latest?

PRAS SUBRAMANIAN: Yeah, the union said that they were going to do this stand up style strike. And they followed through, they did that last night at midnight, basically, like you said, striking at three different plants. And I want to note these three plants are very specific. So it's GM's Wentzville, Missouri plant, which builds midsize trucks and full-size vans. Ford's Michigan assembly, which is, let's say, they note final assembly and paint only. That's what they said about that plant. It's a range of midsize pickups and Bronco SUVs.

JULIE HYMAN: The Bronco, right.

PRAS SUBRAMANIAN: Yes. And the Stellantis Toledo assembly plant, which is the Jeep Wrangler and Gladiator. So these are specific products that are pretty popular amongst those big three customers. So they targeted them specifically. That's what they're going to go to right now, around 13,000 employees, you said, but only a small percentage of the 146,000-ish employees at UAW has under its roster. So very targeted here. They want to do this right now.

A couple of the automakers put out statements saying that they're kind of not surprised, but they're disappointed, basically saying the UAW wouldn't come budge from their initially high demand. So they're kind of disappointed there. A Ford source tells me that this-- if they were to accept all the UAW demands, it would double their labor costs. So they're kind of very concerned about that. But the UAW argues, hey, our cause is righteous here. The CEOs are pulling 20 million bucks a year for GM up the profit guidance.

So there's a lot of back and forth there. Both sides feel that they're in the right. And this battle, I think, and we'll ask Rick, I don't think it's anywhere close to being over.

JULIE HYMAN: Well, before we get to that, just one more thing about tactics that is quite interesting to me here with these targeted plants. As you mentioned, these three plants being affected thus far do make popular models, but they don't make the most popular models, which sort of leaves the UAW with another bargaining chip or another lever, if you will. If they affect production of, say, the F-150, then that ratchets up the pressure, right?

PRAS SUBRAMANIAN: Right. I think they picked models that potentially are popular but not the huge holy grails of GM, say, the full-size pickup-- Ford's full-size pickups as well, Stellantis RAM brand, right? So they didn't do that yet. But I think that the automakers on the outside can actually do something on their end, and they can lock out the workers. That's another option. Hey, you know what, let's get the end game now. Lock them all out and see what happens. That's an option that's being-- not that I've heard that from automakers, but it's been talked about by analysts.

DIANE KING HALL: So Rick, what do you make of all this? We've had this kind of labor uprising that we've seen in different industries and now here hitting the auto sector. What do we think about this trend that we're seeing here?

RICK NEWMAN: Well, first of all, I want to hit on something Pras just mentioned. We're only getting started here. This strike could easily go on for a month or two. And I've talked with some analysts who say 60 days seems to be the point-- the pain point for both sides because that's about how much inventory the Detroit automakers have. It varies by model, but that's an average. And that's also-- 60 days is also the point at which the UAW strike fund would start to run out, and they would not have any money to pay the striking workers anymore.

So that means, I think, this is going to get a lot worse. And I think this is going to be a real test of how Americans actually feel about this. On one hand, if this goes on for more than a month, let's say, it will probably lead to higher prices, not just for the Detroit models but if the Detroit models, SUVs, and if we ever get to pickups, do start to run scarce, then that means all the other brands will be able to raise their prices as well. And we were just getting-- starting to get back to normal in the car market.

I mean, we had all the COVID disruptions, supply chain disruptions, semiconductor shortage. We've talked about this many times, car prices skyrocketed, including used prices because people couldn't get new cars. And that has all sort of been slowly normalizing, and now we have this. So it depends on how long this strike lasts, but my bet is this is going to last for a considerable time and is going to force Americans to pick a side, basically. I mean, are they going to say, yeah, this is fine because workers need to show-- flex their muscles these days? Or are they going to say, we're sick of high car prices. Go back to work and make more cars. I really don't know how it's going to shake out. And I think it's really interesting to watch this.

JULIE HYMAN: And of course, there's a political element, which is your bread and butter. I mean, Shawn Fein really-- with a populist message here, to your point, that sounds good, probably, to a lot of Americans. Given the other strikes that we have seen over the past couple of years and the Biden administration getting involved in many of those cases, to what point do you think it will need to come in this case before the Biden administration steps in?

RICK NEWMAN: It's a great question. And to some extent, Joe Biden has already stepped in before the strike even started because his whole presidency, he has called himself the most pro-union President in American history. So if that is true, Biden is on the side of the UAW. He is on the side of the striking worker. I don't know how you can be the most pro-union President ever and not be that way. So if Biden somehow says, I'm not really completely backing the union here, then he's lying about being the most pro-union President ever.

So he might end up a little bit stuck on this if this gets to a second month or even a third month because I think the strike will get less popular the longer these workers hold out. That has been the case for a long time. And let's remember, we do have a fairly large non-unionized automotive workforce in the United States. Tesla is not unionized. It's the most profitable automaker in the country, almost all the transplants. The import brands that now all of them have plants in the United States, those are almost all non-unionized.

And you got a lot of workers there saying, we get by, so what is so special about the UAW and these people who work for these three manufacturers that they should get more than the industry average? So I think those types of dynamics are going to become more intense the longer this strike goes on.

PRAS SUBRAMANIAN: Hey, Rick, you mentioned popular opinion. I saw a CNN poll that showed that over 70% of Americans are on the side of the UAW and the workers. So I think that gives the union more ammo as they sort of ramp up the rhetoric and keep it going. But as that dips down, that gives them more pressure to make a deal. I think that's the kind of formula that I see it.

RICK NEWMAN: Yeah, my guess, Pras, is that's a high watermark. So everybody is in favor of the worker when it doesn't cost the economy or cost ordinary people anything. And the longer this goes on, the automakers will be out there saying, look, we're making a reasonable offer. So the question is, to what extent will people believe them? And I think the more this-- the longer this goes on, the more people are going to say, come on, UAW, you need to come to the table.

JULIE HYMAN: Yeah, I mean, we talked about the ripple effect. You talked about the ripple effect on car prices, Rick. Pras, there's also the ripple effect on the broader auto industry. We've been watching auto supplier stocks and manufacturers. For example, this morning, the likes of an auto parts makers. They're kind of mixed this morning, but definitely there'll be something to watch. Will people, for example, repair their cars more if they're not able to get a new car? We've been watching the auto dealers also. Are they going to be able to get inventory going forward? So again, they're not moving much this morning, but they should definitely be on people's watch lists here as we go forward.

PRAS SUBRAMANIAN: This is a big deal because of the BorgWarners of the world, the leaders of the world. When you shut down a plant, they can't-- they don't need the parts anymore from those suppliers. So they have-- their lead times are only two weeks, a very short lead times. They have to shut down immediately. Their workers then have to go on-- potentially, on whatever state you're in. If it's because of the fact that another work stoppage is happening, you may not qualify for unemployment benefits.

JULIE HYMAN: Oh, wow.

PRAS SUBRAMANIAN: So depending on the state that you're in. So for the suppliers, it's a big deal. They don't-- they have thinner margins. They don't have as much runway in terms of capital. It might be the pressure from the suppliers that say, hey, UAW, we need to get going here because you're-- the workers that work on that side of the business are struggling.

JULIE HYMAN: That is a really interesting point and an important one for those workers and for people who are watching those stocks. Also, Pras and Rick, thank you so much. Team coverage on that big story this morning.