Detroit carmakers face financial strain amid ongoing UAW strike

© Reuters.

The ongoing strike by the United Auto Workers (UAW) union is impacting Detroit's big three carmakers - Ford (NYSE:F), General Motors (NYSE:GM), and Stellantis (NYSE:STLA) - with significant financial losses expected. The strike began on Thursday, following unsuccessful negotiations, and is estimated to be costing both Ford and GM between $100 million to $125 million per week, according to analysts at Goldman Sachs.

In response to the strike, both Ford and GM have begun idling operations. This week, GM is anticipated to suspend production at its Fairfax plant in Kansas City, Kansas, which will impact around 2,000 workers. Concurrently, Ford has temporarily laid off 600 employees due to a halt in operations at its Michigan Assembly Plant body department as it cannot continue production due to the strike's effects on the plant's assembly and paint areas.

The UAW has strategically targeted three factories so far: a section of a Ford plant in Wayne, Michigan; a GM assembly plant in Wentzville, Missouri; and a Stellantis assembly complex in Toledo, Ohio. These plants collectively represent nearly 13,000 workers and contribute to more than 14,000 vehicles in weekly production.

The affected plants are significant contributors to the companies' revenue streams. For instance, Ford's Wayne plant is responsible for the production of the Bronco and Ranger models, while GM's Wentzville plant produces the GMC Canyon and Colorado. Despite Stellantis workers participating in the strike, Goldman Sachs has not yet estimated the potential financial impact on the Jeep manufacturer.

The UAW boasts nearly 150,000 members and may halt labor at additional factories depending on how negotiations evolve in upcoming days. Union members are advocating for increased wages, cost of living adjustments, reinstatement of pensions, a 32-hour work week among other demands. These requests come during a time when automakers have experienced significant profits during the pandemic-induced supply-and-demand crunch.

The ongoing strike not only threatens the financial stability of the Detroit 3 and their workers, but it also poses potential ramifications for the broader industry and car buyers. Consumers looking for deals on a Detroit 3 car may find that incentives introduced over the summer months have disappeared. Additionally, vehicle prices may return to sticker price or higher, and even for non-Detroit 3 vehicles, dealers are anticipated to manage their supply cautiously.

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