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The United Automobile Workers (U.A.W.) union, under the leadership of President Shawn Fain, has been on strike for a month now at General Motors (NYSE:), Ford (NYSE:), and Stellantis (NYSE:). The strikes started on September 15th when workers walked out of plants owned by these automakers and have since grown in stages to exert pressure.
The U.A.W., which began negotiations for new labor contracts with these companies in July, is demanding significant wage increases and improvements to contracts, including retirement plans. The union also seeks to end a system that pays new hires just over half of the top U.A.W wage of $32 per hour. Currently, around 34,000 of the 150,000 U.A.W members working for these companies are on strike.
One of the most recent sites affected by the strike is Ford’s largest Kentucky Truck Plant. This plant produces the highly profitable Super Duty version of its F-series pickup trucks, generating $25 billion in revenue annually. Kumar Galhotra, president of Ford’s combustion engine vehicles division, said that Ford had reached its limit on what it could offer the union without affecting its business and investments in electric vehicles.
The strikes have also extended to other areas within the automotive industry. They occurred at Mack Trucks and were authorized against General Dynamics (NYSE:). Additionally, about 1,000 workers represented by U.A.W have been on strike at Blue Cross Blue Shield of Michigan for a month.
The strikes have impacted 38 G.M. and Stellantis spare-parts warehouses across the country, two G.M. plants in Michigan and Missouri, and a Stellantis plant in Ohio. Despite this, the companies have offered more than a 20% wage increase over four years.
As one of the companies affected, General Motors (GM) has been facing significant challenges. According to InvestingPro data, GM’s market cap stands at 40.91 billion USD and it has a P/E ratio of 4.12. Despite the current labor unrest, GM’s management has been aggressively buying back shares and its strong earnings should allow for continued dividend payments, as per InvestingPro Tips.
Furthermore, its revenue for the last twelve months (LTM2023.Q2) was 169.73 billion USD, with a growth of 28.48%. GM, a prominent player in the automobile industry, has been trading near its 52-week low, with its price having fallen significantly over the last three months. Analysts predict the company will be profitable this year, having been profitable over the last twelve months.
However, GM suffers from weak gross profit margins, which stood at 12.73% for LTM2023.Q2. This, coupled with the ongoing strikes, could potentially impact its future profitability.
For those interested in investing, GM is trading at a low P/E ratio relative to near-term earnings growth and its valuation implies a strong free cash flow yield. For more insights and tips, investors can refer to InvestingPro Tips, available as part of InvestingPro’s premium package. You can check out the full list of tips here.
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