The ongoing auto worker strike could last up to 45 days, which could result in catastrophic consequences for automakers. Colin Langet, an analyst at Wells Fargo, warns that this strike is different from past ones as it involves all three automakers simultaneously. He estimates that it could cost GM, Ford, and Stellantis approximately two and a half to three and a half billion dollars each if the strike continues for a month. Langet also highlights the challenges facing the automotive industry, including the transition to EVs and pressures from regulatory bodies. He is underweight on both GM and Ford stocks due to the current situation.
1. The guest estimates that the strike could go on for 45 days.
2. This could lead to catastrophic consequences.
3. Colin Langet, Wells Fargo's Automotive and Mobility analyst, is the guest.
4. This strike is different from previous strikes in that they are striking at all three at the same time, but not striking with every plant.
5. The current production reduction of the strike is only about 10%.
6. The strike currently targets the less profitable vehicles, but the next wave will target the most profitable vehicles.
7. The strike could cost GM and Ford around two and a half billion dollars each if it lasts for a month.
8. Fixed costs are the real pain points for the automakers.
9. The EV transition will be difficult with competitors like Tesla and emission standards that the automakers need to hit by 2030.
10. Wage demands from the UAW are two and a half to three billion dollars.
11. The offers by automakers are already over a billion dollars for 21 wage increase.
12. The automakers are negotiating at a peak profitability point, while pricing is going down.
13. The EV ramp-up will dilute their profit margins while they are investing a lot.
14. The automakers will have to figure out how many unprofitable EVs to sell to keep the highest full-size pickups selling.
15. The shareholder fallout from the 2007 auto industry crisis is a cautionary tale.
16. The automakers are heading in a dangerous direction, with regulatory pressure, pricing concerns, labor inflation, and retiree health care making things worse.
17. The demands by the UAW are non-starters and ignoring them is why they may not get the six to eight billion dollars.