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UAW Strike Update: Tentative Deal Reached With Ford May Set the Pattern for GM and Stellantis

Deal avoids all workers getting pension and retiree healthcare benefits.

The Ford Mustang Mach-E GT SUV on display.
Securities In This Article
Stellantis NV
(STLA)
Ford Motor Co
(F)
General Motors Co
(GM)

Key Morningstar Metrics for Ford

UAW Strike Update

The United Auto Workers union announced the night of Oct. 25 that it reached a tentative new 4.5-year contract with Ford F.

The deal is not effective until ratified by a majority vote of Ford’s approximately 57,000 UAW workers. UAW’s Ford national council will meet in Detroit on Oct. 29 to vote on sending the contract to all members. If they vote to do so, the union that night will host a live video to give members details and release summary literature. There will then be local chapter meetings to discuss the deal and eventually a vote. The union has instructed Ford workers to return to work during the voting process to pressure GM GM and Stellantis STLA to make a deal. The strike started at all three firms on Sept. 15. We expect the deal to be ratified.

UAW president Shawn Fain and vice president Chuck Browning hosted a video to announce the deal. The new deal has more raises than the past 22 years combined and the gains in this contract are 4 times bigger than gains in the 2019 deal. Wages will increase 25% to a maximum production rate of just over $40/hour at the end of the deal and include an 11% raise immediately upon ratification. There was no mention of a ratification bonus, but we expect the deal has one, as is customary. The contract also has three years to max wages instead of eight, increases for retirees, current workers’ pensions, and 401(k) plans, cost of living adjustments that we estimate at about 3% annually, and for the first time ever the union can strike over plant closures. This means Ford, and perhaps the Detroit Three, will likely never close a plant again without incurring a strike.

We’re glad the deal doesn’t include a return to all workers getting pension and retiree healthcare, as we don’t think the Detroit Three can afford it. Our Ford fair value estimate is unchanged for now, but incremental labor costs may need a $1-$3 per share fair value reduction. We will wait for more details or ratification to make any changes from this tentative agreement.

Ford Motor Stock Price

Source: Morningstar Direct.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

David Whiston

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007.

Before Morningstar, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner. In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011.

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