In a recent announcement, Ford Motor revealed that it will be laying off approximately 600 workers at its Michigan assembly plant. This decision comes as the United Auto Workers (UAW) commenced a strike at the plant, but UAW President Shawn Fain specifically instructed only workers in the paint shop and final assembly to participate in the strike.
Both Ford and the UAW have yet to respond to requests for comment. However, it is evident that it would be impractical for Ford to continue operating the plant, which is responsible for manufacturing Ford Rangers and Broncos, if the cars cannot undergo the necessary painting or completion processes.
The contracts between the UAW and Ford, General Motors (GM), and Chrysler parent Stellantis expired on Thursday without reaching a new agreement. As a result, the UAW initiated a partial strike at three sites: Ford’s assembly plant in Wayne, Mich.; a GM facility in Wentzville, Mo.; and a Stellantis assembly complex in Toledo, Ohio. This strategic move by the union to target specific facilities for strikes, as well as simultaneously target all three Detroit-based automakers, marks a new approach.
Baird analyst Luke Junk noted in a recent report that the initial scope of the strike was narrower than expected. Junk initially anticipated that the UAW would likely target engine and transmission plants, effectively halting all North American operations. He also warned that the situation could potentially worsen from this point forward.
This labor action in 2023 follows a strike in 2019 against GM, which lasted around 40 days and cost the company approximately $3.6 billion in operating profit. Excluding the impact of the strike, GM reported an adjusted operating profit of about $8.4 billion for the full year, suggesting a potential total operating profit of $12 billion.
Despite the challenges faced in 2020 due to the Covid pandemic and the temporary shutdown of various parts of the global economy, GM managed to remain profitable, reporting operating profits of approximately $9.7 billion for that year. It is difficult to determine how much of the $3.6 billion strike impact was recovered in subsequent years.
GM continued to maintain profitability in 2021 and 2022, reporting operating profits of $14.3 billion and $14.5 billion, respectively. Looking ahead, management expects to achieve an operating profit of approximately $13 billion in 2023, without factoring in any potential impacts from the strike.
Investors seeking guidance on how to navigate the UAW labor stoppage in 2023 can refer to GM’s experience as a reference point.
