Tesla Clear Winner In 'Game Of Thrones' Battle Between UAW And Detroit's Big Three, Says Analyst
Benzinga · 09/15 06:18

The workers affiliated to the United Auto Workers union have gone on strike due to a lack of agreement between the parties by the Thursday, 11: 509 p.m. deadline. Against the backdrop, analysts singled out Tesla, Inc. (NASDAQ:TSLA) as one of the biggest beneficiaries of the standoff between the striking union members and Detroit's big three.

Big Three's EV Losses Will Mount: The union's demands include the elimination of wage tiers, 35% wage increases, restoration of cost-of-living allowance increases, increased benefits such as health care, traditional pension, four-day work week and 32 hours per week, and better protection for workers laid off due to the elimination of gas-powered train, said Deepwater Asset Management Managing Partner Gene Munster.

Even before the upcoming wage increase, the big three were paying workers 39% more than comparable Tesla workers and this gap will likely now increase, the fund manager said.

If the UAW succeeds in getting even a 25% wage increase, the overall compensation package will likely increase by a net 20%, given the profit sharing, Munster said. The big three automakers, namely General Motors Corp. (NYSE:GM), Ford Motor Co. (NYSE:F) and Stellantis N.V. (NYSE:STLA), will see labor costs increasing to about $80 per hour, or 67% higher than Tesla, he said.

Munster factored in a 15% increase in pay for Tesla employees, although Tesla is not involved in the UAW negotiations.

Putting it together, manufacturing labor costs for the big three will become 40-45% higher than Tesla's, he said.

A 10-day UAW strike that will shut down the big three could cost carmakers, suppliers and workers over $5 billion, Munster said, citing data from Anderson Economic Group.

“While the Big Three will be forced to pay more for labor, they cannot afford it,” the tech analyst said.

“It will give Tesla more room to keep prices low which should result in negative EV margins for the Big Three for the next two-plus years, he said, adding that their EV losses will mount, as they transition to electric, benefitting Tesla.

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Body Blow to GM, Ford: A strike lasting longer than four weeks would be a body blow to the EV ambitions of GM and Ford in the first half of 2024, said Wedbush analyst Daniel Ives. “The clear winner in this ‘Game of Thrones’ battle between the UAW vs. GM/Ford is Tesla which sits in a non-union position,” he said.

Tesla's biggest potential EV competitors now face mounting costs/complexities in the years ahead depending on how this ultimately plays out, the analyst said.

The analyst sees this as a potential nightmare situation for GM and Ford, as they are in the early stages of a massive EV transformation path for the next decade that will define future success.

“A non-union Tesla does not face similar issues which speaks to the complexity both GM and Ford face going up against the EV leader Tesla, while trying to satisfy rising union demands,” Ives said.

A lengthy strike could push out the production and EV roadmap for the legacy automakers, the analyst said. If some of the major proposals are accepted by the automakers, the billions of incremental annual costs will be damaging and ultimately increase the prices of EVs rolling out over the next 12 to 18 months to consumers, he added.

GM closed Thursday's session unchanged at $33.66, Ford moved 0.16% lower to $12.62 and Stellantis lost 0.58% before closing at $18.84, according to Benzinga Pro data.

Tesla settled at $276.04, up 1.75%.

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