The labor contract between the United Auto Workers and the Detroit-Three automakers expires Thursday. A deal isn’t done and Wall Street believes a strike is virtually assured.
What’s more, a strike will have wide-ranging impacts. Big numbers, mostly in the billions, will get thrown around daily but any strike will eventually get resolved and most of the economic activity, such as producing and buying new cars, will shift to different months on the calendar. The Anderson Economic Group estimated the cost to the U.S. economy of a UAW strike was about $500 million a day. A 10-day strike amounts to about 0.02% of total annual American economic output.
That’s what’s at risk for the companies. For consumers, lower auto production means a lower supply of new vehicles and higher prices for new and used cars, as well as higher prices for auto insurance. Insurance rates are tied to the value of vehicles. UBS analyst Joseph Spak has Buy ratings on all three stocks. That’s partly because of the recent decline and partly because all three have above-average growth on the horizon because of business tied to EVs and self-driving cars.
It also sounds like a reason to avoid Toyota Motor shares for a little while. Shares are up about 18% over the past two months. Toyota might be a winner in a strike, but it’s a short-term winner.
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Source: MarketWatch - 🏆 3. / 97 Read more »